The freemium gaming app business model is the strategy that has helped large studios gain massive returns on mobile games, but the system, sometimes begrudgingly referred to as "pay to win," is forcing independent developers to work harder to drive innovation and leverage flexibility to stay on top of market trends, according to app development resource Developer Economics.
From the consumer's point of view, all developers may appear to choose whether they'll adopt the freemium model to monetize mobile software. On the contrary, smaller studios often lack resources to wait for the revenue to build from a trickle to a deluge of profits.
Because freemium games allow consumers to progress deep into a game without paying a dime, the model has been effective in courting gamers into a relationship in which they'll pay more to keep going than they would if they'd purchased a similar title for an upfront fee. Sometimes it is all but impossible to complete a freemium game without giving in to in-app purchases of upgrades.
In a blog post on Developer Economics, Ted Nash, of indie ad platform Tapdaq, says the large developers, often referred to as AAA studios, will continue to dominate app stores and the freemium model will remain the bane of indie developers.
"[I] don't think freemium as a business model for games gives a fair platform for genuine independent studios to thrive," Nash says. "However, individuals and small studios who create games are usually far more dynamic and should adapt to evolution faster than larger corporations."
The freemium model also benefits large studios, as consumer expectations are lower for a "free" game than for one that charges a fee up-front, Nash reasons. So along with starving indie developers of revenue when using the model, there are high expectations placed on those who choose to charge a flat fee at the door.
The freemium model has drawn the ire of consumers and regulators alike, as app store account holders have been charged hundreds of dollars for in-app purchases made by young children, without parental consent. Because of a legal battle regarding this issue, Apple no longer classifies freemium apps as "Free," choosing to label them instead as "Get" after the Federal Trade Commission sued Apple. The two parties ultimately agreed to a $100 million settlement.
Consumers have railed against Apple, Google and Amazon for what they consider lax safeguards that prevent users from racking up massive amounts of money from freemium apps. Core gamers, those who religiously play on consoles and PCs, often deride the freemium formula as being "grindy and "pay to win" instead of free to play.
Despite the consumer backlash against the freemium model, people are still paying to play games that serve the first few rounds on the house. However, consumers have voted with their wallets and freemium games consistently top the charts of the highest-grossing apps in the app store.
Nash says it's time for lovers of video games to take a pass on the temptation of freemium games. Doing so will encourage large developers to release deeper games and will take the pressure off indie studios.
"If game players are so anti-freemium games, then they need to do their bit," says Nash. "They need to start spending money on items which actually cost the developer resources to make, as opposed to buying hints and level-skipping upgrades which defeat the object of playing the game in the first place. They need to value the mobile gaming experience."
