Seems not that long ago -- in 2005, in fact -- that the industry felt the need to boost console game prices -- to as much as $60 -- in light of the rising cost of current-gen production.

But today -- only six years later -- in a very different world where "free-to-play" reigns, the industry is wondering aloud what will become of developers and publishers who stubbornly refuse to leave the paid business model behind.

Will gamers who are becoming used to getting their gaming fix at a nominal cost -- or at no cost whatsoever -- be willing to pay premium prices... even if publishers can make the case that theirs are premium games?

Beyond pricing, gamers have become increasingly used to new ways to consume content, thanks in large part to iOS and Facebook. New business and content models allow for agile responses to users' requests and microtransaction updates keep games lively -- and studios alive.

How important is it for console publishers and developers to respond to all this?

"This is very difficult and very complicated for Microsoft and Sony and Nintendo," says David Edery, principal of consulting firm Fuzbi LLC. "They know how to do one thing and do it very well. They -- and their top publishers -- know how to sell you a retail product for a large amount of money... and they've been doing that for a long time.

"So there's no question that they're scared; they're scared of screwing up a transition. Right now they have a model that they know works and they don't know if other models will work for them. And, consequently, that's why you see them moving so damned slowly.

"They're also worried about their relationship with retailers," he adds. "You hear everyone talking about the inevitable death of retail, but retail isn't dead yet; it still does have power. So the console makers have certainly been giving a lot of thought to 'How the heck do we explore these new models while, at the same time, not pissing off GameStop and Walmart too much.' And that makes this whole transition exponentially more complicated than it might be otherwise."

Indeed, in a recent Gamasutra interview, Nintendo insisted that it won't be cutting the prices of its 3DS handheld games, which currently sell for about $40 each.

"In terms of one dollar games or free games... we're not going to be competing with that," said 3DS project lead Hideki Konno. "We're just going to continually strive to not just maintain, but increase, the quality of the entertainment that we're providing, and let it sort itself out. Again, we're not worried about competing at a price point level. And I don't think that's just Nintendo; I believe that's more than likely Sony and Microsoft's opinion on that as well."

Free Realms

But while Sony would not provide a spokesperson to discuss its take on free-to-play games, the fact that two weeks ago its Sony Online Entertainment division released its popular and family-friendly free-to-play game Free Realms on the PlayStation 3 speaks for itself.

Originally launched for Windows in 2009 (a Mac edition debuted last November), Free Realms has picked up almost 17 million registered users. Though playing the game is free, users can purchase monthly memberships for additional content as well as in-game items via microtransactions.

In a story on Gamasutra last month, SOE was quoted as saying that Free Realms will be the first free-to-play MMO and the first family-targeted virtual world released on any console.

This could be a testing ground for future forays by Sony into the world of free-to-play, just as other publishers are dipping in their toes to test the waters.

At Electronic Arts, for instance, the giant publisher is poised to come out with its second free-to-play shooter, Battlefield Play4Free, which is currently moving into open beta and which is expected to fully launch during the spring. Its first, Battlefield Heroes was released in June 2009. And one of EA's other internal development studios -- EA Phenomic in Germany -- is about to start development on its third free-to-play title.

"So we're already in our third generation of titles in this business model which is a consumer behavior-led thing," says Ben Cousins, who until recently had been general manager of the publisher's free-focused Easy Studios. "There's a whole generation of very young people out there for whom the idea of going to a game store and spending $60 on something they haven't even tried yet is a very strange thing, just as it would their going to a record store and rifling through the vinyl."

"I don't think either business model -- paid or free -- is better than the other. I just think we're looking at a change of behaviors in consumers and these new platforms allow a very convenience-driven consumption of games. I think of it this way -- rather than the business model coming first, it's the distribution method that came first."

With two years of free-to-play under his belt, Cousins says one of the two biggest mental shifts he's had to undergo is that, when you launch the game, the process isn't finished; it's just starting.

And, he says, you need to be "incredibly, deeply reliant on metrics and data. If you rely on hearsay or your feelings about the product, you can kill it by making wrong decisions. We've learned to watch our metrics and become a data-driven business rather than a completely creatively-driven business."

