Vendors love subscription-based pay models for their consistent and predictable streams of revenue. Similar ideas have existed for at least a century, from jelly-of-the-month clubs to gym and cable subscriptions – but now, the Internet has made a wider variety of services and more personalized marketing possible.
Here’s a brief overview of how videogame producers are using digital distribution to redefine the subscription model. For those of you that don’t know your MMOs from your FPSes, I’ve also provided non-videogame examples of companies that have adopted these strategies to sell actual goods.
Subscription-based games like World of WarCraft that charge a fee every month have existed since the late 1990’s, but this model is quickly being phased out by more casual games that you can play for free and don’t have to spend so much time or money on – think Angry Birds or Minecraft.
In that sense, gaming was forced to evolve a lot like TV and movies have had to in order to compete with streaming sites like YouTube. Lately, videogames have taken the Netflix/Hulu approach: instead of just getting one game for a monthly fee, you’re given access to a whole library of older games that you would have otherwise had to pay for individually (see: PlayStation Plus, EA Access).
Just like the superhero movies that dominate the box office on a regular basis, the most popular and highest-selling videogames tend to be sequels or part of an established franchise. This trend has discouraged large companies from investing in new properties, but newer, smaller teams are still exploring the Wild West of app and mobile game development.
In 2011, Free-to-Play (F2P) games like Angry Birds made more money in Apple’s App Store than “premium” games you had to pay money upfront for. Despite the name, F2P developers make their money by charging user fees for updates, upgrades, and additional levels.
The success of this model hints at a paradigm shift in marketing: it’s no longer based around simple sales numbers “one-and-done” products, but generating and maintaining interest over time for a single game. The crazy part is that even though only 1 – 5% of mobile gamers will actually spend money, these F2P games end up reaching such a broad audience that they can still turn over huge profits.
This isn’t an entirely new method of distribution – consider musicians who release free mixtapes in the hopes that they’ll make their money back from shows and merchandise. U2 did the same thing earlier this month by uploading its newest album to 500,000,000 iTunes accounts worldwide. The band received a lot of backlash for this move, since even though the music was technically free, finding the album forced into your iTunes was kind of like waking up with a pimple.
The criticism that followed U2’s large scale gaffe tell us that what consumers truly value is the agency that comes with deciding what we do and do not pay for. We’re so devoted to the concept of “choice” that there is, in fact, a subset of the population that would rather pay $300 for a videogame sword than accept Bono’s new album for free.