Free-to-play Isn’t Free Enough (or How I Learned to Stop Worrying and Love Blockchain) Pt.1
This is the first of three posts on our motivations for starting Forte, a new company formed to accelerate adoption of blockchain technology in the games industry. These posts are oriented toward my blockchain curious friends in the games industry, and try not to assume too much blockchain / crypto native knowledge or jargon (except where necessary).
I’ve been building technology for game developers in one form or another for 13 years. In the mid-2000s, we built the most widely used game engine technology in the world at GarageGames, democratizing game development during the advent of digitally distributed games by offering professional caliber solutions at prices anyone could afford. Ten years later, we took this concept even further at Unity, bringing this category to maturity with truly world-class AAA performance, best-in-class authoring tools, support for familiar script languages, and streamlined packaging & deployment to more than a dozen platforms. Over the same time period, a new class of infrastructure needs was created as dramatic changes to the business models supporting game developers’ creations swept through the industry.
To compete effectively in this new market where developers could gain direct access to their players through digital distribution, development budgets increasingly needed to absorb costs associated with different services and infrastructure to find and grow live audiences of players. A successful game developer toolset expanded to need data science & tools, identity management, live operations, realtime customer support, content management & updates, performance marketing & automation, highly concurrent scalable web services, low latency data stores, and server-authoritative logic of ever increasing complexity. We got a taste of this complexity at GarageGames firsthand in 2008, running our own free-to-play games and building common infrastructure on the open web just prior to Facebook opening its web platform and immense distribution leverage to developers, creating a frenzy of growth that birthed the likes of Zynga and Kabam. At Unity, solving this class of problems was my primary area of concern and focus. In the years since, I’ve been an investor in, developer of, and customer of dozens of solutions built to address these challenges and I’ve come to understand them as a far more potent competitive differentiator than traditional technology focus at game companies (rendering, physics, particles, scripting, animation, etc.) or middleware providers like Unity and Epic.
What drove all this complexity for game developers? The short answer is simple: free-to-play. But let’s unpack it…
In the mid-2000s, you’d have been hard-pressed to find free-to-play game economies almost anywhere in the West. They’d just begun to surface in the East where console distribution was stymied in favor of PC net cafes (China), broadband penetration was a decade ahead of the West (South Korea), and carrier-dominated mobile markets (Japan) supported mobile payments and direct-to-consumer business models for mobile app & content developers. In discussing the topic of free-to-play with publishers from the West at this time, you’d often hear comments like “those models won’t work with gamers here” or that none of these franchises had “staying power.” These attitudes changed rapidly over a short period of time as large game publishers in the West found themselves missing growth opportunities and being punished by public markets as they had difficulty playing catch up after nimble new gaming startups grew at incredible speeds..
For those paying close attention to the industry during this period, it was clear that a convergence of trends were about to make the free-to-play / micro-transaction based business models impossible to ignore. On the web, performance advertising made the acquisition of players a quantifiable science, and Facebook initially made it *much* simpler for developers to manage. Gaming-capable mobile phone adoption and eventual consolidation under iOS and Android brought still greater reach and fidelity to the science of finding an audience of players at global scale. Marketing a $60 console product, or even a $10 retail PC product, in competition for these same players was largely a long-term losing proposition for publishers on open platforms and the clock was ticking loudly for console publishers in their protected ecosystems.
Of course, it wasn’t just the advantage offered by marketing a free-to-play product (vs. a pay-upfront product) that turned the tide toward microtransaction dominance — it was this in combination with the high-fidelity management of a game’s audience. Publishers with the ability to quantify and differentiate the disparate value that players bring to a game were also able to differentiate their marketing efforts based on this data. There are very few effective performance marketing channels available for paid games. Advertising companies like Facebook, Google, and Unity (among many others) have made nearly 3B mobile users, thanks to rich data profiles, available to marketers to pursue at specific per user installation cost with high-fidelity targeting. With very few exceptions (e.g. Minecraft), this reach in combination with very sophisticated live operations services created nearly all of the game industry’s biggest winners of the last decade. The outsized success of companies like King, Supercell, Kabam, Epic (with Fortnite), Zynga and MZ would not have been possible without rapid and effective adaptation to this disruption.
Every successful free-to-play game developer faced a growing dilemma. To create deeply engaging games that anyone could play for free, but also play an important and self-directed role earning progress and rewards meant that game economies needed to become much deeper and more complicated as they balanced self-directed progress with the need to create very deep wells of value for the most committed and highest spending players. There’s a natural tension between the efforts of designers to create and nurture an economy that supports players desire for agency / self-directed play so that the road ahead won’t become predictable and boring after months or years of play, and with enough depth to support a wide variety of engagement and spending among players, and the necessity of being able to manage such a flexible system.
Most games manage this complexity with the mere illusion of flexibility when, under the hood, modes of progress are very much on rails. Some games not only take on the risk of increased flexibility, but also the task and preparation of corrective tools to avoid unstable or undesirable outcomes, like players having way too much of a given resource or not caring at all about items the designers intended to be pursued as highly desirable rewards. At the very flexible end of the spectrum, this ends up looking like running a very sophisticated economy with command & control like management features where the “state” owns all the assets as a monopoly supplier and makes the market for every demand, or at least the demands they are able to anticipate.
If you ever wondered why so many games have so many currencies, item types, and siloed systems, it’s not because this is what players want or what designers want. It’s what designers need to make sense of and effectively manage the complexity of a game economy, doing their best to anticipate every demand with adequate supplies and a system of sources and sinks. Want less complexity? It will likely come at the expense of either agency for the player or control for the game team.
The very best designers go to great lengths to hide this complexity from players, or introduce it slowly, gated by long-term engagement. Supercell are masters at this (and many other design challenges), as are the authors of long-lived games like Eve Online, World of Warcraft, and classics like Travian (like Kevin, this was my own first introduction to free-to-play game economies). I’d be remiss without also giving a shout out to to the Destiny team (primarily in year one), for building in an incredibly elegant way all the systems needed to support a long-lived free-to-play franchise, offering tremendous flexibility / agency to the player while making interaction & management of these systems intuitive and easy to understand. If we lived in an A/B testable universe, I’d love to know what might have been had that game embraced free-to-play and been equipped with first-class live management tools.
Over the course of its 10+ year history in the West, and 15+ year history worldwide, free-to-play game economies and their operations have become increasingly sophisticated and a daunting effort for even the best-resourced projects in the industry. This dramatic increase in sophistication and complexity has led to something of an efficiency plateau, where design has grown stagnant, growth has started to slow, and the industry overall has needed to consolidate.
Free-to-play games have come a long way, but incremental improvements to design and economic models is yielding diminishing returns for developers. At the same time, players feel an increasing dissonance with their real world intuitions about transacting for value in these games, and directing their own effort and choices in game economies. What excites me most about Forte, blockchain technology in games, and peer-to-peer (or multi-directional) economies is the vast new design potential created in their wake. This will mean new growth for developers and more meaningful, rewarding participation for players.
In the next post, we’ll go deeper into player agency in games, and explore why modern free-to-play game systems aren’t a dead end, but an important step toward freer, more powerful player-driven game economies of the future (thanks to blockchain).