Digital Transformation video games

Freemium model : the market shaker

Nowadays, w hat is free and what is not? While we were on the phone with my Dad, we asked ourselves this question. We were discussing the evolution between our two generations. The fact that new generations gets some free products or services that older generations were paying. My Dad was saying : “everything is free and the worse is that you don’t even realize the situation, because you were born with it”.

Then, I thought about it and looked at: music, movies, news, internet communication tools and even games are actually free. Companies are building freemium strategies to give us a free access to things. So I decided to select this model for the blog.

The definition of Freemium is a business strategy involving a free offer including open access mixed with a “Premium” offer, more upscale, with a paying access. Applied to video games, freemium is a business model that provides games for free. But players must pay a fee to get special characteristics or content.

A big majority of free games are downloaded on mobile devices such as tablets and smartphones on the Apple Store or Google Play Store.

Freemium games are still the preferred choice on the side of app developers. In fact, these App market places are where the sources of income are the highest. Developers just have to wait their revenues later on, when some of their users will purchase features in the app. The freemium route for many people is absolutely great especially on mobile, because it can generate large amounts of profit for developers who manage to create popular applications.

Freemium games are rising at a very fast rythm and it continues to accelerate at an important rate. Indeed, it is estimated that adults spend now on average 5 hours online and on their mobile devices. Y ou can take the metro in Paris to see how many people play on their smartphones. The time spent online has now exceeded the time spent watching television. Let’s take the example of a place in the world where the TV has a big importance in daily life : USA

chart 2

This chart from F lurry says “people are spending more time in mobile apps than watching TV. In 2015, U.S. consumers spent 198 minutes in mobile apps per day compared to 168 minutes watching TV. That time in mobile apps is up from 139 minutes in 2014 and 126 minutes in 2013, and that doesn’t include time spent in mobile browsers”.

Then, when people are on their Smartphone they spend 32% on this time on Gaming asserted by the chart below :

Chart

There have never been so many players for games on mobile devices. Developers had to change. The aim is now to find the most effective ways to monetize the potential customers and the revenue perspective. Moreover, the mindset of people downloading has changed. If you are not a game or a free application, you will have much trouble in selling.

So, can we say that mobile gaming is designated to be only “freemium”?

There are more and more players on smartphone that’s a fact. Studies estimate that more than 10 million French have installed at least one game in their mobile. If this growth is mainly due to titles like Angry Birds or Candy Crush Saga, others have selected the « paid » option games like Leo’s Cut the Rope, or The Room 2 Monument Valley yet. The proportion is such that developers hesitate to even deploy their games, despite the installed base.

But whatever the explanation, the fact is that mobile gamers are pirates like the others. And the volume is such that this behavior significantly influences the profitability and business model of the video game on smartphone with a freemium trend ( free with app purchase) is confirmed, to the detriment of premium (full payment from game to download).

Just a question before we conclude, what do you think is the most sold video game of all times?

Super Mario on Nintendo? Good thought, but no. The answer is the freemium game Tetris launched in 2006 with 425 million items sold in 2015 versus 40 million for the Italian plumber. These figures give you an idea of the power of freemium on the video games’ market.

The revolution is on.

I think it will be interesting to follow the evolution of the Freemium model and game-play games on Mobile / Tablet, for now the big names in the gaming industry are not mobile platforms but still Playstation, Xbox and Nintendo.

About the author

Thomas Fontoynont

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