Can Cloud-Gaming Replace the Faltering Free-to-Play Gaming Model?

Gaming and Entertainment July 17, 2014

A curious phenomenon arose in gaming (particularly online gaming) some years back; companies started to make their games available for free. Where previously the majority of games required either a one-time purchase or a monthly subscription (or both), the new free-to-play games required absolutely no payment to ever be made. Instead, the games generated revenue by selling items or additional features for the games.

This model was initially a success for many companies, especially smaller and less prominent ones,whose games would otherwise have been unlikely to convince people to pay fees to play them. Once gamers were playing them, it became easier to convince them to spend a little money to enhance their experience.

However these games largely survived on the backs of “whales”; high-paying players who would spend literally thousands of dollars on the game, sometimes selling what they purchased for real money within the game world for the game’s currency, to enhance their character further. As the majority of games switched to free-to-play however, including several major releases that previously would’ve been subscription-based, it became obvious that there simply weren’t enough “whales” to support that many free-to-play games, and the model started to suffer. Free-to-play games started closing their doors regularly, and according to MMO pioneer Richard Bartle, this model now has a “half-life”, that will see it fall out of favor.

More recent games have gone back to the subscription-based model, including ArcheAge, WildStar, The Elder Scrolls Online, and others. However there’s a fear that gamers may now be so conditioned to having games for free that they’ll be unwilling to begin paying to play what before was often free. This is where a new payment model may be necessary to sustain online gaming and even gaming in general into the future, and this is where cloud gaming will likely step in.

If the popularity of Netflix for television and movies is any indication, cloud gaming will likely prove to be a huge success. While such services already exist in the form of OnLive (which actually folded in 2012, but has since relaunched), they have yet to take off partially because of existing technical limitations that hinder their broader adoption. A major one is the internet connections of many people, which make it difficult, if not impossible, for them to stream and play games without latency. That situation is steadily improving however, with Akamai reporting that connections of 10Mbps or greater in the U.S have risen by 82% year-over-year. The infrastructure on OnLive’s side has also improved, and they’ve erected more data centers to be closer to gamers regardless of their location, and help further limit latency.

While existing payment models will likely continue for a few years yet, the improving technical infrastructure on both sides of the cloud-gaming establish likely herald it as the gaming payment model of the future.

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