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New business models: how to make money giving your game away for free

New business models: how to make money giving your game away for free



“Free” is proving to be the most profitable price point for a game....

“Free” is proving to be the most profitable price point for a game.

It’s working for giants like Zynga (Cityville) and Bigpoint (Dark Orbit). It’s working for small companies like Nimblebits (Tiny Tower) and Snappy Touch (Flower Garden). If you make games (or want to), you need to understand the power of free.

I originally presented this at the public sessions at Edinburgh Interactive on 11th August 2011. http://edinburghinteractive.co.uk/public-programme



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    New business models: how to make money giving your game away for free New business models: how to make money giving your game away for free Presentation Transcript

    • Nicholas Lovell
      Edinburgh Interactive Entertainment Festival
      August 11th 2011
      NEW BUSINESS MODELSHow to make money giving your game away for free
    • Nicholas Lovell, GAMESbrief
      Author, How to Publish a Game
      Director, GAMESbrief
      Clients include Atari, Channel 4, Channelflip, Firefly, IPC, nDreams, Rebellion and Square Enix
      @nicholaslovell / @gamesbrief
    • Subscribe to the blog
    • Show offer: Get 80% off
      Go to www.gamesbrief.com/store
      Enter code EIEF80
      Get How to Publish a GAME for 80% off:
      Digital: £99£19.90
      Physical: £149£29.90
      Both: £149£29.90
    • Free – It WORKS
    • Free has been hugely successful
      filed its S-1
      $600m + in revenues
      Valuation expected >$10bn
      Tiny Tower:
      2 men, four months
      Currently #12 in the top grossing chart
      Conservative estimate: $3m revenue in first 12 months
      (PS: # 1, 3, 4, 5, 6 are free too)
      €200 million in revenue
      €650 million valuation
    • Free is a marketing technique
      Free means you have a lower barrier to entry
      Free means more people try your game
      Free gives you players; players are potential customers
      It’s all about the conversion from free users to revenue generating users
      If you are not free, you are competing with free
      Free from someone else
    • Why does free work?
    • The price/demand curve
      In an era of physical distribution, you need to set a single price
      For games, around $40
      “It’s great
      value, I’d have paid much more”
      “That’s too expensive for me”
    • Now we let users set the price
      Hypothesis: Allow users to choose how much they spend on your product, and your revenues will go up
      • DDO revenues up 500%
      • LOTRO and Everquest II showed a similar story
      $10 MMO subscription
    • WRONG!
    • Allowing users to choose how little to pay is not the secret
      We all knew that 95% of users played for free
      We now know that 80-90% of revenues come from 0.5% of users
      • Spending $50 - $10,000 or more
      Free: 95%
      Paying: 5%
      80-90% of revenue from 0.5% of users
    • Find the whales
    • An iOS example: Pocket Frogs
    • An iOS example: Pocket Frogs
    • Content is the hardest thing to sell
    • It’s deeper than that
    • People pay for status, for emotions, for feelings, for progress
      People will pay to:
      Fit in: “everyone else has got a Santa Hat, I want one too”
      Stand out: “Look at me with my twin flaming swords of Poinsettia”
      Fit in AND stand out: “Hey, we’re the guild where everyone wears purple”
      Build friendships: “Here, let me give you some flowers as a sign of our friendship”
      Flirt: It’s the Internet. Of course it’s about sex.
    • Some basic rules of free
    • ARM yourself
      Hoping for the best is not good enough, you need to ARM yourself
      ACQUISITION: How do I get people through the door cost-effectively?
      RETENTION:How do I keep people coming back for more?
      MONETISATION: How do I build money-making strategies into gameplay
      Most developers focus on one of these
      All three are really important
    • The rule of 0-1-100
      Make it enjoyable for people to play for free for ever
      Make it easy for people to spend $1
      Make it possible for people to spend $100 per month
    • Be generous
      “Give, and it shall be given unto you” Luke 6:38
    • You’re not making films anymore
    • Free is flexible
    • Are free / freemium / F2P games evil?
    • NO
    • F2P = evil (or not)
      The business model is designed to take money from you
      So is the coin-op, or the MMO, or the DLC
      Some people spend lots of money on it
      You get lots of content for free
      Instead of paying for access, you pay for the experience that you VALUE
      They’re not real games
      Grow up.
      Oh, and the games will grow up too
      They don’t have enough skill / fairness / challenge
      Well don’t play them then
      Just because you don’t like them, doesn’t mean they are evil
    • Some valid concerns
      How much money is it ethical to take from a single player, in a single month?
      Are microtransactions appropriate for children?
      Are there certain games that aren’t suited to free-to-play
      I say no
      There may be some players who aren’t suited to microtransactions
      Free games require certain infrastructure and expertise that may challenge the indie developer
      Will it stop working?
    • Morph – a thought experiment
      Business model 1
      Make an iPhone App
      Offer a Lite version and a 99¢ game
      Business model 2
      • Make a free iPhone App
      • Incorporate ads for a limited edition, 1,000-only print of the original Morph, framed for your wall for $999
      • Conversion rate of 0.1% = same revenue (oh, no 30% to Apple)
    • I love free
    • Free is changing the games industry – for the better
      Free allows small studios to make big money from serving niche audiences
      Free reduces risk, and hence increases diversity
      Free gives more choice to consumers
      I get lots of games for free!
    • Thank younicholas@gamesbrief.comFollow my blogwww.gamesbrief.comBuy my booksEIEF80 (until Friday 5pm)