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Freemium – an amalgamation of free and premium – is a business model where users are provided basic services for free with the option to pay and unlock premium add-on features later. This strategy is quite famous in the gaming sector, where companies lower the price of the game to zero to increase the number of downloads since it costs nothing to the user to start playing. Subsequently, the company can earn high revenues through micropayments. This model works on the lines of drug dealers, giving customers basic services for free to get them started and then charging higher amounts when they ask for more. Seeing the inherent benefits, many gaming companies have shifted from premium to freemium models. The math behind this is simple – if temple run was previously available for $0.99 and now after it has been made free to download, the game can get 10X downloads and a 15% conversion rate, making $0.99 through in-app purchases. Not only is Temple Run able to increase its revenues but also gets a free-to-play tag to its name. Even though the majority of the players do not make these purchases, they effectively act as a magnet to attract other prospective premium customers. This model is particularly prominent in multiplayer online games, which are played on devices such as smartphones, tablets and personal computers. Instead of actual money, most freemium games have virtual currency like gold coins, gems, superpowers, lives or hearts for executing in-game transactions.

Game developers are constantly looking for ways to monetise gameplay, and this is an interesting way to do so. An important task in the gaming sector is to incorporate behavioural psychology into the gaming structure. These gaming companies leverage the finite nature of players’ self-control by time-and-again flaring lucrative offers which can help players advance in the game or get a customised appearance for their characters. Since the cost of such add-ons is rather low, once the player gets addicted to the game, they will likely make the purchase. For example, in the game Modern Combat, players have the option to either complete a season or make a payment in order to get agent skins. Agent skins are cosmetic reskins that basically add no functional differences to the characters but only provide an additional layer of customisation. Despite zero utility, players still make such purchases which are evident from the fact that this drives the majority of their revenue. Just like gambling machines in casinos keeps people involved by serving regular customers with free snacks and drinks, freemium games, using similar strategies, keep players engaged by providing daily rewards, login bonuses and daily challenges. In order to target those customers who aren’t willing to pay for add-ons, companies also offer the removal of pain points from the game. A pain point is something that delivers an annoying experience to a player, such as pop up ads and video ads.

Some games offer removal of waiting time to open chests and rewards to provide a seamless gaming experience, while others, like candy crush, use micro-triggers to keep players hooked up. These developers understand the fact that people have an inherent preference for things that are scarcely available and thus provide players with exhaustive lives that revive only after 30 minutes. The player is thus left with the option to either wait or pay to play. Some games even send players reminders about special events or items for the given day, and if they haven’t played in a while, induce players to open the game and start playing. Games like Clash of Clans and Asphalt Legends require players to put considerable time and effort into developing game characters or building vehicles by collecting parts and upgrading levels to improve performance. When players get attached to their character or vehicle, gaming companies lure them into paying for these level upgrades and components for character development. These developers also use strategies such as limited-time offers, free trials and discounts on long-term subscriptions to create urgency amongst players and get them to convert.

However, freemium games are often criticised for favouring money over skill since they provide an unfair advantage to those who are willing to pay. This frustrates players as they feel the gaming companies are trying to soak in as much money as they can from the players’ pockets. These companies may need to operate at a loss for a considerable time as once people become habitual to playing for free, it is tough to convince them to pay for add-ons. The company is also required to put equal resources, at least initially, with both paying and non-paying customers, increasing their overall costs.

Nonetheless, the freemium model is an excellent way for game developers to multiply their revenues, along with giving players the opportunity of a more customised and fun experience. It also gives many people with lower incomes the opportunity to play without spending anything, which is not the case with premium games. Since it costs nothing to start playing, players also get the chance to see if they like the game or not before actually making purchases. Also, freemium games aren’t much different from arcade-machine games. In an arcade game, the player is required to put coins in the machine to play and repeat the process if they wish to play again. It is argued that if these video games have had a history of making people pay amounts in small instalments over a long time to play, the freemium model can not be put to blame.

If we take the case of the game – Plants vs Zombies 2, the strategy of the developers there is to make money out of the most devoted players who wish to unlock every plant, and thus the barriers to play for regular players are kept to a minimum. It takes a lot of grinds to get through the levels of the game and unlock new worlds, but it is not impossible. If the player wishes to go up the ladder a little faster, they can spend some cash without the game stopping them from achieving that themselves. This is the balance that every game developing company should strive to achieve. Players want free games with the best virtual experience, and developers need to make money. The key here is to develop an intelligent business model where players are not annoyed with the free version but, at the same time, also have an incentive to upgrade to the premium version. Thus, for the freemium gaming model to be successful, there is a need for an understanding between the developers and the players so that developers can multiply their revenues and customers can get a unique and dynamic experience without worrying much about their budgets.

By Akanksha Bhatt


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