Entertainment

The allure of free-to-play has grown too big for console gaming to ignore

The lucrative success of free-to-play is pushing more console and PC developers to change their business models.

A screenshot of Velan Studios’ Knockout City.

There's a growing cohort of premium games with shifting business models.

Image: Velan Studios

Velan Studios, the New York-based developer behind competitive dodgeball video game Knockout City, made an announcement last month that just a few years ago would have made the company an extreme outlier. Knockout City, the studio said, is going free-to-play in the spring, roughly one year after launching with a price tag of $20. The company is also splitting with publishing partner Electronic Arts to self-publish the game going forward.

In today’s game industry, that decision makes Knockout City part of a growing cohort of premium games with shifting business models, in response to a hypercompetitive market for online gaming that increasingly prioritizes a price tag of zero to reach a maximum number of players. Alongside Knockout City are massive hits like Psyonix’s Rocket League, PlayerUnknown’s Battlegrounds, Bungie’s Destiny 2 and Valve’s Counter-Strike: Global Offensive, all of which shifted to free-to-play in the last four years.

The logic is simple. In today’s gaming climate, developers are competing for an ever-shrinking slice of a player’s attention, and online games now live or die depending on whether they can hook players and keep them invested for months to years at a time, with games evolving into live services as opposed to one-off products. Paramount to keeping players around is making it easy for new ones to pick the game up and start playing with friends. Putting up a barrier of $20 or $40 or $60 can mean the difference between a small audience and a colossal one.

“Players may have churned out, more rivals have popped up. Now is the time they [might] want to broaden their audience and bring more players in,” said Craig Chapple, an analyst with gaming analytics firm Sensor Tower. “With free-to-play, you get rid of all barriers to playing your game. You make it accessible to the widest possible audience, and it all comes down to: Is the game fun, and do you want to keep playing the game?”

The free-to-play business model was once more exclusively the strategy of mobile games, which have become the fastest-growing and most lucrative sector of the $180 billion global game industry by tapping into massive international smartphone audiences. Mobile games have hit unprecedented scale and can generate billions in annual revenue because they are free and monetize through microtransactions, and because smartphones are far more ubiquitous than special-purpose gaming hardware.

A number of popular PC games began shifting to free-to-play over a decade ago, including competitive hits like Riot’s League of Legends. But console gaming has lagged far behind. Arguably not until Epic’s Fortnite released in 2017 did console game publishers start to see the potential in releasing cross-platform, free-to-play games that earn revenue over a long arc of time using in-game items and other microtransactions. (Fortnite also popularized the battle season subscription, which has been widely copied by other live service games.)

This shift to free-to-play often is accompanied by a switch in publisher or parent company, and reflects the ever-changing attitudes around how games should be funded during development and how to make that money back after launch. For instance, Rocket League only went free-to-play after Epic Games purchased Psyonix, and Bungie only shifted Destiny 2 to a free-to-play model after it split with publishing partner Activision.

“We’re really excited to bring our game to millions of new players around the world, by removing the price tag entirely,” Velan Studios said in a statement. “We couldn’t have introduced Knockout City to the world without the incredible support of EA Originals, but now as we switch to free-to-play, the natural next step is for us to take over publishing responsibilities and work even more closely with our community.”

For much of the last decade, developers have tried a hybrid approach, to mixed success. Electronic Arts is infamous for tarnishing paid games like Star Wars Battlefront II and the recently released Battlefield 2042 with messy in-game monetization. Meanwhile, a number of widely celebrated premium games like Blizzard’s Overwatch ran afoul of both consumers and overseas regulators by insisting on selling loot boxes, even after charging players an upfront cost to play.

“A lot of premium games do this, especially when they’re working on a live service. The ambition is to make it last for years, and they try to have the best of both worlds,” Chapple said. “Some do it successfully and players are fine with it, but some don’t.”

PUBG is perhaps the best example of a game that relied on a hybrid business model and managed to skirt controversy. From launch in 2017, PUBG on consoles and PC carried a price tag of $30, though the game also included loot boxes and other microtransactions. On mobile, however, the creators of PUBG partnered with Tencent to create an independent, free-to-play version of the game that has since become one of the most popular titles on the planet, earning nearly $3 billion last year alone and close to $8 billion in lifetime revenue.

Meanwhile, the console and PC versions of PUBG sold over 70 million copies, making it the fifth best-selling game of all time before publisher Krafton announced the game would shift to a free-to-play back in January. In the first week after going free, Krafton said PUBG saw a nearly 500% increase in new players, outpacing the game’s explosive growth at launch back in 2017.

