The free-to-play business model is sweeping through the game industry and could generate $7 billion in revenues worldwide by 2015, according to a report by DFC Intelligence and LiveGamer. While that’s good, it doesn’t represent the hyper growth that some observers expect for the category.
The forecast shows growing acceptance of the model, where users can play a game for free and pay real money for virtual goods in the game as they progress. The model has become popular in everything from Asian fantasy role-playing games to casual games such as FarmVille on Facebook. It also includes online games such as Free Realms, RuneScape and MapleStory in the massively multiplayer lite category.
David Cole, an analyst at market researcher DFC Intelligence, said in an interview that free-to-play games were a $3.2 billion business in 2009, thanks mainly to $2.1 billion in revenues in Asia. The U.S., meanwhile, has been slower to accept the model. But with the growth of Facebook games, free-to-play is on the rise here too. In the U.S., free-to-play games generated $350 million in 2009, according to DFC. That will grow to $500 million in 2010 and $1.5 billion in 2015. By comparison, console game sales in the U.S. at retail are about $20 billion.
Cole said he is well aware that some people have estimated that Zynga alone generated $270 million in 2009 and was on a much faster run rate in 2010. Also, Inside Network estimated that virtual goods revenues would grow from $1 billion in 2009 to $1.6 billion in the U.S. in 2010. Cole thinks those numbers are too high. He said his numbers include virtual goods revenues from social games and massively multiplayer online games where there is no mandatory subscription fee. He also said he does not include offer-related revenue in his numbers.
Still, Cole said, “There is a lot of opportunity here and we see healthy growth in 2010.” He said the percentage of people who pay for virtual goods in a game varies wildly, but it is usually well under 10 percent. The average purchase is usually over $10, which suggests that the description of these transactions as “micro transactions” is wrong. LiveGamer said its 145 titles see an average revenue per paying user of $28 per month.
The survey was conducted in January and February 2010 among nearly 5,000 gamers in North America and Europe. In addition, DFC analyzed seven years of LiveGamer’s data. LiveGamer runs a virtual goods platform for games.