Tobold's Blog
Tuesday, September 20, 2011
Which business model is better?

Syl yesterday asked an interesting question on the post about monthly subscription and Free2Play business models: "The really interesting question though is what's better for the player? - or rather, which model is/was better for whom and why." Now many people will instinctively answer that the monthly subscription business model is better, and point out the many rather bad Free2Play games as proof. Which of course is a fallacy, based on the inability of people to distinguish between the quality of a game and the quality of its business model. There have been many cases where a game switched from monthly subscription to Free2Play, and obviously that doesn't change the quality of the gameplay. And there are some rather horrible monthly subscription games too. No, to check what is better for the players we can't just compare the most popular monthly subscription game with some cheap Free2Play game. We need to look at the business model separately from other aspects like gameplay, which aren't strictly related.

Which business model is better for any given player depends on how much he has to pay and what he gets out of that money. Thus "free" isn't always best, because if for a small payment you could get a lot more fun, that would probably be the better option. It helps to consider how other hobbies work: How much does collecting stamps cost? Simple question, but obviously it doesn't have a simple answer. If one thinks how stamp collecting works, and where the cost come from, it slowly crystallizes that the cost of stamp collecting is related to how committed you are to your collection. A beginner or somebody not striving for anything like a complete collection can have a lot of fun for next to no money with kiloware stamps. But once you travel to stamp conventions and pay for the stamps missing in your collection, the cost goes up. The more important your collection becomes to you, the more money you're going to spend. And that is pretty much the essence of how Free2Play games work as well.

That does have both advantages and disadvantages. One obvious advantage of Free2Play games is that you are always given the opportunity to start playing for free. If you don't like the game, you haven't incurred any cost to find out. Of course that advantage isn't exclusive to Free2Play games, many monthly subscription games have free trials now. But unless you count betas, free trials usually aren't available in the early days of a subscription MMORPG. Where the advantage becomes unique is in the case of people slightly more committed than the free players, but spending very little. Or, in a related case, with people playing a game on and off, with low intensity. As your spending on a Free2Play game depends on how intensely you are playing it, you don't pay anything when you are on holiday or taking a break from the game. That is a lot more difficult with subscription games, subscription game companies make millions from players who stopped playing but fail to unsubscribe for some time.

The obvious disadvantage of that model is that if you are very committed to your game, you might end up spending quite a lot on it. And that where the monthly subscription games become better: Because everybody pays the same price, regardless of how much they play, the people playing the most obviously get the best deal.

St. Thomas Aquinas believed in the notion of a just price, the notion that there is something like a true value of a good, at which it should be sold, based on the cost of production. Neither of the two business models discussed here achieves that, both are in some way "unfair", with some players subsidizing others. In a monthly subscription game, the people playing very little subsidize those who play a lot, because the cost of providing the game has components like server load and bandwidth which go up proportionally to play time, plus other costs like running forums or providing customer service, which also tend to get used more by people who play more. In a Free2Play game a minority (industry rule of thumb is 5%) of players pays for everybody else, with a very few people with too much money spending rather outrageous sums. If you would want to design a business model which is closest to fair, to a just price, you would have to charge by the hour, like World of Warcraft does in China.

So ultimately which business model is better for the player depends on what kind of player he is. People who tend to stick to one game and play it very intensively do better with the monthly subscription model. Players who like to flit from game to game and never commit to one game for a long time do better with the Free2Play model. Conflict arises from the fact that the group who is subsidizing the other players in each of these models would be better off playing a game of the other business model. Thus some people feel the need to disparage the business model that is less advantageous to them, so as not to lose their sponsors. If everybody would play only games with the business model that was the most advantageous to them, game companies would make a lot less money, and would have to raise prices or put more paywalls into their games. Maybe one day everybody figures this out, the two business models crash simultaneously, and we'll see pay-per-hour games rising from the ashes.
You seem to ignore that players are not just customers but also content for other players.

Those who play more are more likely to act as content provider (raid and battleground leader, guild leader and officer, the helpful guy who knows if glyph of fireball is good for the frost mage or not).
I wouldn't have thought that Gevlon of all people is living in a fantasy utopia in which experienced players are helpful to newbies. You're more likely to get help from another new player than from a veteran.

Anyway the argument cuts both ways, other players *are* content in Free2Play games like World of Tanks just by being there as teammates and enemies.
We can actually objectively determine what payment model is best for players: the one which maximizes consumer surplus.

Paradoxically, the F2P model is both the best and the worst in this regard. The worst because by product segmentation, these companies can charge different prices to different gamers, eroding the maximum amount of consumer surplus. The Free part of the equation though creates "infinite demand" style shenanigans that only resolve themselves because people have a finite amount of time to play games.