Very few games can pull off what PUBG did, and the timeline for shifting to free-to-play for online multiplayer games appears to have accelerated greatly. Nowadays, it’s difficult to find success in the mobile market as a premium paid game unless you’re bundled as part of Apple’s Arcade subscription service or the competing Google Play Pass, Chapple said.

On console and PC, premium games with a price tag either tend to be new releases in major, established franchises, like FromSoftware’s Elden Ring or Sony’s Horizon Forbidden West, or they happen to be a breakout indie success story, like Sloclap’s martial arts brawler Sifu. Other indie games, like Acid Nerve’s Death’s Door and Drinkbox Studios’ Nobody Saves the World, have been finding success by partnering with Microsoft to either release on Xbox Game Pass at launch or join the subscription service after a brief period of selling the game at full price.

For online-only games, and especially ones like Knockout City that follow the Fortnite-like seasonal model with a steady update cycle of new features and content, it seems increasingly the case that the live service model is the only viable path to growing an audience and making money. “With live service multiplayer games, there is an argument to be made: ‘Why isn’t this free-to-play?’ If you’ve built up this microtransaction ecosystem, why not try to focus on that?” Chapple said.

“The reason I left [2K Games] and went to Amazon is because I want to do live service games. Because I actually believe it’s the future,” Amazon Games chief Christoph Hartmann told Protocol in a recent interview. “It is very hard to do single-player games that have a high chance of commercial success because the production costs, as we know, with every generation of consoles or PCs, goes higher and higher.”

Hartmann said he’s a firm believer that down the line, “every game is going to be a live service game” in one way or another. “When you look at the development cost and you look at what you pay for a game, you clearly see the development costs going [up], and then the game price is [staying flat],” he added. “That's why you have fewer and fewer games, and that's why you also have so many franchises.”

Games like Knockout City and Rocket League will of course continue to exist, and some may still try to launch with hybrid models. EA and Velan Studios knew from the get-go that free-to-play was a viable strategy; Knockout City amassed 2 million players in its first three days last year by letting anyone play it for free up until they reached a certain in-game level. The studio also inked a deal with Sony to give it away for free through PlayStation Plus for the entirety of 2021.

But it ultimately took a breakup with EA for Velan to take the plunge, and the studio now says it’s better prepared to “to fully realize our vision for the long-term future of this game.” And as live service gaming continues its broad takeover of the industry, Knockout City won’t be the last premium console and PC game to remove its price tag or forgo it from the onset.

LA is a growing tech hub. But not everyone may fit.

LA has a housing crisis similar to Silicon Valley’s. And single-family-zoning laws are mostly to blame.

As the number of tech companies in the region grows, so does the number of tech workers, whose high salaries put them at an advantage in both LA's renting and buying markets.

Photo: Nat Rubio-Licht/Protocol

LA’s tech scene is on the rise. The number of unicorn companies in Los Angeles is growing, and the city has become the third-largest startup ecosystem nationally behind the Bay Area and New York with more than 4,000 VC-backed startups in industries ranging from aerospace to creators. As the number of tech companies in the region grows, so does the number of tech workers. The city is quickly becoming more and more like Silicon Valley — a new startup and a dozen tech workers on every corner and companies like Google, Netflix, and Twitter setting up offices there.

But with growth comes growing pains. Los Angeles, especially the burgeoning Silicon Beach area — which includes Santa Monica, Venice, and Marina del Rey — shares something in common with its namesake Silicon Valley: a severe lack of housing.

Keep Reading Show less
Nat Rubio-Licht

Nat Rubio-Licht is a Los Angeles-based news writer at Protocol. They graduated from Syracuse University with a degree in newspaper and online journalism in May 2020. Prior to joining the team, they worked at the Los Angeles Business Journal as a technology and aerospace reporter.

While there remains debate among economists about whether we are officially in a full-blown recession, the signs are certainly there. Like most executives right now, the outlook concerns me.

In any case, businesses aren’t waiting for the official pronouncement. They’re already bracing for impact as U.S. inflation and interest rates soar. Inflation peaked at 9.1% in June 2022 — the highest increase since November 1981 — and the Federal Reserve is targeting an interest rate of 3% by the end of this year.

