Inflated console prices are fuelling free-to-play growth

The high price of home console games is fuelling the growth of the free-to-play market, as consumers shun fixed prices and sample games with no initial costs.

Speaking at the 2012 D.I.C.E. Summit in Las Vegas, Gabriel Leydon, CEO of mobile company Addmired, said that the console business has upheld a standard pricing structure for physical product for so long it can no longer afford to take risks with IP, instead churning out sequels to recoup the inflated costs of game development.

"Mobile is the home of free-to-play and that's the next big model for video games," said Leydon. "The real problem [for consoles] is price fixing. Consoles set expectations for prices for thirty years."

There's something the Americans don't get yet, that the Chinese, Korean and Japanese developers are much, better at making the next ten years of games than we are.

Gabriel Leydon, Addmired

"Nobody talks about how bad it is to charge somebody $70 for something they don't like. You can't know what you're getting because it's another sequel with $100 million of marketing. One day after Call of Duty is out the used section in GameStop is filled with them. You have an army of consumers who paid $70 and lost $40 by trading it in."

Free-to-play eliminates risk for the consumer, said Leydon, while the console business is making it harder for consumers to find value in a market where online passes reduce the ability to trade a game, or future consoles may eliminate the ability to play used games at all.

According to Leydon, with good free-to-play the risk is passed to the developer, which is then forced to innovate to attract and keep consumers playing games.

"It removes the risk from the consumer, the consumer pays nothing to try out the game. I want the consumer to play for months without paying. Good free to play encourages players to stay and that's where the longevity is because the risk of an online pass, consoles that can't play used games, DLC and all this stuff, after I've paid $70... Why would do I do that? I can play lots of great games that are free.

"The risk is being transferred from the consumer to the developer. The developer has all of the risk now so they end up doing crazy stuff because it's a new industry."

The argument that console games offer something bigger or better than mobile games isn't valid, said Leydon, who pointed to the record industry sticking by vinyl as better for audio quality when CDs were first introduced, and CD's when MP3 technology came to market.

"Free-to-play is the MP3 of the video game industry and it will destroy all business models and it removes the risk for the consumer," he stated.

But he admitted that there are a lot of poor free-to-play games on the market, and that the biggest challenge in the mobile sector is pulling in players to sample games in the first place.

"It's brutal. The model for acquiring users is insanely complicated," he offered. "We've been doing this for three years and it keeps changing, it's very hard. It can be profitable but we can also throw money down a black hole. Most of our players don't play a second session. But the rest stay and play and if they stay long enough they end up playing and we can run a business."

He also pointed to the success of a company like Gree, which makes a better profit from its 25 million users than Zynga does with over 200 million players on Facebook, as evidence that the US is way behind Asian companies when it comes to creating successful free-to-play, mobile and social games.

"They make better and better games than most western developers. There's something the Americans don't get yet, that the Chinese, Korean and Japanese developers are much, much better at making the next ten years of games than