Honestly, believe the best is the Pay Once box model. When I bought Battlefield 2 back in the day, I paid $50 and experienced 2 years of entertainment. Servers and CustServ cost money, I understand, but that really is not my problem. In both F2P and sub models, the game companies have incentives to drag out the experience with grinds and unfun activities - contrast that with Pay Once models where the company requires positive word of mouth and healthy servers full of players to sell more copies (e.g. the only way to get more money). Couple that with the largest possible consumer surplus amounts, and I believe it is the best model.

Then again, Blizzard obviously gets away with charging $105 for each "free" content patch, so they are probably onto something.
One thing about free to play is that it's more intrusive. You will get popups or reminders that a bonus can be purchased. For people who love to emerge themselves in the escapism of virtual worlds F2P is a lower value good.

That can of course be turned right round. I rather like it that Eve is F2P for me and I find collecting isk for subs rather enjoyable. It feels like something for nothing, as if I were somehow cheating the system.
One thing about free to play is that it's more intrusive.

Not inherently so. For example World of Tanks has absolutely no pop-ups or other intrusive messages of any kind. During combat it is even technically impossible to see anything related to payment options.

I do agree though that there are a lot of Free2Play games which shove the payment options into your face every minute. But that is just bad design and usually leads to me quitting those games very fast.
Cheers for taking this up, Tobold. I have still not quite made my mind about about what model is best for me, but I suspect this has more to do with myself being unable to make dedicated decisions at the moment. there are clear pros and cons to each payment model depending on playstyle. pay per hour - there's a reason why nobody is currently offering it, is there? ;)

Since you mentioned the effect of sub-based MMOs being harder to break up with (which is true), I found the recent presentation by Raph Koster on F2P very interesting; while it's easier to leave F2Ps, he made a case about of the "different psychology" between the player who has brought himself to cut lose of a subscription, and the one who is merely "away from the game" for a while and therefore much more likely to return, too. canceling a sub is usually foregone by a lot of negative feelings and emotions, sometimes even the resolution to never return. while we know just how reliable resolutions such as these are (...), I believe he still has a point that the F2P player is likelier to return sometime. which speak for the "on and off" relationship you mentioned too, but might actually be an advantage of F2P, depending on what player we're assuming. another argument for this theory would be the huge number of WoW players who will stop/unsubscribe after only the first 10 or so levels.

This was a new factor for me entirely related to the F2P debate, not something I had considered up to now.
I disagree that sticking with a game means you're better off with a subscription game. I've played DDO for well over a year now playing free-to-play. By having some patience and waiting for sales, I've kept my spending limited and I own pretty much everything I want in the game. I don't have the latest and greatest the day it's out, but that's fine with me. As I've said before, I know exactly how much I've spent in DDO, whereas I could only guess for other games.

Also, keep in mind that different people value something differently. So, you might pay more for something I don't think is worth nearly that much money. Happens all the time in the offline world, too. :)
A good F2P (which we all know is really just about micro transactions) is one that doesn't constantly remind you that you can in fact buy items from the game. I've been playing alot of League of Legends in the last 2 months and I think it is a perfect example of how to do F2P. You can buy items in LoL but I don't feel forced to or pressured to at all. I've spent about $60 so far on the game from buying things such as skins to character packs. The game was designed with micro transactions in mind from the beginning so it feels natural and un-intrusive.

For some reason the games I least like that are micro transaction are Facebook games. It feels like they try and force you into spending money by implementing artificial bottle necks.

For MMO's I'm still a fan of the monthly fee. It's more like a service I'm paying for, such as Cable TV or Internet. I prefer monthly fees because I think the MMO genre already leads to alot of bottle necking content and making them F2P would only encourage that kind of content.
Free to play games are best to the people that have a large amount of real life money to spent..

explain : I have yet to see a free to play game that doesn't offer in its store services or virtual goods that directly impact on the balance and gameplay. A fresh Example of this is Lotro. You can buy deeds and you can buy xp boosts, e.t.c. all these gives an unfair advantage in my opinion.

Subscription games have not items that impact on gameplay, only vanity items.

I remember a post you did in the past about games being a hobby and that you should be allowed to spent your money in games as you did in hobbies. You brought the example of Golf...or tennis..

for example you said that someone who play tennis and buy an expensive tennis racket he would considered wise man and he could play with someone that have bought a cheap tennis racket. I fully disagree on this..

