The Next Wave of Free-to-Play: Licensing

[In this feature, Gamasutra speaks to CrowdStar, Bigpoint, and Gazillion about the opportunities and, in their opinions, increasing necessity to incorporate licensed content in free-to-play games, as a way to build engagement in a competitive marketplace.]

Free-to-play games and big licenses? Until recently, no one would have thought them a good marriage with the exception, perhaps, of kids' games. But some developers who once swore the only way to go was with original IP are having a change of heart.

Indie developer Three Rings, for instance -- a long-time proponent of original IP like its Puzzle Pirates, Spiral Knights, and Corpse Craft -- is working on a free-to-play online multiplayer version of the long-running BBC sci-fi TV show Dr. Who for release later this year.

What would make a developer swing 180 degrees and sign up for its first licensed IP?

Three Rings CEO Daniel James chose not to comment for this story.

However, in Bigpoint's case, the Hamburg, Germany-based developer needed a few blockbuster titles to penetrate the U.S. market... something with higher profiles than the non-licensed, free-to-play games it had released in Germany, like Zoomumba and Farmerama.

Given the fact that the company had been 70 percent-acquired by NBC Universal in 2008, developing F2P versions of "Battlestar Galactica" and "The Mummy" -- both Universal properties -- seemed like a natural.

According to Bigpoint founder and CEO Heiko Hubertz, gamers often abandon F2P games quickly if they don't like them immediately since they have paid nothing to try them.

"The developer needs to convince the gamer to stay longer than five minutes, play a bit, and give the game a chance which then makes the likelihood of converting them to a paying user later on much, much higher," he says. "The way we do that is with third-party franchises which the gamer may already know, he's familiar with the character and the story, he trusts in the IP, and he gives the game a longer shot."

In the case of Battlestar Galactica Online, for example, says Hubertz, people who are familiar with and are big fans of the franchise already know the Cylon civilization, they know the different spaceships, they recognize the original music score which is used extensively, and they may be anxious to know how the game plays out.

As it turns out, the space combat MMO became Bigpoint's best launch of all time, with two million registered users in under three months.

Hubertz stresses that, franchise aside, Bigpoint would never have been able to crack the U.S. browser market unless its premier American game had the high-quality and professional look of a console game, which is what U.S. gamers are used to playing.

"So we invested a lot of money in technology, we pegged Unity as our developer engine, we put a lot of extra effort into the look and feel and, in the end, it was well worth it for us," he says.

While Bigpoint chose Battlestar Galactica as its first license partially because its earlier hit, Dark Orbit, gave it some sci-fi gaming experience. The developer chose The Mummy as its second license mainly because it perceived user demographics to be 50/50 male/female.

"We were aware that females not only like to play F2P games but they also spend money on them," Hubertz adds. "So we decided that, after beginning with a male-oriented title, we would expand to something everybody might enjoy. Especially since The Mummy is also well-known in Asia as well as Europe. It's also much easier to sell virtual items in a fantasy game like The Mummy Online." The third-person isometric action-adventure F2P MMOG is scheduled to launch this fall.

Bigpoint plans to come out with several additional licensed games in 2012, including Universal Monsters, a third-person, multiplayer, action RPG now in early development that features Dracula, Frankenstein's monster, the Wolf Man, and other Universal-owned creatures. But, says Hubertz, Bigpoint won't restrict future titles to licenses.

On the other hand, San Mateo, CA-based MMO developer Gazillion Entertainment plans to concentrate on its licensing partnership with Marvel Entertainment. In April, it completed development of its kid-focused Marvel MMO Super Hero Squad Online and "in at least a year" it intends to release a F2P Marvel Universe MMO.

"Generally speaking, licenses help in a really crowded market -- and this is a space that is a lot more crowded than it was three or four years ago," says Dan Fiden, Gazillion's VP of publishing. "On Facebook in particular, licenses certainly are helpful in allowing developers to more easily acquire customers. If you have a great brand partner -- something that evokes the kind of game in either tone or gameplay that you're offering -- it's an easier way to communicate with your potential customers."

While licensed PC and console games often earn their reputation for poor quality because they often need to be rushed in order to be released day-and-date with, perhaps, a high-profile movie, licensed F2P online games are a different beast, says Fiden.

