Sony Video Game Consoles

The free-to-play business model for video games first originated in the early 2000s in South Korea. The approach, embodied by games such as Nexon’s MapleStory, allowed frustrated developers to evade rampant piracy and lower the bar for casual gamers to join massively multiplayer online games.

Today, the free-to-play gaming model is global in scope and has come to dominate the mobile gaming market. It’s also an area of growth for console games. Sony Online Entertainment, the Japanese tech giant’s video game development and publishing arm, saw success by bringing the massively multiplayer PC game DC Universe Online to its PlayStation 3 and 4 consoles. The division’s president, John Smedley, says more than 18 million people subscribe to the free-to-play game. Forty percent of them do so on a PlayStation 4. Console gamers account for approximately 76% of the total hours played in DC Universe Online.

Smedley says PlayStation 4 has been helpful in growing Sony’s free-to-play gaming effort. Console gamers who are used to spending as much as $60 for a disc-based game are spending 3.5 times as much money as PC gamers on in-game micro transactions in free-to-play games. “The PS4 numbers surprised us, ” Smedley says. “It means that there are natural lulls in between some of the big titles like Destiny and free-to-play fits in there perfectly. There’s a real long-term business on PS4 for the free-to-play market.”

According to Newzoo, a video game research firm, the free-to-play MMO (massively multiplayer online) market will generate $14.4 billion in global sales this year. North America will account for $1.8 billion of that revenue. The global gamer has spent $43.96 on average this year on free-to-play games; North American gamers spent $51.06. The free-to-play market is, to use the term coined by Chris Anderson in Wired in 2004, a “long tail” one sustained by what gaming industry veterans call “whales”—the users who spend the most money on games annually. Whales make up just 5%—that’s nearly 45 million people—of all MMO gamers worldwide. In North America, whales make up 9% of MMO gamers, or about 8 million people.

Michael Pachter, video game analyst at Wedbush Securities, expects free-to-play games to generate $16 billion in Western markets this year. Three-quarters of those sales will come from mobile devices. He believes the console portion is well below $1 billion—below even $200 million, he says—but is on the incline. Joost van Dreunen, CEO of SuperData Research, expects the free-to-play console market to generate $96 million in the United States this year. A top title such as Digital Extremes’ Warframe generates an average of $1.3 million a month worldwide, he says.

“We’re forecasting the free-to-play console market to roughly double over the next two years, ” van Dreunen says, “but its growth is hampered by the fact that both the Xbox One and PS4 require some type of subscription payment, which means that a lot of console gamers will have spent their money before they even hit an in-game wall.”

Anecdotal evidence suggests that console gamers are embracing free-to-play games. At the PlayStation Experience event held by Sony Computer Entertainment in Las Vegas in December, fans stood in long lines waiting to play Sony’s new free-to-play game Kill Strain. Sony Online Entertainment’s booth at the show was filled with gamers playing Planetside 2 and DC Universe Online on PlayStation 4.

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