Welcome Back Program on PlayStation Network Highlights New Business Model

The PlayStation network was hacked and the personal information of millions of users was compromised. The network was down while Sony worked to fix the problem. Once security was improved, Sony initiated the Welcome Back program to restart activity and trust in the network. A recent article in IndustryGamers discussed new info on the free-to-play business model generated by the Welcome Back program.

Several games were given away for free, including LittleBigPlanet and InFamous. Both LBP andInFamous released new sequels around the same time and have seen a spike in sales, likely from PSN users who tried the original games for free.

“ESRB president Patricia Vance once discussed the lack of ‘release sequences’ in the video game industry compared to other forms of entertainment. For instance, a movie is first released in theaters where it generates the most revenue, then moves to the Pay-Per-View market, followed by the rental market and lastly, broadcast for free on network television. Within the video game industry, however, these sequences typically occur simultaneously with games being available physically, digitally and for rental concurrently and rarely made available for free.”

A lot of notables in the industry have been crowing about free-to-play for awhile, however, generating interest in sequels and the brand in general has not been often cited as a reason for free-to-play.

“The data [from the Welcome Back program] would indicate that the free sequence may be incredibly beneficial to the video game industry. For instance, LittleBigPlanet 2 experienced a 66 percent gain in IGN Page Views and a 23 percent increase in Unique Interest (an IGN viewer indicating interest or purchase in a title) in June compared to the month of May,”

The game industry is looking for new business models and millions in venture capital is being spent on companies trying to find the next big thing in video game sales and distribution.

“Making games a free download before their sequel releases is not a sustainable business model. Many gamers would wise up and wait for the free version to release, particularly if we’re talking about a single-player game. There are alternatives, however – the full game could be offered as a cheap download, like $5, for the month leading up to the game’s release.”

I’m not sure why the author says free downloads before sequel release is not a sustainable business model. I think it depends on the game. If it’s a core title, lots of gamers won’t wait for the free release, especially since core sequels are usually years in development. If it’s more of a mass-market title, free downloads have the potential to greatly expand the market share of the brand and add value for sequels, spin-offs, other platforms, DLC and microtransactions.

Also, the free download business model can be modified by adding in-game advertising and other forms of monetization.

“This has already proven to be a successful model in the mobile sphere, and when gamers actually get some value out of the ads (namely, a free game) they’ll probably resent them a whole lot less.”

The article also talks about free-to-play working if the titles are only available free to PlayStation Plus and Xbox Live Gold members. That is, getting more people to subscribe to the paid network models so they can get free games.

That sounds like a great idea for console manufacturers, but what about developers? Will they get a cut every time a subscriber downloads a free-to-play title and will the revenue share with first parties be worthwhile? I think that’s a big question. We’d need to prove added brand value and greater likelihood of big sequel sales before major titles would go into that pipeline.

“The above ad supported model is something that I think would work best with PSN or XBLA titles. It gives players a chance to try out a title for as long as they like without paying, and it gives the developer a little cash from the advertisements. I’m not sure it would work as a replacement for the cash received when a AAA title can command $59 on release, but it’s not a bad alternative.”

Another model not mentioned is releasing a free “lite” version of the game without all the levels, multiplayer options, level editors, etc. of the retail version. A “lite” version of a game can give players enough information to let them know if they’re interested in a sequel while still providing some incentive to pay for the original title. For example, players can upgrade the “lite” version of the game to the complete version for a reduced cost.

“…games still need better alternatives than retail supplemented by a little DLC and perhaps a multiplayer component. There are smarter ways to extend the life of AAA products, and after some experimentation, free or very cheap products may end up being the way to go for the industry.”

 We definitely need to do something to get console titles away from the $59.99 price point. There are too many people spending too many hours playing free or low-cost games. I think publishers need to look at combining business models for titles in every genre, looking at the market and the brand power to decide how best to monetize the title in multiple ways.

For example, you can buy the retail version of the game for $29.99, purchase additional levels at 99¢ each, buy skins, weapons, vehicles and such for varying prices and purchase the same game on other platforms at a discount. The console manufacturers and publishers won’t get their $59.99 up front, but there will be more overall sales at $29.99 and more players available to purchase additional content.

This model could do a lot for core brands that aren’t played by the mass market and do what the casual/social/mobile revolution has done for the whole industry—greatly expanding the percentage of people who play video games regularly. The console revolution brought many more people into video games. Casual/mobile/social expanded our market exponentially. More players equals more potential dollars overall. The casual/social/mobile players are not going to be easily convinced to pay $59.99, but they are already used to paying more to get additional content for games they already enjoy.

http://www.industrygamers.com/news/how-aaa-games-can-be-free-or-close-to-it/