Keep Reading Show less
Nancy Sansom

Nancy Sansom is the Chief Marketing Officer for Versapay, the leader in Collaborative AR. In this role, she leads marketing, demand generation, product marketing, partner marketing, events, brand, content marketing and communications. She has more than 20 years of experience running successful product and marketing organizations in high-growth software companies focused on HCM and financial technology. Prior to joining Versapay, Nancy served on the senior leadership teams at PlanSource, Benefitfocus and PeopleMatter.

Policy

SFPD can now surveil a private camera network funded by Ripple chair

The San Francisco Board of Supervisors approved a policy that the ACLU and EFF argue will further criminalize marginalized groups.

SFPD will be able to temporarily tap into private surveillance networks in certain circumstances.

Photo: Justin Sullivan/Getty Images

Ripple chairman and co-founder Chris Larsen has been funding a network of security cameras throughout San Francisco for a decade. Now, the city has given its police department the green light to monitor the feeds from those cameras — and any other private surveillance devices in the city — in real time, whether or not a crime has been committed.

This week, San Francisco’s Board of Supervisors approved a controversial plan to allow SFPD to temporarily tap into private surveillance networks during life-threatening emergencies, large events, and in the course of criminal investigations, including investigations of misdemeanors. The decision came despite fervent opposition from groups, including the ACLU of Northern California and the Electronic Frontier Foundation, which say the police department’s new authority will be misused against protesters and marginalized groups in a city that has been a bastion for both.

Keep Reading Show less
Issie Lapowsky

Issie Lapowsky ( @issielapowsky) is Protocol's chief correspondent, covering the intersection of technology, politics, and national affairs. She also oversees Protocol's fellowship program. Previously, she was a senior writer at Wired, where she covered the 2016 election and the Facebook beat in its aftermath. Prior to that, Issie worked as a staff writer for Inc. magazine, writing about small business and entrepreneurship. She has also worked as an on-air contributor for CBS News and taught a graduate-level course at New York University's Center for Publishing on how tech giants have affected publishing.

Enterprise

These two AWS vets think they can finally solve enterprise blockchain

Vendia, founded by Tim Wagner and Shruthi Rao, wants to help companies build real-time, decentralized data applications. Its product allows enterprises to more easily share code and data across clouds, regions, companies, accounts, and technology stacks.

“We have this thesis here: Cloud was always the missing ingredient in blockchain, and Vendia added it in,” Wagner (right) told Protocol of his and Shruthi Rao's company.

Photo: Vendia

The promise of an enterprise blockchain was not lost on CIOs — the idea that a database or an API could keep corporate data consistent with their business partners, be it their upstream supply chains, downstream logistics, or financial partners.

But while it was one of the most anticipated and hyped technologies in recent memory, blockchain also has been one of the most failed technologies in terms of enterprise pilots and implementations, according to Vendia CEO Tim Wagner.

Keep Reading Show less
Donna Goodison

Donna Goodison (@dgoodison) is Protocol's senior reporter focusing on enterprise infrastructure technology, from the 'Big 3' cloud computing providers to data centers. She previously covered the public cloud at CRN after 15 years as a business reporter for the Boston Herald. Based in Massachusetts, she also has worked as a Boston Globe freelancer, business reporter at the Boston Business Journal and real estate reporter at Banker & Tradesman after toiling at weekly newspapers.

Fintech

Kraken's CEO got tired of being in finance

Jesse Powell tells Protocol the bureaucratic obligations of running a financial services business contributed to his decision to step back from his role as CEO of one of the world’s largest crypto exchanges.

Photo: David Paul Morris/Bloomberg via Getty Images

Kraken is going through a major leadership change after what has been a tough year for the crypto powerhouse, and for departing CEO Jesse Powell.

The crypto market is still struggling to recover from a major crash, although Kraken appears to have navigated the crisis better than other rivals. Despite his exchange’s apparent success, Powell found himself in the hot seat over allegations published in The New York Times that he made insensitive comments on gender and race that sparked heated conversations within the company.

Keep Reading Show less
Benjamin Pimentel

Benjamin Pimentel ( @benpimentel) covers crypto and fintech from San Francisco. He has reported on many of the biggest tech stories over the past 20 years for the San Francisco Chronicle, Dow Jones MarketWatch and Business Insider, from the dot-com crash, the rise of cloud computing, social networking and AI to the impact of the Great Recession and the COVID crisis on Silicon Valley and beyond. He can be reached at bpimentel@protocol.com or via Google Voice at (925) 307-9342.

Latest Stories
Bulletins