free-to-play

The Free-To-Play Business Model In A Nutshell

A free-to-play is a model that became particularly popular in gaming. Free-to-play is also commonly referred to as free-to-start. For instance, companies like Epic Games have launched popular games like Fortnite‘s Battle Royale, which had ingrained a free-to-play model. This is a model that become extremely popular in the digital age of gaming.

When did this all start?

The free-to-play model isn’t new, and it came from another model, made popular in gaming, throughout the 1980s: shareware.

The shareware model was officially born (at least its official name) in 1982, when Andrew Fluegelman created a communications program called PC-TALK. Fluegelman released the software by asking users to pay for it, only if they thought it was worth it.

For the nascent software industry, that way of doing business seemed a shared idea. Indeed, at the same time, in Washington State, another programmer, named Jim Button, created EASY-FILE. Button, similarly to Fluegelman released the software for free. And he asked users to either share the program or give a donation if they liked it.

By 1982, Fluegelman and Button met each other (through another user who noticed how they used a similar marketing and distribution model) and they agreed upon a set of joined actions to standardize their business models (like referencing each other’s program and by setting a voluntary donation at $25).

Though, they slightly changed the name for each model. Fluegelman called its model “Freeware,” Button, instead called it “user supported software.”

The concept of shareware still at the embryonic stage, would become a standard in a few years. As other programmers and entrepreneurs started to adopt this model, it consolidated. Perhaps, Bob Wallace, a former Microsoft employee, founded QuickSoft, and it offered it with a similar model.

In an in-depth article of IntoWorld in the 1980s, entitled “Software For A Donation” the protagonists of the shareware (then popularized as freeware) model were proposed as alternatives to large players, who were not interested in that sort of model.

While those companies never turned into multi-billion-dollar companies, they did show an alternative model for gaming. It would still take a few decades for this model to fully become viable.

Some major games like Fortnite, and companies like Epic Games have used it as their core model.

Fortnite: free-to-play business model case study

how-much-money-has-fortnite-made
Fortnite developed by Epic Games is available in three modes. Save the World follows a premium model, where the game is sold, starting at $14.99- Battle Royale follows a free-to-play model, available for free. Still, gamers can buy things or customize characters with its digital currency (V-Bucks), and Creative Mode. As reported by Variety, Fortnite made $1.8 billion in 2019 and $2.4 billion in 2018.

While free-to-play in itself is a distribution model, rather than a business model. In reality, the way the game gets distributed influences the whole business model for the company. In fact, as a company like Epic Games, distributed Fortnite’s Battle Royale in a free-to-play mode it had to monetize the game at some other level.

Therefore, Epic Games came up with the V-Bucks digital currency, which could be used only on Fortnite to enable several level of aesthetic customization to characters (or to buy ancillary things within the game). Given the massive adoption of Fortnite, this strategy has proved quite lucrative. The free-to-play model, executed in this way can be extremely powerful to gain traction, quickly.

However, to make enough money to sustain the operations, and be also profitable, it will require to be distributed to a large number of people, to become a hit. When it does, chances that gamers will want to customize their characters will improve dramatically, thus enhancing monetization. That’s become the game itself becomes a cultural hit.

Connected Business Concepts

EA Sports Business Model

ea-sports-business-model
EA Sports is among the largest gaming publishers, with a hybrid strategy of fully-owned games and licensed games distributed with a cross-platform approach. FIFA is the game that most contributes to its revenues and live services (Ultimate Team in particular) are the largest revenue contributors to EA revenues.

Gaming Industry

gaming-industry
The gaming industry, part of the entertainment industry, is comprised of three main types of players. From game engines, which help developers build their games. To publishing gaming houses. And gaming consoles. While the prevailing business model for decades has been that of selling the console at cost, and make money on games. Digital games changed the way games are distributed and sold, and it opened up the way to free-to-play models.

Roblox Business Model

roblox-business-model
Roblox is an online gaming platform where users can create avatars and explore various gaming experiences. Each experience will be monetized based on how its developer has structured the game. For instance, free games allow users to spend the platform’s currency, called Robux, to get specific enhancements or purchase items like clothing accessories for the avatars, simulated gestures from the Roblox Avatar Marketplace. Therefore, Roblox makes money by earning a commission on each transaction and through its internal ad network.

Tencent

what-does-tencent-own
Tencent is a Chinese multinational conglomerate founded in 1998 by Ma Huateng, Zhang Zhidong, and Xu Chenye. Among its various global subsidiaries are companies in the online services, music, and artificial intelligence industries. But it is perhaps best known for its interest in the video game sector – both as a game developer for the Chinese market and the acquirer of several established gaming companies. Tencent is a vast company with a stake in more than 600 companies. Following is a look at some of the companies and subsidiaries it has a majority stake in.

Epic Games Business Model

epic-games-business-model
Epic Games is a gaming company, that develops, publishes, and distributes games. It comprises the Unreal Engine, making money through licensing agreements with developers and creators. Its games (like Fortnite) mostly follow a free-to-play model on PC and an in-app purchase model on the digital marketplace. And its storefront Epic Games Store, taking a 12% cut on games’ sales.

Free-To Play Business Model

free-to-play
A free-to-play is a model that became particularly popular in gaming. Free-to-play is also commonly referred to as free-to-start. For instance, companies like Epic Games have launched popular games like Fortnite’s Battle Royale, which had ingrained a free-to-play model. This is a model that become extremely popular in the digital age of gaming.

Play-To-Earn Business Model

play-to-earn
The play-to-earn model is a business model allowing gamers to farm or collect cryptocurrency and NFTs that can be sold on the market. This model has become a standard already in the “crypto gaming industry,” where the blockchain-based games enable token economics to kick in as an incentives mechanism at scale for users to play and be engaged.

How Does Candy Crush Make Money?

how-does-candy-crush-make-money
Candy Crush Saga is a match-three puzzle video game developed and published by King, a company specializing in social network-based games. Businessman Riccardo Zacconi co-founded King in 2003 after selling a subscription dating service he had also founded several years previous. The initial source of income for King was advertising revenue, but this strategy was abandoned in 2013. Today, Candy Crush Saga uses the freemium model (free to play) of revenue generation.

Epic Games Flywheel

epic-games-flywheel
Above the example of how the free-to-play model combined with the multi-player mode enabled the quick spread of Fortnite.

Read also: Gaming Industry, Epic Games Business Model, How Much Money Has Fortnite Made, EA Sports Business Model

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