With video games, virtual economy equals real money
— -- While it seems counterintuitive, the hottest trend in the video game industry is giving away games for free, then offering a deeper-level of interaction — for a fee.
Whether it's new titles, like Smurfs' Village on iPhone or old standards like EverQuest, publishers are in a race to offer free-to-play games — sometimes known as "freemium" games — and in many cases, it's making them a fortune.
By offering well-known games — or new titles (generally featuring popular franchises) for free, publishers are tapping into people's bargain-hunting nature. And in fishing for those new players, they often find a whale.
A recent survey by Park Associates found that while only 5 to 10 percent of the player base of social and free-to-play games regularly pays out of pocket, those who do pay are generous. The average Facebook gamer who spends money on games spends about $29 per month, according to the report. And those who pay for virtual goods and upgrades in free-to-play games average about $21 per month.
And that adds up quickly when your player base is in the millions.
One area where free-to-play has seen tremendous success is on Apple's iPhone.
Capcom's Smurfs' Village and Snoopy's Street Fair have had a regular presence on Apple's list of the top grossing apps since their release. (Smurfs' Village, released in 2012, still holds the sixth spot.)
Hoping to follow in that path is Electronic Arts, which recently launched a freemium title based on The Simpsons franchise.
"Consumers are looking for not only a freemium title, but one that's filled with licensed properties and characters they care about," says Bernard Kim, senior vice president of social and mobile games for EA. "Our goal is to have an evergreen title that makes consumers and users laugh and enjoy themselves. And we'd love to have that same kind of lifeline [as 'Smurfs' Village']."
It's a philosophy that seems to be working. EA was forced to pull The Simpsons: Tapped Out from the app store because of overwhelming demand that swamped the publisher's servers. (It's expected to be available again soon.)
"We see this product as having a tremendously long tail," says Kim. "The key to a product like this is to continue to generate new content. Just as the writers are creating new content for the program, that's our goal with this as well. … I personally believe it's going to be one of our biggest releases of 2012."
The trick to making money from freemium games is the availability of a premium currency. Players might pick up money in the game, but generally they're steered to create new objects. In The Simpsons: Tapped Out, for instance, they must rebuild Springfield after Homer inadvertently destroys the town.
Building objects can be done with that easily found in-game cash, but to complete a project could take hours of real time. To hurry things along, players can spend real-world cash on premium currency to reduce the process to seconds.
Legacy games are also good candidates for free-to-play titles. Sony Online Entertainment discovered this in 2011, when it switched its catalog of multiplayer online games (which at the time, charged all players $15 per month) to a tiered model that included a free-to-play option.
