The Review: A Journal of Undergraduate Student Research

Volume 16 Article 4

2015

Free to Play: Mobile Gaming and the Precipitous Rise of Freemium

Craig Heier [email protected]

Follow this and additional works at: https://fisherpub.sjfc.edu/ur

Part of the E-Commerce Commons, Other Business Commons, Recreation Business Commons, and the Technology and Innovation Commons How has open access to Fisher Digital Publications benefited ou?y

Recommended Citation Heier, Craig. "Free to Play: Mobile Gaming and the Precipitous Rise of Freemium." The Review: A Journal of Undergraduate Student Research 16 (2015): 5-11. Web. [date of access]. .

This document is posted at https://fisherpub.sjfc.edu/ur/vol16/iss1/4 and is brought to you for free and open access by Fisher Digital Publications at St. John Fisher College. For more information, please contact [email protected]. Free to Play: Mobile Gaming and the Precipitous Rise of Freemium

Abstract With the abundance of games that enter the App Store marketplace, developers struggle to compete for the user’s attention and potential download. Unlike traditional console-games, mobile-based consumers tend to be more apprehensive towards purchasing an app or a game if they are unable to trial it beforehand. These factors have contributed to the freemium becoming the face of the mobile gaming industry.

Keywords mobile gaming, freemium, gaming platforms

This article is available in The Review: A Journal of Undergraduate Student Research: https://fisherpub.sjfc.edu/ur/ vol16/iss1/4 Heier: Free to Play: Mobile Gaming

Free to Play: Mobile Gaming and the Precipitous Rise of Freemium

Craig Heier

Abstract opposition to ‘Pay2Win’ is still a With the abundance of games that enter pressing issue for developers. the App Store marketplace, developers The freemium strategy has the struggle to compete for the user’s possibility of attracting criticism, but the attention and potential download. fundamentals in which it operates are the Unlike traditional console-games, keys to financial success in any business: mobile-based consumers tend to be more repeat sales and maximizing income per apprehensive towards purchasing an app customer. or a game if they are unable to trial it beforehand. These factors have Emergence of In-App-Purchases for contributed to the freemium business Mobile Gaming model becoming the face of the mobile In the current mobile gaming gaming industry. landscape, there is a dividing problem amongst consumers and game Introduction developers, which concerns the The admiration of the freemium economic model that these games strategy (free-to-play with in-app implement. The vast majority of the purchases) is merely felt by the mobile markets are emerging as different developers and has triggered controversy variations of freemium-based games and from consumers. Critics of freemium apps. This dictates where an app or a games derive from two separate groups. game can be downloaded for free, then First is the faction of people that oppose the users have the option within the app the ‘Pay2Win’ system. This system to purchase extra content, boosts or permits a game to allocate advantages to levels. Critics of this business model players who spend the most (typically believe that mobile games or called ‘coiners’), rather than reward the applications should be sold at a price most skilled players. The second group that includes the entirety of the game of critics comes from parents who have and not be withheld content as an been charged hundreds of dollars as a incentive to purchase. Although result of their children playing these consumers have been subjected to games without the parent or account similar techniques of holder’s authorization. This issue was promotion, such as ‘free-trials,’ in the ultimately resolved in 2014, with Federal world of mobile gaming, the use of this Trade Commission’s settlement with model under the terminology of ‘in-app- Apple for over $32.5 million in purchases’ has generated an abundance reimbursements and the ban on allowing of controversy. purchases without password verification. While the parents who are freemium What is a Freemium? critics were primarily a problem caused The freemium strategy has been by the App Store provider, the a very successful and popular for mobile-based games. The