While Cousins says it's hard to predict the future, he believes there's a good chance that the paid business model will completely collapse in the same way the packaged goods music model has collapsed.

"Companies that are able to move with the times and adopt the new business models -- and EA is an example of one which I think is very aggressively pursuing new business models -- they're likely to survive," he adds. "Companies that are just looking at short-term returns and aren't thinking about this inflection point, I think those companies could find themselves in trouble."

But Donald Mustard believes there's room enough for everybody.

Mustard is creative director and co-founder of Chair Entertainment Group, whose parent is Epic Games. Having developed Shadow Complex for Xbox Live Arcade and Infinity Blade for iOS, he has experience in both arenas.

Infinity Blade

"As a consumer, I want to be able to have super-short-session games on my iPhone and I want to have huge, expansive, amazing experiences on my big TV with my surround sound," he explains. "I want all of it. It gives me a ton of diversity as a gamer -- and I think there are lots of people out there who feel the same way. I believe there are some really smart people in the games industry who understand this and will shift what they produce to accommodate the consumers."

In fact, Mustard's strategy at Chair Entertainment has been exactly that -- looking at the various platforms and analyzing where the opportunities lie in each.

For instance, he says, when Chair decided that it wanted to be part of the emerging iOS market, it took a careful look at what games were successful and how people were playing those games.

"Because the iPhone has a touchscreen and the Xbox 360 doesn't, we wanted to utilize that touchscreen in a way that was unique that would provide a different type of gaming experience than one might have on an Xbox 360 or PS3," he recalls. "And we designed Infinity Blade from the ground up to utilize all the iPhone features so that the game would be totally different -- in the way you touch it, in how long you play it, and so on.

"We took the same approach on Shadow Complex -- analyzing what we could do that was unique to the Xbox 360, to its specific controller. And we think that's what has led to a lot of our success... finding the strengths and the opportunities of different devices and tailoring experiences for it."

Mustard recalls being amazed at how quickly gamers responded when Infinity Blade was released, showering Chair with instantaneous feedback that enabled the developer to improve the game in a way that would have been impossible with a console game.

"For example, we immediately heard from just a few people who were playing on their iPads and wished we had made the dodge buttons a little bigger because their fingers had a hard time reaching them," he says. "Traditionally we would have said that there was such a small number of people with that complaint that it wasn't worth the time and effort to create a patch.

"But, with the iOS platform, we were like 'Hey, that's a good idea!' -- and within a few days we had given gamers the option to make that button larger or smaller. That was an eye-opening experience for us -- to be able to respond to the market that quickly."

Similarly, Chair wanted to create a next-gen modern side-scroller that utilized the power of the Xbox 360. "We didn't think we could sell that kind of game for $60, but we still thought there was a market for it," Mustard recalls.

"We were so glad that Microsoft has a digital market -- Xbox Live Arcade -- where we could sell Shadow Complex for $15 or $20. And so the bottom line was that we found two different platforms for our two games, both very appropriate to those particular games, and both turned out to be hugely successful."

All the same, Mustard said that it is "inevitable" that the console space will have to learn from the iOS space -- when it comes to quick updates and responsiveness to users. "I think that the things that are happening in the social space and the handheld space are going to completely change the way we look at console games moving forward," he told Gamasutra in a recent interview.

The real question is what will the market be like when the next generation of consoles is unveiled two to three years from now. Ben Cousins believes that, by that time, gamers' iPads or their laptops will be significantly more powerful than consoles.

"So we could find ourselves at a point in 2012 or 2013 where a free-to-play game is not only free but is actually more convenient to play than a console game -- and even looks better," he says. "If I were a console maker today, I think the iPad would be my biggest worry."

Fuzbi's Edery agrees.

"In the very near future, it's very possible that Nintendo could wake up and find that Apple has eaten their lunch -- or Google through Android has done it. If the console makers don't start the transition process immediately, well, history is littered with companies that waited too long to embrace a revolution that was threatening their core business," he says.

"I mean, Kodak is the classic example. Digital photography was trying to take off and Kodak had this incredibly lucrative film business -- so they hemmed and hawed about whether it was worth tackling. The next thing you know it, Kodak is a shadow of its former self. That's exactly what can happen to console makers, there's just no question about it."