The Market for English Language Client-Based Free-to-Play PC Games

DFC Intelligence, October 2010, Pages: 235

This new 235 page report focuses on the growing market for games that are distributed for free and generate revenue through optional business models such as virtual items or subscriptions.

In the ever-changing gaming industry, it is a daunting task to properly define and analyze a market segment in the gaming industry. Especially in the relatively new free-to-play (F2P) segments everything is constantly changing and evolving. In an attempt to achieve such a goal, DFC Intelligence narrows down the research scope as specific as possible even though sometimes it may seems arbitrary.

This report aggregates actual revenue and registered users (RU) of client-based F2P PC online gaming market that are published in the English language from 2006 to 2009 and a five-year estimated forecast from 2010 to 2015.

The report covers the F2P online games that meet following criteria: 1) require a thick game client download and installation, 2) allow a user initially to play for free with optional microtransaction-based in-game item purchase and/or subscription for premium content, 3) run on PC platform, and 4) target English speaking countries with a goal to generate most of their revenue in North America.

Popular games that fall into the category include but not limited to Aeria Game’s Shaiya, EA’s Battlefield Heroes, Gala-Net’s Flyff, Joymax’ Silkroad Online, KingsIsle’s Wizard 101, Nexon America’s Maple Story, Perfect World’s Perfect World, Sony Online Entertainment’s Free Realms. This also includes some former subscription based games that are going to a free model starting with Turbine’s Dungeons and Dragons Online in fall 2009.

In this report, we first define the free-to-play (F2P) games by business model and by distribution platform. Also, the report aggregates actual revenue and registered users (RU) of the client-based F2P PC online games in North America from 2006 to 2009 and provides a five-year revenue and RU forecast from 2010 to 2015. The report was developed with a combination of secondary and primary research. Usage data was collected from multiple products over the course of four years and interviews with executives from more than 20 F2P game-related companies were conducted in 2010.

I. EXECUTIVE SUMMARY
A. WHAT IS CLIENT BASED F2P?
B. MARKET SIZE
C. ISSUES
1. Consumer Mentality
2. Payment Methods and Prepaid Cards
3. Fraud, Chargebacks and Cheating
4. Legal Issues
5. Game Design and Localization
6. Competition from Traditional Games and Browser Based Games
7. The Entrance of Established Brands and Media Companies
8. Marketing Challenges
9. Need for a Big Hit
10. Consolidation and the Need for Diversification
II. DEFINITIONS AND HISTORY
A. INDUSTRY HISTORY
B. DEFINITIONS
1. Definition of Free-To-Play
2. F2P Games by Distribution Platform
3. F2P Business Model Definitions
III. BUSINESS MODELS
A. OVERVIEW
B. REVENUE SIDE ANALYSIS
1. Revenue Model 1: Modest Success F2P/Optional Subscription
2. Revenue Model 2: Solid Hit F2P/Optional Subscription
3. Revenue Model 3: Slow Build Big Hit F2P/Optional Subscription
4. Revenue Model 4: Major Hit F2P/Optional Subscription
5. Revenue Model 5: Solid Hit Pure Virtual Goods Model
6. Revenue Model 6: Major Hit Pure Virtual Goods Model
7. Simple Revenue Business Models
C. COST SIDE ANALYSIS
1. Overview
2. Development Cost
3. Marketing and User Acquisition Cost
4. Client Delivery Costs
5. Payment Methods and Financial Infrastructure Costs
6. Ongoing Costs
7. Client-Based F2P Cost Model
IV. MARKET SIZE AND FORECASTS
A. ENGLISH LANGUAGE CLIENT-BASED F2P PC ONLINE GAMES: 2006-2009
B. MARKET FORECASTS: 2010-2015
V. COMPANY AND PRODUCT PROFILES
A. AERIA GAMES
B. ANAKAMA GAMES
C. GALA-NET
D. GAMEPOT USA
E. JOYMAX
F. K2 NETWORKS
G. KINGSISLE ENTERTAINMENT
H. NDOORS
I. NEXON
J. NHN USA
K. NTREEV USA
L. ONNET
M. OUTSPARK
N. PERFECT WORLD
O. RIOT GAMES
P. SONY ONLINE ENTERTAINMENT FREE REALMS
Q. TURBINE
R. WALT DISNEY COMPANY
S. WEMADE ENTERTAINMENT USA
V. COMPANY AND PRODUCT PROFILES
A. AERIA GAMES
B. ANAKAMA GAMES
C. GALA-NET
D. GAMEPOT USA
E. JOYMAX
F. K2 NETWORKS
G. KINGSISLE ENTERTAINMENT
H. NDOORS
I. NEXON
J. NHN USA
K. NTREEV USA
L. ONNET
M. OUTSPARK
N. PERFECT WORLD
O. RIOT GAMES
P. SONY ONLINE ENTERTAINMENT FREE REALMS
Q. TURBINE
R. WALT DISNEY COMPANY
S. WEMADE ENTERTAINMENT USA

