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.

Workplace

Netflix’s layoffs reveal a larger diversity challenge in tech

Netflix just laid off 150 full-time employees and a number of agency contractors. Many of them were the company’s most marginalized employees.

It quickly became clear that many of the laid-off contractors possessed marginalized identities.

Illustration: Christopher T. Fong/Protocol

After Netflix’s first round of layoffs, there was a brief period of relief for the contractors who ran Netflix’s audience-oriented social media channels, like Strong Black Lead, Most and Con Todo. But the calm didn’t last.

Last week, Netflix laid off 150 full-time employees and a number of agency contractors. The customary #opentowork posts flooded LinkedIn, many coming from impacted members of Netflix’s talent and recruiting teams. A number of laid-off social media contractors also took to Twitter to share the news. It quickly became clear that similar to the layoffs at Tudum, Netflix’s entertainment site, many of the affected contractors possessed marginalized identities. The channels they ran focused on Black, LGBTQ+, Latinx and Asian audiences, among others.

Keep Reading Show less
Lizzy Lawrence

Lizzy Lawrence ( @LizzyLaw_) is a reporter at Protocol, covering tools and productivity in the workplace. She's a recent graduate of the University of Michigan, where she studied sociology and international studies. She served as editor in chief of The Michigan Daily, her school's independent newspaper. She's based in D.C., and can be reached at llawrence@protocol.com.

Sponsored Content

Why the digital transformation of industries is creating a more sustainable future

Qualcomm’s chief sustainability officer Angela Baker on how companies can view going “digital” as a way not only toward growth, as laid out in a recent report, but also toward establishing and meeting environmental, social and governance goals.

Three letters dominate business practice at present: ESG, or environmental, social and governance goals. The number of mentions of the environment in financial earnings has doubled in the last five years, according to GlobalData: 600,000 companies mentioned the term in their annual or quarterly results last year.

But meeting those ESG goals can be a challenge — one that businesses can’t and shouldn’t take lightly. Ahead of an exclusive fireside chat at Davos, Angela Baker, chief sustainability officer at Qualcomm, sat down with Protocol to speak about how best to achieve those targets and how Qualcomm thinks about its own sustainability strategy, net zero commitment, other ESG targets and more.

Keep Reading Show less
Chris Stokel-Walker

Chris Stokel-Walker is a freelance technology and culture journalist and author of "YouTubers: How YouTube Shook Up TV and Created a New Generation of Stars." His work has been published in The New York Times, The Guardian and Wired.

Fintech

Crypto doesn’t have to be red or blue

Sens. Cynthia Lummis and Kirsten Gillibrand are backing bipartisan legislation that establishes regulatory clarity for cryptocurrencies. This is the right way to approach a foundational technology.

"Crypto doesn’t neatly fall along party lines because, as a foundational technology, it is — or should be — inherently nonpartisan," says Diogo Mónica, co-founder and president of Anchorage Digital.

Photo: Anchorage Digital

Diogo Mónica is president and co-founder of Anchorage Digital.

When I moved from Portugal to the United States to work at Square, it was hard to wrap my head around the two-party system that dominates American politics. As I saw at home, democracies, by their very nature, can be messy. But as an outsider looking in, I can’t help but worry that the ever-widening gap between America’s two major parties looms over crypto’s future.

Keep Reading Show less
Diogo Mónica
Diogo Mónica is the co-founder and president of Anchorage Digital, the premier digital asset platform for institutions. He holds a Ph.D. in computer science from the Technical University of Lisbon, and has worked in software security for over 15 years. As an early employee at Square, he helped build security architecture that now moves $100 billion annually. At Docker, he helped secure core infrastructure used in global banks, governments and the three largest cloud providers.
Fintech

What downturn? A16z raises $4.5 billion for latest crypto fund

The new fund is more than double the $2.2 billion fund the VC firm raised just last June.

A16z general partner Arianna Simpson said that despite the precipitous drop in crypto prices in recent months, the firm is looking to stay active in the market and isn’t worried about short-term price changes.

Photo: Andreessen Horowitz

Andreessen Horowitz has raised $4.5 billion for two crypto venture funds. They’re the industry’s largest ever and represent an outsized bet on the future of Web3 startups, even with the industry in the midst of a steep market downturn.

The pool of money is technically two separate funds: a $1.5 billion fund for seed deals and a $3 billion fund for broader venture deals. That’s more than other megafunds recently raised by competitors such as Paradigm and Haun Ventures.

Keep Reading Show less
Tomio Geron

Tomio Geron ( @tomiogeron) is a San Francisco-based reporter covering fintech. He was previously a reporter and editor at The Wall Street Journal, covering venture capital and startups. Before that, he worked as a staff writer at Forbes, covering social media and venture capital, and also edited the Midas List of top tech investors. He has also worked at newspapers covering crime, courts, health and other topics. He can be reached at tgeron@protocol.com or tgeron@protonmail.com.

Entertainment

How Amazon built its kid-focused Glow video calling projector

Robots, laser pointers, talking stuffies: Amazon’s devices team went through many iterations while developing its very first interactive projection device.

The Amazon Glow is the first interactive projection device sold by Amazon, and it could be a stepping stone for the company to use the technology in other areas.

Illustration: Christopher T. Fong/Protocol

Cats love chasing laser pointers. So why not have kids do the same?

When a small team within Amazon’s devices group began exploring the idea of a kid-focused video calling device nearly five years ago, they toyed with a lot of far-out ideas, a laser pointer controlled by an adult calling from afar being one of them. The suggestion was quickly dismissed over eye safety concerns, but it did lead the team down a path exploring projection technologies.

Keep Reading Show less
Janko Roettgers

Janko Roettgers (@jank0) is a senior reporter at Protocol, reporting on the shifting power dynamics between tech, media, and entertainment, including the impact of new technologies. Previously, Janko was Variety's first-ever technology writer in San Francisco, where he covered big tech and emerging technologies. He has reported for Gigaom, Frankfurter Rundschau, Berliner Zeitung, and ORF, among others. He has written three books on consumer cord-cutting and online music and co-edited an anthology on internet subcultures. He lives with his family in Oakland.

Latest Stories
Bulletins