"The current F2P games are constantly being updated and frequently don't launch in the same way that a package goods game launches," he explains. "For example, we're not tied to the release of the latest X-Men movie. Tying directly to a specific date isn't the reason we're working with this license; that would be a little short-sighted.

"This is a broad license that allows us to take advantage of lots of opportunities and Marvel events in the movie, TV, or comic world after the game is up and running. Our biggest priority isn't meeting a certain deadline; it's making sure the basic game and basic service are as good as we want them to be."

Fiden suspects that as more and more F2P developers turn to licensing so that their games will stand out in the crowd, the preponderance of licenses will ironically create a "crowd of licenses." The competition will then heat up for the most high-profile, most "well-loved licenses."

He predicts developers will recognize the opportunity to use "non-obvious licenses," ones that are well-known but may not be obvious choices for gaming -- and then employ them in creative ways. For instance, he says, when he used to work in the casino gambling space, one of the more popular titles was a Top Gun game -- not a brand one would immediately associate with slot machines.

"But people remembered the movie fondly and the game manufacturer was able to use the brand to create something that ultimately resonated with customers," he recalls. "I think developers will be seeking out those sorts of opportunities."

He also foresees an increase in the number of developers doing in-game licenses rather than licensing the entire game, which is something that's very popular in Korea.

"You might have a car in the F2P game and you'll be able to modify it with an item that actually exists in the real world," he says. "For example, a mini-transaction might enable you to put, say, Firestone tires on your car. I think some developers might want to generate revenue that way."

Indeed, at Burlingame, CA-based CrowdStar, CEO Peter Relan sees in-game licensing as "lower hanging fruit," and, at the moment, prefers the smaller investment it involves compared to more expensive full-game licensing.

"I'm neither a fan nor am I not a fan of licensing an entire game," he explains. "But because the investment can be four times the magnitude higher, we are currently involved only in in-game brand integrations which is better understood, is less complex, and requires less development time. Full-game licenses are not on our drawing board but it is something we are investigating for the future."

One of the developer's more successful in-game licenses involves the Old Navy brand and CrowdStar's It Girl game in which users are challenged to become the most stylish person at cool events around the world by visiting stores and searching racks for fashionable outfits.

CrowdStar created an Old Navy store in It Girl where, rather than buying generic jeans, users could make in-game purchases of Old Navy jeans. Over 9.5 million users visited the store, 7.5 million racks were searched, 5.5 million garments were purchased with in-game cash, and 300,000 Old Navy gifts were sent to friends.

Similarly, in CrowdStar's Happy Aquarium, the developer introduced Bon Jovi-themed wallpaper, guitars, and a drum set that gamers could purchase to decorate their fish tanks.

"This is an ongoing effort on our part to find just the right brands to license and incorporate into our F2P games," says Relan.

Meanwhile, CrowdStar would only entertain the idea of creating an entire game around a brand if "the brand has a natural fit to our sort of game design skills and our audience management skills," he adds. "The investment may be high, but we might go for it if we feel the payoff isn't that risky, if we are pretty sure we can monetize users, and if we're confident we can get our investment back and make a good return on it. So far we haven't found that sort of synergy, but obviously our recent investment from Time Warner has given us a huge library of brands to sort through."

Indeed, even Bigpoint and Gazillion -- which are actively engaged in full-game licensing -- recognize that there are advantages to creating your own original IP, like not having to split revenue with an IP holder. And, if a developer's original IP is wildly successful, they can leverage that IP to build multiple businesses.

"An obvious example is FarmVille," says Gazillion's Fiden, "which has become really valuable IP for Zynga."

The bottom line, says Bigpoint's Hubertz, is that even with licenses, there are considerable risks that begin with license selection.

"If you choose a license that's really nichey or that doesn't have a huge fanbase, you may turn off gamers who might not want to play your game regardless how much fun it is," he advises. "This is a real hit-or-miss business; just because you have a license doesn't mean your game will be successful or that you'll get your money back. Licensing may be even riskier than creating your own IP -- you have to pay a license fee, a guarantee fee, royalties on your revenue, and so on. And you have a license owner looking over your shoulder which makes game development that much more difficult.

"We plan to launch a couple of licensed games next year," he says, "but whether they will be successful, well, that depends on how well we've picked the licenses. Only time will tell."