In this world of next-gen systems, high definition graphics, motion controls, and frame rates that would blow our pong-playing parents' minds, flash games remain a strong component of games being played worldwide. It's hard to find someone who has never played an online flash game - and had a good time doing it at that.
While speaking recently at Game Connect Asia Pacific, David Edery, former head of Microsoft's Xbox Live Arcade spoke about the nature of videogame markets, and how free-to-play flash games manage to break the mold in increasingly significant ways.
Why do so many game developers seem to think that flash is not a market worthy of their time and effort? Maybe because flash games are generally expected to be free. And while people generally like free content, publishers do not.
And that's where FarmVille changed everything. The Facebook game by Zynga that caught on like wildfire has-- like it or not-- added millions of people to the gaming community, and potentially changed the way that modern game developers think about their business models.
Edery, founder of Spry Fox Games and Fuzbi consulting, explained that a new gaming platorm must go through 4 distinct stages in its development:
- In the beginning, nobody quite knows what to do with the platform and content is stagnant. Until some developer comes along with a new idea, and there is an eruption in the excitement surrounding the platform.
- The platform is then swamped with copycats, as other developers attempt to capitalize on the same interest without generating new content.
- The platform then experiences content overload, which Edery refers to as "inevitable misery." Too much noise erases the lines between the good and the bad.
- Finally, a handful of companies grasp how to realize the platform's potential, and begin to deliver a steady stream of high quality content that is able to stand out from the rest.
Edery has a lot to back up his view, since nearly every gamer can recognize this pattern since the inception of their platform. In this model, developers are given the power to evolve the industry and market as a whole by delivering better content to consumers. Where Edery sees the advantage of free-to-play games like FarmVille is the lack of a serious barriers to entry - since no payment or download is required. In this sense, flash games offer consumers a chance to see for themselves without having to give anything up-- a benefit for developers that other platforms cannot share.
With millions of flash players around the world, Edery's Spry Fox is dedicating itself to developing quality flash titles, with a business model centred around microtransactions. By making your money a dollar or two at a time from customers who would rather purchase extra content than work for it, or miss out on it altogether, advantages become apparent. To back up his claims, Edery drew attention to a quote from an MIT Sloan/Wall Street Journal Management Review:
“A very large percentage of loyal customers–often more than 50 percent -- are not profitable for most companies, because their loyalty is driven largely by an expectation of great deals. Profitable customers tend to make up only about 20% of a company’s customers.”
While the report was concerned with industries in general, the 20% stands out to game developers, since it reflects the rates that free-to-play games usually see as customers switching from free to paid play. Since Farmville was free for anyone who wanted to spend time with it, many took the opportunity to kill time when the game first launched. Releasing a free demo is still seen as a good way of increasing the amount of potential buyers, so this shouldn't come as a surprise to anyone. By making it possible to spam-advertise all of the player's friends with a single click, and placing incentives on doing so, the base of people playing grows exponentially.
While retail released games on major consoles may seem to make more in profits, the investment and risk is much greater as well. Mainstream console gaming hinges on one single fact: a game needs to be bought in order for the developer to generate revenue from it. Lest we forget, revenue isn't even the same thing as profits, just a return on your investment. And that is where Edery sees the greatest potential in free-to-play gaming:
“Free-to-play is a way of saying ‘I get the fact that 80 percent of my customers are probably not going to be profitable for me’ ... No problem. I’ll make a game that they can play and have fun with ... I’m not going to worry too much about what happens with them. I just need them to be there so they invite their friends to come in and play and hopefully give me lots of money.”
Edery definitely has examples on his side, with World of Warcraft, Team Fortress 2, and a host of other online games recently throwing their lot in with the microtransaction crowd. Not to mention, Lord of The Rings Online switch to free-to-play with microtransaction has led to the game being more profitable. It seems simple enough; the more people that you have playing your game, the more profitable it will always be. So what's the easiest way of getting people to play it? Make it free.
So what does this mean for the future of gaming? Edery's thoughts and theories are strongly backed by the adoption of free-to-play as a legitimate business model, especially in MMOs, so we'll have to wait and see if this is just the first stage in a new lifecycle for free-to-play. As always, we'll keep you posted.