The Free Zone: F2P and the 2011 MMOG Market

With another year drawing to a close, research firm Newzoo recently open-released an MMOG "trend report" that appears to be derived from a larger study it is offering for sale.  Since the free document serves, at least in part, as a form of teaser, the specifics provided are relatively limited.  However, it does offer information based on 13 countries in various parts of the globe.  They are the US, seven in Europe (UK, Germany, France, Spain, Italy, Netherlands, Belgium), three emerging (Brazil, Mexico, Russia), and two Asian (China, Korea).  It's not clear how much faith we can put in the data since key facts such as the sample size, selection criteria, methodology et al aren't disclosed, and the validity of extrapolating to other countries may be questionable.  With this caveat in mind, I still found quite a bit of interest.

Some things are pretty obvious, like that the market is growing in terms of number of gamers, value and proportion of paying users, while on the other hand, the level of competition is rising even more rapidly.  This situation benefits us as consumers by providing more options and by raising the quality bar that titles must meet in order to be viable.  However, it also means new offerings will find it harder to carve out audiences large enough for them to survive, and even more so to prosper.

Under the heading "Key Trends & Challenges", the report poses a number of questions.  One of these, "Is Free-to-Play here to stay?", is answered in the affirmative, but asking this at all seems rather silly, especially when the data a couple of pages later shows F2P holding the majority of the international MMO dollar value pie.  While some still cling to the perception that the subscription model is dominant in the west, Newzoo's figures show almost a dead heat; 53% of the US market plus 47% for the European countries named above.  The other numbers presented put F2P with 51% in China and Korea, and 59% in the three emerging nations.

As for absolute dollars, a little extrapolation puts China and Korea combined around $4.3 billion, approaching the total for the US ($2.6 billion) plus the European nations ($2.1 billion).  It's also of interest that the report says the total American MMO spend will show 3% growth for this year, about $0.1 billion, including $0.2 billion for the F2P sector.  Obviously, this means subscription revenue declined around $0.1 billion.  In terms of dollar market share, this represents a drop of 8% for P2P compared to 2010.  As well, since China in particular and Asia in general continue to grow more rapidly, it seems likely that the East will remain by far the most valuable MMO market in 2012. 

What's more, the paper adds three interesting statements.  The first is that F2P "has also proven that it can bring in more revenues than P2P."  Next is that "we foresee most game publishers offering a mix of P2P and F2P bizz models and leaving the choice to the player."  The third is that "More than half of P2P gamers also spend additional money on virtual items within the game".  Given the last of these in particular, it's not a big leap to think we'll see the second.  The trend toward more hybrid revenue models isn't new, but it also has yet to peak.

Another intriguing query is "Will Asian companies lead global consolidation?"  The report says "They will play a big role".  Here again, this supports the qualitative feeling I've had for a while.  The leading Chinese and Korean publishers have money to invest, although they may be held back by not having very many studios available as desirable acquisition targets.  However, it's also not easy to envision a lot of action in the other direction.  So, it does seem likely that whatever degree of consolidation does occur will be led from Asia.  

I also took note of the date provided about platform preferences.  Some readers might be particularly surprised by the finding that 84% of US MMO gamers play browser-based titles.  Just over half, 43%, choose them exclusively.  This leaves only 16% in the client-based only segment.  The splits in the other national groupings regions are fairly similar, with China and Korea having the largest client-based sector at 24%.  Internationally, those who only play browser-based offerings comprise about 46% of the total MMO user base within the studied countries.  I have no reason to think this figure won't grow next year.

The last thing that really caught my eye was list showing the fastest-growing F2P games in three regions of the world during this past September and October.  Based on data from IQU, which is said to have an "80M player profile dBase", it shows League of Legends led the way in the US, followed by Wizard101 and Age of Conan.  LoL also took third in Europe / Russia, where World of Tanks and Grand Fantasia grabbed the top two spots, while in Latin America, Shaiya held sway ahead of Priston Tale and World of Tanks.  I suspect most will find a surprise or two, as did I.