Published by Fisher Digital Publications, 2015 1 The Review: A Journal of Undergraduate Student Research, Vol. 16 [2015], Art. 4

model is structured so that developers Critics feel that the success of release the core functionality of their freemium games will inevitably alter the games for free, while offering upgrades, integrity of game developers as they features and additional content for a construct features, functionalities, and price with in-app purchases. The term difficulty curves for their games. Justin freemium originates from the Davis from the Imagine Games Network combination of the words “free” and (IGN) gaming elaborates on this “premium”. Essentially freemiums are concern by comparing traditional free-trials, ‘lite’ versions and paid- console games to freemium mobile premiums all wrapped into one business games: “if gamers buy a $60 game and model. The marketing strategy is based encounter an especially tough challenge, on the principle that a free game will they will work until they overcome it. more likely be downloaded over a game But encountering this same situation in a charging an upfront price. The potential freemium game with paid power-ups of generating a recurring revenue stream makes players wonder if the section is with in-app purchases overshadows the only tough because the developer is perceived loss of revenue by releasing trying to get players to spend money” the game for free. (Davis). For gamers, this breaks the trust with developers and Davis begs the Consumer Criticism question, “how long will a player Freemium games pose an struggle before concluding the stage is interesting debate over whether the just too tough without paid power-ups?” benefits outweigh the negatives. For This plants a seed of doubt that was starters, it is a win-win situation for both never present in traditional video games. consumers and developers when a game The slanted difficulty curve and is released for free. This allows users to constant advertisements for in-app play, test and determine if they enjoy the purchases can be too enticing for young game enough to keep playing with no generations to resist spending. Chris loss of money. Similarly, the benefit of Maxcer from Tech News World believes releasing a game for free drastically that freemium games “prey on the least improves the chances of the developer’s savvy and weakest of us all: kids and game being downloaded. Negatively, people with highly addictive ‘pay-to-play’ and ‘pay-to-win’ models personalities” (Maxcer). Maxcer are often used as controversial features reinforces his argument by pointing out of freemium games. ‘Pay-to-play’ how the game developer “has worked in models limit a user’s gameplay duration, a series of minor challenges and rewards unless they buy a time extension or wait to start creating actions (cues) associated 24-hours until the game resets. Another with rewards (pleasure response).” The criticism of freemium systems is when cues and pleasure responses of the game multiplayer games reward the biggest come from minimal stimulation as the spenders who essentially ‘pay-to-win.’ player first begins the game, however as These types of games reward spenders the player gets deeper into the game, the with unfair advantages and games boosts action required to stimulate the pleasure rather than awarding them to the most response (receiving awards, winning) skilled players. will become so difficult that it can only be satisfied with in-app purchases. For

https://fisherpub.sjfc.edu/ur/vol16/iss1/4 2 Heier: Free to Play: Mobile Gaming

Maxcer, freemium games are resolved this particular problem and programmed specifically and source of criticism for freemium games. intentionally to string its users down a After discussing the numerous progressively addictive path until “it arguments against the freemium games, seems natural to just tap and pay, tap and it is important to fully understand why pay…in order to win” (Maxcer). The game developers choose this business acceptance of Maxcer’s argument has model over traditional methods. been a tough pill to swallow for parents of these so-called ‘freemium-addicts.’ The Casual Gamer Consumer Base Within the two largest app-store After the introduction of the providers, Apple and , the Apple App Store in July 2008, the convenience of syncing a user’s credit traditional business model of card to their account is the norm. For publishing was drastically changed. thousands of parents who have kids Smart phones and tablets broadened the consistently play these freemium games, demographics of potential gamers the accessibility and incentive to spend substantially. The functionality of money is becoming a growing problem. mobile devices allow a new sector of In one case in Britain, an 8-year-old girl consumers the access to try video games managed to run up a bill of 4,000 pounds that they normally would not purchase if ($6,700) making in-app purchases from additional hardware was required (i.e. games such as “My Horse” and “Smurf’s gaming consoles or computers). Anyone Village” (Kang). Cases like these have with a smart phone or tablet becomes led to major settlements from companies subject to this clause, even if the like Apple to reimburse these purchases. intention of the device’s purchase was In January of 2014, Apple agreed to pay merely for its basic capabilities of at least $32.5 million in compensation to communication and/or productivity. As parents who didn’t authorize hefty the popularity of mobile devices purchases racked up by their children on increase, users tend to look for a simple their and iPads (Kang). The and casual game to spend their free time Federal Trade Commission’s settlement periodically through the course of the with Apple became the first punishment day (Vock, Dolen, and Ruyter 316). As handed to a major tech company over in- a result, there is not a need to build an app purchase games. The FTC reports in-depth and high-concept game for the that Apple unfairly deceived consumers demographics of mobile gamers. by allowing unlimited in-app purchases Approachable, simple and easy for a 15-minute period once the game to learn are not words typically used to was download without requiring any describe some of the most successful form of authorization. Consequently, console games, such as Microsoft’s Halo Apple made changes to their iOS series. For the mobile gaming sector operating system in order to require however, these attributes are ideal for its users to enter a password to authorize consumer base. A perfect example of any purchases on the account at any this concept is Dong Ngu Yen’s notable time. Although this settlement was quite game, Flappy Bird. The mechanics of recent, it appears that Apple and the the game are incredibly simple as it Federal Trade Commission successfully features a small bird which users are to fly between obstacles by tapping the

