Freemium Didn’t Start With Gaming
The term “freemium” is applied mainly to online games these days but the concept goes back further; in fact it originated with other types of digital offerings like software and media services, and has been around since the 1980s: remember in the 90s when “lite” versions of software were often provided by developers on floppy disk or CD-ROM, sometimes with an expiry date? It was a kind of “try before you buy” deal.
Back then the system wasn’t termed “freemium”; that happened around 2006, when it started to be applied to games in particular.
Virtually all gamers will be familiar with it now: the original version of the app, game or service is downloadable free of charge, but users are charged for more advanced features or functionality.
Traditionally, developers limited the freemium experience by:
- Limiting features – for software a “lite” version is available; for games, levels are blocked
- Limiting capacity – database sizes can be limited, for instance
- Limiting the number of seats –individual users can access it, but whole networks cannot
- Limiting support facilities – “lite” users do not get technical support
- Limiting by time – there may be an expiry date that can be extended or reset
With games, another simple way to limit the freemium experience is for certain features to be unlocked only with a minimum effort required: for example, in-game currency must be slowly accumulated– or this can be accelerated by purchasing them.
The Game Developer Challenge
The challenge for the developer has been, and remains, to pitch the free aspects of the game correctly: enough features and functionality must be provided to encourage downloads and for a “lite” user to get enough of a taste to be impressed enough to pay for more.
The key question to consider? At what point of the game has the user been engaged enough that they are convinced that they need to unlock more levels or buy virtual goods? This could be called the “tipping point”.
For the developer the stakes are high. The freemium model represents a low-cost way to get an offering out there and to get people talking about it and referring it to friends and network contacts. It can build up a customer base rapidly and at low cost. There is little to lose by giving electronic software away for free – that’s why we have seen the likes of Skype and LinkedIn using the business model very effectively.
For the user of course it’s a no-risk approach that has gone down particularly well in an online environment where people don’t like to part with their money unless they are 100% sure that they are not going to get cheated.
Where is Freemium Going?
At present the freemium model dominates social gaming and mobile gaming. You find it in all the most popular games with multi-million downloads, from Candy Crush and Plants vs. Zombies down to new games struggling with a few hundred downloads.
While at first sight it may appear that the freemium model is limited in scope, with only so many ways to innovate within it, there are some other avenues open. More options are now being presented to players – and that’s important for gen-y-ers who demand choice. In the future the “pay” or “stop playing” decision may be more complicated.
Recently the VP of studios at GameHouse said:
“I think we’ll see an expansion…to (the point where) you can pay, or you can engage socially, or you can go back and grind in the game and play with us a little bit longer, or you can watch some advertising along the way, or maybe you can take a subscription on and we’ll let you move forward.”
The subscription option is interesting and has obviously been done before with network gaming –to great effect with the likes of World of Warcraft. For people with set budgets, or parents concerned about their kids running up virtual goods bills online, it could be a good option.
We are likely to see subscriptions come in, alongside more advertising within the basic framework of the freemium model, but it seems clear that the model will evolve further, rather than be replaced any time soon.