Freemium: Brilliant Business Model or Ethical Nightmare

Recently our class discussed mobile gaming and how its audience has grown so quickly, especially amongst casual gamers. While it is great to see so many new people get into one of my favorite hobbies, many are concerned about how companies are profiting off of these new gamers. I am talking of course about the freemium pricing strategy. According to freemium.org, “freemium is a combination of the words free and premium”. The basic idea is that you give away the game for free, but sell “premium” products within the game. A great example of this in action can be seen in the popular mobile game, Candy Crush. The game was downloadable for free on the app store and could be played for free, but there is a catch. You only get so many lives for a particular period of time, but if you run out, you can pay real cash to get those new lives instantly. Seems like a fairly reasonable business model so what is the problem?

One of the biggest criticisms with freemium games has to do with its addictive nature. Like gambling, freemium games use tricks to get people to keep coming back over and over again. One trick that comes to mind is the alert system in these games. Often times, freemium games have you build something and you have to wait a given period of time before it is complete. Then they send you a reminder when it’s complete and you open up the game and then continue on. Freemium games also often send you a message any time there is a new event or special item on that given day, causing you to open the app and start playing. Then they may send you a reminder if you haven’t played in a while, so you open the app and start playing. Then the list keeps going on and on, sending message after message to keep getting you to come back and play. It reminds me a lot of Pavlov’s Dog experiment. The game keeps ringing the bell and you keep drooling all over the game.

The other problem with freemium games are whales. The term “whale” actually originated in the gambling scene and referred to a player who bets high amounts of money. The term is used similarly in freemium games, where a whale is a person who purchases a large amount of the “premium” products within the game. Of course any product is going to have sub-groups of people who buy more of it then other sub-groups, but the real issue is how large of a percentage these whales makeup of the market. In fact, in 2014 they found that .15% of Mobiles Gamers Contributed 50% of all the in-game revenue. So this small minority of whales are basically financing the industry. Some would argue this is a major issue because these whales almost seem like gambling addicts who keep coming back to lose their money, while the mobile gaming companies are encouraging them.

Now I know I talked a lot about these ethical issues with mobile gaming, but there are some good reasons that companies use this model. For one thing, freemium is a good way to combat piracy. Piracy has been a big issue since software was first invented. It is just too easy to do, and it causes companies to lose a lot of money. Then along came freemium, which gave away its product for “free”. Customers saw this and realized that there was no need to download the software from an illegal site, when they could get the original with no cost to them. Then after they started playing the game for free, some felt willing to pay a little bit of cash in order to get some of the perks. The effects of freemium can be seen when looked at in the music industry. When Spotify came out, which is a freemium based music streaming service, it was found that music piracy went down. So, it would make sense that this would work in a similar matter if applied to video games. Although I should note that some freemium games are still illegally downloaded, and there are ways to get past the system of paying for the “premium” content, but overall freemium seems to reduce the privacy problems.

Another thing about freemium is that it is not that different from classic pricing models for videogames, specifically if one looks at the arcade error. With arcade games, one simply inserts a quarter or two, plays the game until they die or win, and then inserts a few more quarters to do it all again. One could argue that this model is actually worse because at least with freemium, you can theoretically play the game without spending a cent. So if videogames have a history of people paying small amounts for a game repeatedly over a long period of time, then what is wrong with the freemium model?

So in the end, the ethical issues surrounding freemium is still up for debate. Some claim it is a perfectly fine model that helps combat piracy, while others think it relies on unethical tactics such as inducing addiction. Regardless, it looks like freemium is here to stay, so we better get used to it.

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2 Responses to Freemium: Brilliant Business Model or Ethical Nightmare

  1. Benjamin Katz says:

    “Freemium” games are quite an ethical dilemma to me since I am both a consumer and a developer. While I agree these types of games can be annoying to the consumer, it is an effective way of getting widespread recognition and a larger player base. Because of this, many smaller companies decide to pursue this kind of development model in order to sweep fears of failure under the rug. Even larger companies, such as Supercell (developer of Clash of Clans) will continue this type of development model for any additional games they make. The simple reasoning behind this? Because it is profitable – developers are surely less likely to make games that won’t bring return on their initial investment.

    However, in the eye of the consumer – seeing that a game on an app-store that is free is a lot less scarier than a game that has a price. This may seem odd because these types of consumers would rather play a game for free, get hooked, and then empty their paychecks on said games rather than pay an initial fee. This can be attributed to the consumer’s fear that they may be wasting money on a game they won’t like playing. If a game is free, they get a chance to see what the game is like before making an investment in it. A solution to this problem could be to allow refunds on mobile games (but only if they have played under a certain number of hours, to prevent fraudulent purchases).

  2. Dalton DelPiano says:

    Freemium games are one of those things that for some reason I spend a lot of my time thinking about. Overall, I believe that they have decreased the quality of video games over the past years, specifically since smartphones came out. First of all, it brought people into the game industry that in my opinion shouldn’t be there, people with a more business mind set than a creative and game design mindset. Video games are in my opinion the ultimate form of expression and one of the best way for any person to express their creative ideas. When people try to optimize their games for money, I feel like I’m almost being tricked into playing their game, instead of me, myself, playing it willingly. Optimization for money most of the time certainly does not contribute overall of an increase in quality of gameplay, and instead focuses on mental manipulation into getting you to press that buy button. Decreases development time for gameplay programming and increased time for monetization doesn’t seem to me like the user is coming first, and instead the pockets of the CEO’s of these large gaming corporations. Secondly, your point above regarding the piracy levels decreasing in games is interesting as well. First hand I have seen people install simple jailbreak tweaks to completely bypass the app store in app purchase system, unlocking unlimited gems that allow the user to essentially skip the time barrier aspect of normal freemium games. The intriguing thing is that once the user figured out how to essentially have unlimited money “IRL” the game because too easy and boring. This brings up the question of whether or not these games are even good at all. If the game can be broken with a fat wallet outside the diegesis of of the game, plain and simple, the game can not be considered “good” from the perspective of a serious gamer. It ruins any aspect of competitiveness the game has to offer and turns it into a bidding war between willing (unwilling??) players. Overall, I completely disagree with the way the game industry has been going, with the increase of pay-to-win games, day-one DLC, and forcing users into paying money for unlockable content when they payed $60 for a new game(see Ubisoft’s For Honor).

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