Published by Fisher Digital Publications, 2015 3 The Review: A Journal of Undergraduate Student Research, Vol. 16 [2015], Art. 4

touch-screen to keep their character mobile gaming market, the corporately airborne. Although the game appears selective console platform would have in quite simple, users quickly discover how place expensive obstacles for any up and unusually challenging it is to play. coming development team to hurdle. Flappy Bird quickly grew popular The traditional licensed business model amongst mobile users and climbed up of game publishing requires developers the charts on Apple’s App Store and to buy the rights to release their game . Seth Sivak, CEO of the from hardware manufacturers such as independent game studio, Proletariat Microsoft, Sony and . If the Games, believes that Flappy Bird’s development company has the financial success is more than just its simple and means to hurdle the licensing rights, they easy to use mechanics. Sivak notes that are still faced with meeting the in the App Store economic system, word requirements of producing a of mouth is bar-none the best promotion. conceptually diverse, high-price and in- Instead of telling a friend or two, depth gaming experience (McCrea 6). “nowadays youngsters have an entire These procedures in essence filter out internet to share with” exponentially the smaller budget development entities raising the coverage of that particular and keep the multi-million dollar game (LeFebvre). The other influential companies in lone control of the console factor that directly coincides with marketplace. Sivak’s word of mouth concept is that Within the economic structure of Flappy Bird was available to the App Stores, independent game growing masses of followers for free. developers are enabled to release their Primarily there is nothing stopping a games to an immense marketplace. person that has only heard great things When looking at a typical mobile-based about a particular game when it is free to game, one of the most notable download. In an environment such as characteristics is its simplicity and the the App Store where hundreds of ease of learning the mechanics. These thousands of games are available, identifying features are most commonly developers would rather have a potential applied to what’s known as a casual user download and try their game, than game. This type of game is targeted for shy away from a price tag. a mass audience of casual players. This is in contrast to traditional console Traditional Gaming Platforms vs. games, which typically have complex Mobile Gaming Platforms rules and require a greater amount of The nature of mobile gaming commitment from the player. Mobile platforms has allowed independent and game developers favor the casual genre smaller budget developers to capitalize rather than traditional for several on the highly-grossing industry of video reasons, one being the low barrier for games. According to the world’s entry. While console game developers leading information technology research face heavy entry fees, strict quality firm, Gartner Inc., the global video game requirements, non-disclosure marketplace was valued at $93 billion in agreements, policies and licenses, these 2013 and by the end of 2014, Gartner issues are largely absent for mobile predicts this value to reach over $100 game developers. A common billion (Gartner). Before the success of application distribution platform (the