On pc Games our Expensive "tennis racket" is our expensive pc, our expensive Graphic card and our expensive Big Monitor. These are the tools that can boost our gaming experience, that can improve our gameplay..these are our "tennis rackets"...not the in-game virtual goods such as deeds, virtues, xp boosts, skills that we can buy...

So in the end I say that unless a free to play game does not include a store with items that impact on gameplay (as I said yet to see one, correct me if I a mwrong) I vote for subscription - based games, cause they are still have the best quality and they are balanced around effort-reward
There have been many cases where a game switched from monthly subscription to Free2Play, and obviously that doesn't change the quality of the gameplay.

It can. LotRo would be a prominent example of a game that (to me as a subscribing type of person) simply got worse due to F2P.
Even in World of Tanks though you're very aware of the players who have spent money. I've played some maps where it's as if 12 freepers were watching 3v3 real players all with 4-5 kills each duke it out.

It's not always like that and it is a very good game with a discreet F2P implementation but I think it's still inherently less immersive than a sub game version of World of Tanks would have been.
I think that you missed another advantage of the F2P model--the highly committed player can spend more than the flat rate and increase their fun.

The stamp collector can let his hobby become very intense--going to conventions--if he likes. So far subscription models have very little to you can spend on to increase the intensity of play. EVE is one of the few where dual boxing works well, WOW you can't even buy a game play advantage.

F2P allow the consumer much more easily (and legally) substitute money for time--something that can be very powerful for your average gamer (being 36 years old and not nearly having the time they did when they started gaming 20 years ago).
Even in World of Tanks though you're very aware of the players who have spent money. I've played some maps where it's as if 12 freepers were watching 3v3 real players all with 4-5 kills each duke it out.

That is just a classic case of the 12 players being unable to admit that the 3 players are actually better than they are. Thus they explain away the superiority of the 3 good players by claiming that those 3 spent a lot of money on unfair advantages. But that is almost certainly untrue, because there is only one minor advantage in combat you can buy, gold ammo. The rest of the pay options are all towards faster advancement and greater convenience, which is useful, but doesn't help you at all in any individual battle.
Both models try to maximize corporate profits, which is another way to say "minimize costs". (In any competitive market, the price any company can charge is pretty much fixed).

Thus, Blizzard is rewarded by making WoW as time-consuming as possible while keeping new content to a minimum. Daily quests, running heroics ad nauseam, etc.

Conversely, Travian is investing in almost ZERO new content but increasing the production time of buildings. Then charge players for instant building boosters.

As a player, I prefer League of Legends model which aligns the interests of the gamers and company better than any of the above. You pay for boosters (if you're below level 30 and need to catch up). Otherwise, you only pay for skins. New heroes are within your budget if you play regularly.
I'd agree on WoT. I doubt very much if people are wasting gold ammo on pickup games. If my experiences are any indication, me and the rest of my gold tank Lowe crew are significantly worse than the non-gold tank competition.

I don't think it's just the type of player. I think it also depends on matching the type of gameplay to the correct pay model--and there are more than one F2P cash shop models. City of Heroes, for example, has a perfect model for an item and power purchase based cash shop. But since their content tends to be ubiquitous randomly generated dungeons, it would be hard to charge for gated content. LOTRO on the other hand has character classes that are far less viable in a pay per power mode, but they have tons of content that can easily be gated and sold in chunks. Those are both "F2P" but they're really as different from each other as subscription is from cash shop.
I suspect in many cases the F2P games that shove pop-ups in peoples' faces are the ones that are actually easy to play free.

I used to play Project ntropia, and that never shoved pop-ups in your face. it didn't have to, as if you had no in-game currency you couldn't buy ammo, and even your melee weapons would soon become unusable. You could do free things and even earn money, but the options were rather limited.
"People who tend to stick to one game and play it very intensively do better with the monthly subscription model."

If you are talking about MMO communities, isn't the above EXACTLY who you want?

And as a player, isn't finding an MMO game that is so good that it dominates most (or all) of your playing time a good thing, especially at the "might as well be free" rate of $15 a month?
Some games (Lotro / EQ2 / World of Tanks) offer a subscription option alongside free to play. I used to think that this was the best possible situation because a player who doesn't like F2P can switch to sub and vice versa.

Having gained a bit of experience with such games however I now realise that it isn't as simple as it seems at first. The f2p business model requires that the game generates a surplus of income from committed players in order to subsidise those who play for free. Therefore the company must entice subscription players to buy stuff from the item shop as well as paying their subscription.

The sub option is not a cap on expenditure for committed players it is merely the baseline expenditure level.

The only way you can tell someone spent money in League of Legends is if they have a character skin. All other items can be earned by simply playing the game.

