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.

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.
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.
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.

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

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Gennaro Cuofano

Gennaro is the creator of FourWeekMBA which target is to reach over two million business students, executives, and aspiring entrepreneurs in 2020 alone | He is also Head of Business Development for a high-tech startup, which he helped grow at double-digit rate | Gennaro earned an International MBA with emphasis on Corporate Finance and Business Strategy | Visit The FourWeekMBA BizSchool | Or Get in touch with Gennaro here