https://fisherpub.sjfc.edu/ur/vol16/iss1/4 4 Heier: Free to Play: Mobile Gaming

App Store) handles the all distribution downloads at 8% and paid apps with in- and installation of the software at app purchasing at 2% (Fox). virtually no cost. This lowered barrier The decision to release a game results in developers choosing to create free of charge can be a financially dicey simpler games at a disproportionately move, as the game’s popularity is cheaper rate than producing more unforeseeable before it is released. By complex games (Ellingsen 2). Lowering choosing a freemium model or a free the entry barrier also invites greater game with annoying advertisements, the competition amongst developers to fight revenue stream entirely depends on for the user’s attention. Along with the retaining users and popularity for ease of installing and removing games, attracting new ones (Müller 5). In the developers are challenged to get the case of Nguyen’s free Flappy Bird player into the game and interested game, he was able to generate $50,000 a quickly. These factors ultimately make day in advertising revenue at its peak casual games the easiest to get through (“Summing Up”). The most successful to as many users as possible. freemium games, Candy Crush Saga and Clash of Clans, have also generated Developers Seek Alternative Revenue extraordinary revenues. It is estimated Streams that Candy Crush Saga makes With the abundance of games $1,000,000 per day from in-app that enter the App Store marketplace, purchases (BBC). Likewise Surpecell, developers struggle to compete for the the developers of Clash of Clans, have user’s attention and eventual downloads. reported generating $892 million of Games that are sold for anything more revenue for 2013 (Forbes). than $0.99 are often deemed over-priced Distinguished by their success, these and the consumer willingness to even titles have influenced many, if not all, pay $0.99 is becoming questionable developers to choose (Fidelman). To compensate for freemium over any other business consumer trends, the majority of mobile model. platform developers have implemented Looking at in-app purchasing in the freemium in-app purchase business freemium games more generally, the model. Freemium is the gaming model research and mobile consulting which attracts players with a free game company, Swrve, documents these download, but then offers purchases for trends in their 2014 “Mobile Games the game-content within the app. These Monetization Report.” According to purchases can include dual in-game Swrve, a significant portion of revenue currencies, boosters to aid gameplay, in the freemium space comes from a and in many cases time-based limits to very small pool of users who are willing starting new games that can be to spend their way to the end of a game. circumvented through payments (“Vital “50% of a typical game revenue is and Depressing Lesson”). When looking derived from 10% of the playing at the top twenty titles in the Apple App customers, while looking at total usage Store, 90% of them are using the that means half of the revenue stream is freemium template. The remaining coming from just 0.15% of the user percentage of titles are paid-for base” (Swrve). Ewan Spence of Forbes Magazine believes there is rationale

Published by Fisher Digital Publications, 2015 5 The Review: A Journal of Undergraduate Student Research, Vol. 16 [2015], Art. 4

