Tobold's Blog
Monday, September 19, 2011
Free2Play vs. Subscription numbers

Just a quick link to an interesting article in Massively, where the long argument between Free2Play and subscription based business model is reduced to a few simple numbers: Revenue from subscription for MMOs went down by 5% from 2009 to 2010, while Free2Play revenue went up 24%. Nevertheless the subscription model is still ahead, with $1.58 billion annual revenue versus $1.13 for Free2Play.

Note that this is revenue, not profit. I don't have any numbers, but I'd like to point out that in a subscription game everybody or nearly everybody pays, while a Free2Play game has to carry up to 98% of freeloaders, which *do* have some cost. Thus I believe that subscription games have a better profit margin.
I don't know. You didn't take into account for the entitlement aspect. Paying users expect constant vigilant upkeep and new content. Free users may take resources but they also have no leg to stand on as far as quality. You can get away with somewhat more lax upkeep in F2P games than in subscription games.
Obviously the increased profits in F2P are mostly due to the fact that it's only just becoming popular and more and more devs are taking this up and installing lots of gameshop goodness. which would also explain why sub-based MMOs are still ahead overall - but that will change rapidly as soon as the majority of next gen MMOs become F2P.

The really interesting question though is what's better for the player? - or rather, which model is/was better for whom and why. I've read so much on this subject lately, but it's all spread over multiple articles which are either pro/con one model vs. the other. maybe something to pick up on in one big summary post, sometime? ;)
Having worked for three household name companies in my working life, it's my strong impression that large companies are far more interested in market share than profitability. Obviously they need to show a good return for the shareholders, but that's not what gets the people at the top of the business fired up. How well they are doing compared to their competitors, not compared to an absolute standard of profitability, seems to be the main driver.

Small companies care a lot more about actual profit, unsurprisingly.

Of course I look at this from the perspective of an ant gazing up at a skyscraper, so who knows what's really going on.
Free2Play games do have a lot of freeloaders, but I strongly suspect that their costs per player are lower because they don't usually offer in-game customer service support. It's quite telling that all of the games I've seen with a hybrid model reserve access to CSRs for subscribers and point the unwashed masses towards a "knowledge base" instead.

Providing CSRs is a major cost - just doing some back of an envelope calculations based on the costs of providing call centre staff (pretty much equivalent, and related to my day job so I've got a good idea of what THAT costs), then if you have a problem that takes half an hour of a CSR's time to resolve then they've just spent your entire monthly subscription fee fixing it. Fortunately, most player's don't need that - I think I've petitioned a CSR about twice in 10 years of gaming - but customer service staff are definitely the biggest ongoing cost for a subscription MMO. Without that, the F2P games' cost per player is lower - whether it's lower enough to make them more profitable than sub games, we don't know without more data.
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