GCAP: Edery On How Free-To-Play Turns Platform Weakness Into Strength

FarmVille’s success has far more to do with its accessibility than its social aspects. Flash is a potentially lucrative platform that has been grossly under-utilized by talented developers. Games that are free to play turn a weakness that exists in every single industry into a strength. These are the views of industry veteran David Edery, founder of Spry Fox games and Fuzbi consulting, and former head of Microsoft’s Xbox Live Arcade, speaking at Game Connect Asia Pacific this week in Australia. He shows us a the life-cycle of a gaming platform with a graph which plots a jagged trajectory through four developmental phases that, he says, a newborn gaming platform will tend to work its way through. From uncertain beginnings, where no one quite knows what to do with the platform, there eventually comes a burst of content that gets everyone excited. The early adopters clean up. Then, suddenly, the platform is swamped with copycats, who try to carve out their own piece of the pie. Before long, there is a content overload, the phase that Edery calls “inevitable misery”. Finally, with luck, some committed developers really come to grips with the platform’s potential and begin to produce and properly market quality games that transcend the herd. In other words—developers have to be ready to evolve, to find the strengths of their platform and play to them. “I would argue ... what really contributed to the success of games like FarmVille was that, in general, there were incredibly low barriers to customer entry.” There is no download required, and no purchase. In the early days, it was easy to spam the news feeds of your friends—all they had to do was click. Sometimes a platform will stall—serious developers have abandoned Flash, failing to see the potential of the platform. Like FarmVille, it already has a captive audience: numerous portals like Kongregate and Newgrounds, some of which have millions of users. But how to take advantage of this audience? “Ads are junk,” says Edery. Spry Fox is itself investing heavily in Flash, and their business model is based on microtransactions. To illustrate the beauty of the micro model, Edery draws our attention to a quote from an MIT Sloan/Wall Street Journal Management Review: “A very large percentage of loyal customers—often more than 50 percent -- are not profitable for most companies, because their loyalty is driven largely by an expectation of great deals. Profitable customers tend to make up only about 20% of a company’s customers.” The report covers a broad range of industries, but the implications for the games industry are particularly far-reaching. Twenty percent is also approximately the maximum conversion rate that free-to-play games ever hit. “Free-to-play is a way of saying ‘I get the fact that 80 percent of my customers are probably not going to be profitable for me’ ... No problem. I’ll make a game that they can play and have fun with ... I’m not going to worry too much about what happens with them. I just need them to be there so they invite their friends to come in and play and hopefully give me lots of money.” Non-paying players are no longer freeloaders, they’re free advertising.