behind freemium game developers gamers to spread the word when they chasing the aforementioned 0.15% of the come across poorly implemented user base that are responsible for large freemium tricks because voicing their purchases. There is validity behind opposition is key to obtaining change. Spence’s argument when looking at Chris Maxcer from Tech News World Swrve’s documentation of “purchases illustrates the standards that gamers over $50 may only make up 0.7% by should follow when judging freemiums: volume, but by income they make up 9% “if the app provides true value, if it's up of the total revenue” (Swrve). The front in what is free and what is not free, freemium business model allows if it doesn't implement underhanded, developers the ability to generate income confusing tactics that trick or bait-and- through variable pricing and ongoing switch users into buying things they did revenue. The keys to financial success not intend, then freemium is cool.” in the mobile gaming industry are like Gamers need to be conscious of these any other business: repeat sales and exploitive methods as they happen quite maximizing income per customer. often. This awareness will help users identify and ignore such tactics while Conclusion rewarding the developers that treat their The success of the freemium audience right. business model has made an influential impression on game-development studios both large and small. It appears Reference that mobile games will continue to use BBC News. "What Is the Appeal of the in-app purchase method for the Candy Crush Saga?" BBC News. coming years, however the question of BBC (British Broadcasting integrity behind the structural Network), 17 Dec. 2013. Web. 29 development of games will increasingly Apr. 2014. become more pressing as users start to Davis, Justin. "The Dark Future of take notice. Freemium Games, and How We Can Information is power and gamers Avoid It." IGN. News Corporation, should arm themselves with the tools 20 July 2012. Web. 25 Apr. 2014. necessary to avoid an unpleasant Ellingsen, Stian A. "How Tablet-Based freemium experience. Every game on Games Are Changing the Traditional Apple’s App Store lists the most popular Game Markets." IMT 4996 Digital in-app purchases for that game. Gamers Entrepeneurship (2013): 2-5. Print. can use this to decipher how much Fidelman, Mark. "The 6 Things Mobile money they would need to spend to Game Developers Must Do to maximize the game, and whether those Survive." SeekOmega.com. Seek purchases are recurring or not. Gamers Omega, 28 Feb. 2012. Web. 23 Mar. should also avoid purchasing items that 2014. provide gameplay advantages as they Forbes Magazine. "'Clash of Clans' ruin the integrity of the game’s intended Developer Supercell Reports $829 challenge. Developers will take notice Million In Revenue And A Desire To and eventually they will learn to charge Support The Finnish Community." for content and customization rather than Forbes. Forbes Magazine, 12 Feb. gameplay boosts. It is important for 2014. Web. 29 Apr. 2014.

https://fisherpub.sjfc.edu/ur/vol16/iss1/4 6 Heier: Free to Play: Mobile Gaming

Fox, Zoe. "Freemium Is the Most ECT News, 19 Dec. 2013. Web. 22 Profitable Pricing Strategy for Apr. 2014. Apps." Mashable. N.p., 19 Dec. Müller, Roland M. "A Comparison of 2013. Web. 25 Apr. 2014. Inter-Organizational Business Gartner, Press Release. "Gartner Models of Mobile App Stores: There Worldwide Predicts for VGM." Is More than Open vs. Closed." Gartner Says Worldwide Video Journal of Theoretical and Applied Game Market to Total $93 Billion in Electronic Commerce Research. 2013. Gartner Inc., 29 Oct. 2013. N.p., 16 Jan. 2013. Web. 25 Mar. Web. 24 Mar. 2014. 2014. Kang, Cecilia. "FTC Says Apple Will Spence, Ewan. "Summing Up Mobile Pay at Least $32.5 Million over In- Gaming In 2013 With A Single app Purchases." Washington Post. Word...Freemium." Forbes. Forbes The Washington Post, 16 Jan. 2014. Magazine, 28 Dec. 2013. Web. 25 Web. 23 Apr. 2014. Mar. 2014. LeFebvre, Rob. "The Million-Dollar Spence, Ewan. "The Vital And Question: How Do You Make The Depressing Lessons Flappy Bird Can Next Flappy Bird?" Cult of Mac. Teach Indie Developers." Forbes. Cultomedia Corp, 31 Mar. 2014. Forbes Magazine, 18 Feb. 2014. Web. 01 Apr. 2014. Web. 25 Mar. 2014. McCrea, C. "We Play in Public: The Swrve. "Swrve Press Release." Mobile Nature and Context of Portable Games Monetization Report. Swrve Gaming Systems." Convergence: Inc., 25 Feb. 2014. Web. 01 Apr. The International Journal of 2014. Research into New Media Vock, M., W. V. Dolen, and K. D. Technologies 17.4 (2011): 389-403. Ruyter. "Understanding Willingness Print. to Pay for Social Network Sites." Maxcer, Chris. "When Freemium's Journal of Service Research 16.3 Good, It's Very Good and When It's (2013): 311-25. Print. Bad, It's Horrid." Tech News World.

Published by Fisher Digital Publications, 2015 7