Build Healthy Video Game Economies by Giving Players What They Want
Building on the power of Free
There is a saying in the video game business: Players either have time or money, but not both. So far, game developers have done a pretty amazing job of extracting the value of money -- but not so much the value of time. Meanwhile, other media and entertainment services are sprinting ahead by excelling at converting their customers’ time and attention into a payment currency through user-friendly advertising models built on the power of “free.”
Take Spotify, for example: 250 million, or 70%, of its 360 million subscribers are on the service’s free ad-supported plan, instead of the $9.99 basic plan. Spotify thus provides a “payment” option for its listeners that converts engagement into money. A new Spotify Plus tier, at $0.99 per month, provides even greater functionality for its ad-supported users. Brilliant!
Games, meanwhile, are by and large moving to a freemium model that provides unlimited access to full games completely free, but with additional content that largely must be purchased through “live service” economies. This free-to-play (F2P) model has been the norm in mobile games worldwide since 2011 and has been accelerating in console and PC games over the past few years -- most famously with the launch of Fortnite in 2017 -- and will likely take hold in cloud gaming as well.
There are some giant franchises that will still be able to demand a premium upfront price for the foreseeable future from their loyal audiences, but in general, F2P will be the only sure way to launch new IP, garner large audiences and get the revenue flywheel spinning.
Inside the walls of most (if not all) game companies, however, in-game advertising is generally considered to be a scary proposition. Sure, it’s a major contributor to mobile game revenues. But the ads that exist in mobile games, while rewarding for players and largely their choice to watch or not, are often considered a necessary evil for developers and not a true enabler like the Spotify model.
And because of device-level ad targeting, the majority of advertisements in mobile games are ads from other mobile games, creating an arbitration market where the entire mobile game industry is both spending and receiving ad dollars all focused on acquiring the single-digit percentage of mobile game players that spend money in games to buy levels, packs, coins, items, etc. It’s essentially a treadmill business model that has become the norm for developers and that drives big market valuations for companies like Unity, ironSource and AppLovin, while contributing meaningfully to the revenues of Google, Facebook and Twitter.
So the best mobile games might convince 3-5% of their users to spend money in-game, and most are below a 2% spender level. Console and PC games will also face downward spending pressure as more and more games enter the F2P arena. The most successful F2P game of all time, Fortnite, is headed in that direction already. In 2018, it converted 22% of its monthly active players into spenders and looks to be headed to 10% or below in 2021, according to the Epic/Apple court case filings.
Console and PC developers worry that the introduction of a “watch to earn” type of ad model in big-screen games will turn players off and lead to a cheapening of the player journey in their high-production environments. They also have long memories of the overhyped dynamic in-game ad model of the 2010s that left them more than a bit skeptical that brands really want to invest their budgets against gamers. Finally, no F2P developer in the console and PC space that I have met with wants to recreate the less-than-optimal mobile ad experience in their larger-format games.
While game publishers and developers like to say that they are maniacal about thinking and acting player-first, our data shows differently. PlayerWON's Reddit surveys of console and PC gamers across the top premium and F2P games reveal that over 77% of players welcome the opportunity to convert 15 or 30 seconds of their attention into valuable in-game content.
A full 82% of Fortnite players that we surveyed said they relish the opportunity to turn 15-30 seconds of their time into V-Bucks, skins and similar items. The same goes for gamers on the free version of Nvidia’s GeForce Now cloud gaming subscription service, which otherwise costs $8.83 per month. An overwhelming majority of those players, 89%, told us that they would like the ability to skip the waiting queue or earn extended free playtime in return for engaging with brand videos. Additionally, we have seen overwhelming positive social media sentiment from players of games that use the PlayerWON platform to provide a path to free rewards for their big screen, high-production console and PC games.
As with many contrarian business model developments, I suspect we will find the early adopters of a new “payment” type based on attention to be the nimble game companies and services that tend to be more entrepreneurial and innovative. But fairly quickly, the idea of letting players choose how to pay for their content will become the industry standard, including for more risk-averse slow following industry titans.
After all, any game developer that wants to survive and thrive really needs to give their players what they actually want -- and what they want is more “free.” Just ask Spotify.
Want to learn more?Find out how PlayerWON can bring TV advertising budgets to games in your portfolio.