I honestly can't tell who has bout Riot Points and who hasn't other than the skins. Skill is the major factor.

I haven't seen a well done F2P MMO, but that doesn't mean their aren't F2P games out there that make it work.

When I first started playing LoL I bought EXP boost packs to gain levels faster. I quickly discovered this was in fact a BAD idea. As I went up in levels I started playing better people and my skill level didn't match my summoner level. I haven't bought an EXP boost in weeks and I'm enjoying the game because my actual skill is rising at the same rate as my level.
"Honestly, believe the best is the Pay Once box model"

Seconding Azuriel here. Paying for time instead of content, no matter the contortions into subs or F2p, is more trouble than its worth.
One factor that rarely gets mentioned is that paying a subscription makes you a member of a club. Granted it's not a very exclusive club, but it's a club nonetheless.

I like paying a sub for my SoE games because it makes me part of their club. So long as the subscription cost is well within my means, I'm happy to pay it to remain a member of that club, even when I'm not currently using any of the facilities.

If no subscription is required, I can only be part of the club if I actually play. Which is good for my wallet, but not nearly so satisfying psychologically.
Interesting post as always! I've featured it on the Melting Pot today.

It's interesting that the business model you list as closest to fair is also the least popular by far in the game playing world, with a huge negative perception. Per-hour MMOs used to exist, of course, but they mostly vanished with Compuserve.

Do you think they'll be returning, then? Or are they genuinely a thing of the past for other reasons?

- Hugh @ MMO Melting Pot
Do you think they'll be returning, then? Or are they genuinely a thing of the past for other reasons?

Basically the reason why pay-per-hour games are out is because the price per hour of the early games was simply outrageous. WoW in China costs 5 cents per hour, and I believe pay-per-hour would be quite successful with a price up to 20 cents per hour.
I dread the idea of pay-per-hour MMOs because it would mesh horribly well with the "Gogogo, be optimised for speed runs or you are STABBING YOUR TEAM IN THE FACE" mentality. All of a sudden, if you're not over-geared, fully gemmed and using the optimised spec then you are wasting the real life money of your team mates and obviously should die in a fire.

THe fact that the difference in time taken to run the dungeon means you've probably cost them about 3 cents each is irrelevant, of course...
There's a third model, which as far as I know only LOTRO made use of in its early days, and that's the life subscription model (that's the game's life, obviously, not the consumer's).

The life subscription model generated a lot of income for the publishers in the first year or two of the game, which must be a great way to kick-start a new venture. It subsequently came in for a certain amount of stick, as life subscribers were often described as "parasitic" on the game. The original lifetime subscription had been roughly equivalent to twelve monthly subscriptions, so the assumption was that past a year, lifetimers were getting a free ride.

A lifetimer myself, I never bought this argument, partly because the existence of lifetime subscribers, an unknown percentage of whom would anyway in the normal way of things have dropped the game, didn't really represent an ongoing financial burden on the publishers, other than costing a minute amount of server space. On the plus side, however, we represent a large, relatively stable and semi-captive pool of consumers for every paid expansion. Surely not a bad thing?
Kairos - Cryptic have also offered lifetime subs for Champions Online and Star Trek Online.

I see lifetime subs as a good deal for a company that needs to recoup its initial costs ASAP, which is pretty much anyone who doesn't have Sony's/EA's/Actizzard's big pockets bankrolling them, and a good deal for any player who intends to keep dipping into and out of a game over the long term. The majority of players will always go for a traditional month by month sub because a lot of people cannot or will not put up a couple of hundred dollars upfront... although SW:ToR is asking for a lifetime sub style price ofr a collector's edition without including a lifetime sub in the box.
The sub based model is infinitely better because it encourages the firm to run the game as a going concern, and to create a game that is larger than the sum of its parts.

A F2P game will always be balanced around getting people to pay for the things that make the game money, and that will always and without exception produce an inferior game, because the rest of the game must cost-justify itself at the atomic level, in support of this bottom line.

A sub-based game asks the player if the package as a whole is worth his fee.

Sadly, due to the stupidity and short-sightedness of American business executive and consumers, the F2P model will probably prevail, at least until something better comes out of India.
I think you have some basic assumptions wrong.

>One obvious advantage of Free2Play games is that you are always given the opportunity to start playing for free. If you don't like the game, you haven't incurred any cost to find out

Free trials.

>the cost of providing the game has components like server load and bandwidth which go up proportionally to play time

Huh? Every time I've priced bandwidth it's a fixed monthly cost. Same with salaries for help staff and content creators. The cost is overwhelmingly fixed.
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