Index of Tables
Table 1 Modest Success Scenario for an F2P with Optional Subscription
Table 2 Five Year Cumulative Revenue for Modest Success Scenario for an F2P with Optional Subscription
Table 3 Solid Hit Scenario for an F2P with an Optional Subscription
Table 4 Five Year Cumulative Revenue for Solid Hit Scenario for an F2P with Optional Subscription
Table 5 Slow Build Big-Hit Scenario for an F2P with an Optional Subscription
Table 6 Five Year Cumulative Revenue for Slow Build Big Hit Scenario F2P with Optional Subscription
Table 7 Major Hit Scenario for an F2P with an Optional Subscription
Table 8 Five Year Cumulative Revenue for Major Hit Scenario F2P with Optional Subscription
Table 9 Solid Hit Scenario for an F2P with a Pure Virtual Goods Model
Table 10 Five Year Cumulative Revenue for Solid Hit Scenario F2P with Pure Virtual Goods Model
Table 11 Major Hit Scenario for an F2P with a Pure Virtual Goods Model
Table 12 Five Year Cumulative Revenue for Major Hit Scenario F2P with Pure Virtual Goods Model
Table 13 Basic Revenue Model at 2% Conversion Rate
Table 14 Basic Revenue Model at 5% Conversion Rate
Table 15 Basic Revenue Model at 10% Conversion Rate
Table 16 Basic Revenue Model at 15% Conversion Rate
Table 17 F2P Game Marketing Funnel
Table 18 Per User Server Cost by Provider
Table 19 Standard Transaction Fee Comparison between U.S. and Korea
Table 20 Client-Based F2P Customer Acquisition Cost Model
Table 21 Client-Based F2P First-Year Profit/Loss Analysis
Table 22 Client-Based F2P PC Online Game Market Revenue from English Language Games: 2006-2009
Table 23 Client-Based F2P PC Online Game Market Revenue from English Language Games by Region: 2006-2009
Table 24 Client-Based F2P PC Online Game Market Share from English Language Games by Region: 2006-2009
Table 25 Client-Based F2P PC Online Gaming Market Registered Users of English Language Games: 2006-2009
Table 26 Client-Based F2P PC Online Game Registered Users of English Language Games by Region: 2006-2009
Table 27 Client-Based F2P PC Online Game Share of Registered Users of English Language Games by Region: 2006-2009
Table 28 Client-Based F2P PC Online Gaming Market Revenue Forecast for English Language Games: 2010-2015
Table 29 Client-Based F2P PC Online Game Revenue Forecasts from English Language Games by Region: 2010-2015
Table 30 Client-Based F2P PC Online Game Market Share Forecasts from English Language Games by Region: 2010-2015
Table 31 Client-Based F2P PC Online Gaming Market Registered User Forecast for English Language Games: 2010-2015
Table 32 Aeria Games Payment Methods
Table 33 DOFUS Costs

