F2P games make a ton of cash, and here's how

Stock Image (Photo: Getty)
Stock Image (Photo: Getty)

It used to be you'd pay big bucks for a game, then play it without needing to purchase additional content.

These days, you get the game for free, then you pay to either get ahead or for extra content. It may seem like an odd business strategy by giving your hard work away and hoping people spend on your product. But it works.

Free-to-play (F2P) games make a lot of money. More than say, if you were to release a proper paid game. While the global PC F2P market is worth US$22.7 billion, Statista reports that the mobile market is worth three times that at US$67.1 billion instead. Asia generates the lion's share at US$41.8 billion.

For Southeast Asia, Newzoo has the region pegged at US$4.4 billion in 2019, with 70 per cent of that (US$3.1 billion) coming from mobile.

That's a huge chunk of change, so how do popular F2P games generate revenue? The answer lies in a blend of gacha, skins, and in some games, the dreaded pay-to-win. This strategy has proven to be successful for games such as Genshin Impact, Arena of Valor, Wild Rift, MapleStory M, Mobile Legends: Bang Bang, who have all been successful in the region.

"F2P games allow game developers to start building a player-base immediately as the game launches as there is no up-front cost at all, and once players become attached to these games they are more willing to pay in microtransactions for “premium” services," said Yexi Liao, Market Analyst at research analyst firm IDC.

Liao added that while these microtransactions are not a lot compared to the "pay once, play forever" type of games, the eventual sum "will usually exceed the sum of an average paid game".

This makes it extremely lucrative for game developers who want to constantly generate revenue instead of making it in spurts after a long developmental period.

And while you can choose to be completely free-to-play, that doesn't mean you aren't contributing to a company's bottom-line. You playing the game will mean you're considered an active player, boosting the company's annual report figures.

Some games also allow you to watch a video for perks, which gives them ad revenue despite you not paying a cent. IDC's Liao also noted that active F2P players help build the community and increase its popularity. After all, most players stick around for the community, even when the game starts to get harder in an effort to get you to spend.

"A large player-base will mean a strong viewership for esports events and will lead to higher income from live broadcasts of esports events, including sponsorship, broadcast rights, live-event tickets, advertisement," added Liao.

Esports events can help keep players engaged in the game, and players can buy real life merchandise on top of in-game items. Some games, such as Dota 2 and League of Legends, have prize pool contributions from players — Dota 2 raised US$40 million from players who spent close to US$160 million on in-game items.

Lastly, game developers have to be careful not to fall into the pay-to-win trap. Paying to win turns off the community and drives them away.

Knowing they have to spend to get past certain stages turns players off, leading them to quit while bemoaning how a game is a "cash-grab". This also builds up a bad reputation.

Instead, methods such as "impulsive spending" through limited time-purchases and new content should work in getting consumers engaged and spending, says Liao.

Other monetisation methods can include battle passes with seasonal rewards for both free and paid, and tiered spending incentives. Of course, if a developer gets too greedy by offering too many options, then it's likely for users to protest, cut spending, or even quit.

Aloysius Low is an ex-CNET editor with more than 15 years of experience. He's really into cats and is currently reviewing products at canbuyornot.com

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