Index of Tables
Table 1 Modest Success Scenario for an F2P with Optional Subscription
Table 2 Five Year Cumulative Revenue for Modest Success Scenario for an F2P with Optional Subscription
Table 3 Solid Hit Scenario for an F2P with an Optional Subscription
Table 4 Five Year Cumulative Revenue for Solid Hit Scenario for an F2P with Optional Subscription
Table 5 Slow Build Big-Hit Scenario for an F2P with an Optional Subscription
Table 6 Five Year Cumulative Revenue for Slow Build Big Hit Scenario F2P with Optional Subscription
Table 7 Major Hit Scenario for an F2P with an Optional Subscription
Table 8 Five Year Cumulative Revenue for Major Hit Scenario F2P with Optional Subscription
Table 9 Solid Hit Scenario for an F2P with a Pure Virtual Goods Model
Table 10 Five Year Cumulative Revenue for Solid Hit Scenario F2P with Pure Virtual Goods Model
Table 11 Major Hit Scenario for an F2P with a Pure Virtual Goods Model
Table 12 Five Year Cumulative Revenue for Major Hit Scenario F2P with Pure Virtual Goods Model
Table 13 Basic Revenue Model at 2% Conversion Rate
Table 14 Basic Revenue Model at 5% Conversion Rate
Table 15 Basic Revenue Model at 10% Conversion Rate
Table 16 Basic Revenue Model at 15% Conversion Rate
Table 17 F2P Game Marketing Funnel
Table 18 Per User Server Cost by Provider
Table 19 Standard Transaction Fee Comparison between U.S. and Korea
Table 20 Client-Based F2P Customer Acquisition Cost Model
Table 21 Client-Based F2P First-Year Profit/Loss Analysis
Table 22 Client-Based F2P PC Online Game Market Revenue from English Language Games: 2006-2009
Table 23 Client-Based F2P PC Online Game Market Revenue from English Language Games by Region: 2006-2009
Table 24 Client-Based F2P PC Online Game Market Share from English Language Games by Region: 2006-2009
Table 25 Client-Based F2P PC Online Gaming Market Registered Users of English Language Games: 2006-2009
Table 26 Client-Based F2P PC Online Game Registered Users of English Language Games by Region: 2006-2009
Table 27 Client-Based F2P PC Online Game Share of Registered Users of English Language Games by Region: 2006-2009
Table 28 Client-Based F2P PC Online Gaming Market Revenue Forecast for English Language Games: 2010-2015
Table 29 Client-Based F2P PC Online Game Revenue Forecasts from English Language Games by Region: 2010-2015
Table 30 Client-Based F2P PC Online Game Market Share Forecasts from English Language Games by Region: 2010-2015
Table 31 Client-Based F2P PC Online Gaming Market Registered User Forecast for English Language Games: 2010-2015
Table 32 Aeria Games Payment Methods
Table 33 DOFUS Costs
Table 34 DOFUS: Paying Versus Non-Paying Benefits
Table 35 Ankama Payment Methods by Country
Table 36 Gala Inc Revenue by Division (JPY): 2008-2010
Table 37 Gala Inc Revenue by Division (USD): 2008-2010
Table 38 Gala Inc Revenue by Region (JPY): 2006-2010
Table 39 Gala Inc Revenue by Region (USD): 2006-2010
Table 40 Gamepot USA Purchase Methods
Table 41 Joymax Revenue and Income: 2007-2009
Table 42 Joymax Revenue by Product: 2008-2009 in KRW
Table 43 Joymax Revenue by Product: 2008-2009 in USD
Table 44 K2 Networks Payment Methods
Table 45 Knight Online Premium Packages
Table 46 War Rock Premium Packages
Table 47 Wizard 101 Subscription Scheme
Table 48 Wizard 101 Gift Card Distribution
Table 49 Wizard 101Micro-Transaction Scheme
Table 50 Nexon Revenue: 2006-2009: KRW
Table 51 Nexon Revenue: 2006-2009: USD
Table 52 Nexon North American Game Card Retail Distribution
Table 53 NHN Revenue by Source: 2008-2009
Table 54 NHN USA Revenue: 2007-2009
Table 55 Shot Online Global Publishing Schedule
Table 56 Outspark Payment Methods
Table 57 Perfect World Revenue and Income: 2006-2009
Table 58 Perfect World Revenue by Source: 2006-2009
Table 59 Perfect World II Overseas Licensing
Table 60 Legend of Martial Arts Overseas Licensing
Table 61 Zhu Xian Overseas Licensing
Table 62 Chi Bi Overseas Licensing
Table 63 Pocketpet Journey West Overseas Licensing
Table 64 Hot Dance Party Overseas Licensing
Table 65 Dungeons and Dragon Online VIP and Premium Benefits
Table 66 Lord of the Rings Online VIP and Premium Benefits
Table 67 WeMade USA Payment Options

New Report Forecasts English Language Free-to-Play Games to Reach $2 Billion

A new report from DFC Intelligence forecasts that the market for English language client-based free-to-play (F2P) games on the PC is expected to grow from about $250 million in 2009 to $2 billion by 2015. This growth is largely due to widespread adoption of high-speed Internet connections combined with a growing willingness of consumers to buy digital content and improved payment options such as prepaid retail cards.

The F2P market has been firmly established in Asia for many years. According to DFC analyst Insun Yoon, “For many Korean companies the market in North America has not taken off nearly as fast as they expected. Much of this can be attributed to the immature infrastructure and a lack of established payment and service mechanisms. The good news is that this is starting to change and consumers are starting to realize that the game play of top high-end F2P games can be quite sophisticated.”

Most F2P games operate under a model where users can download and play a game for free and have the option to buy virtual goods or upgrade to a subscription package that opens additional play content. “F2P games can have multiple payment options and most successful games look to bundle products in creative packages such as the ability to buy a monthly or annual subscription that include a set amount of virtual currency. Creativity in marketing, packaging and distribution are the keys to generating increased revenue,” said David Cole, an analyst at DFC.

By the end of 2010, it is expected that English language client based F2P games will have a combined total of 128 million registered users. While this is not as high as many browser based games and games on social networks, F2Ps have fairly high conversion rates. “Registered user numbers are a fairly meaningless metric in this market. Once a consumer is able to get a game downloaded and running conversion rates for high-end F2P games tend to be fairly high,” says Yoon.

One major problem is that in North America and Europe it is still difficult for consumers to successfully install a large client. In conjunction with Pando Networks, a game delivery services company, DFC is providing a separate report on Online Game Delivery. This report shows that consumers in South Korea, Romania, Japan and Sweden have significantly higher download speeds than the rest of the world. According to the Pando report, eight of the fastest 12 cities in the world are located in Korea.

The new report entitled The Market for English Language Client-Based Free-to-Play PC Games has complete five-year forecasts, business model scenarios and detailed company profiles. DFC Intelligence also has several reports available surveying consumer attitudes on F2P and digital content in general. Subscribers to DFC’s research package services can get access to additional reports, consumer surveys, historical data, regular updates, more detailed breakouts by country and genre and the ability to search the DFC database and download data to Excel spreadsheets.

- AERIA GAMES
- ANAKAMA GAMES
- GALA-NET
- GAMEPOT USA
- JOYMAX
- K2 NETWORKS
- KINGSISLE ENTERTAINMENT
- NDOORS
- NEXON
- NHN USA
- NTREEV USA
- ONNET
- OUTSPARK
- PERFECT WORLD
- RIOT GAMES
- SONY ONLINE ENTERTAINMENT FREE REALMS
- TURBINE
- WALT DISNEY COMPANY
- WEMADE ENTERTAINMENT USA
- COMPANY AND PRODUCT PROFILES
- AERIA GAMES
- ANAKAMA GAMES
- GALA-NET
- GAMEPOT USA
- JOYMAX
- K2 NETWORKS
- KINGSISLE ENTERTAINMENT
- NDOORS
- NEXON
- NHN USA
- NTREEV USA
- ONNET
- OUTSPARK
- PERFECT WORLD
- RIOT GAMES
- SONY ONLINE ENTERTAINMENT FREE REALMS
- TURBINE
- WALT DISNEY COMPANY
- WEMADE ENTERTAINMENT USA

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