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Free doesn’t work? Try telling that to Jagex making £38m from one free game, RuneScape…

By on April 14, 2010

I’ve just been digging through the past five years of Jagex’s financial results. Being English, the company has to file its accounts at Companies House, which means that we get a great insight into their numbers.

(American private companies: shudder at the idea that being private doesn’t free you from public scrutiny of your profit and loss account).

So just how much money is Runescape making?

Let the financial results speak for themselves.

In the 12 months to March 2009, Jagex generated revenues of £38.4 million and profits of £18.0 million (approximately $58m and $27mm, respectively).

That’s an operating margin of 47%, despite spending “tens of millions of pounds” on the failed Mechscape project.

94% of that revenue comes from subscriptions. Naysayers may scoff that ads don’t pay, but the company is still making over £2 million every year in ad revenue. Which is impressive in its own right.

So is Runescape really free?

Absolutely. The company has over 10 million monthly unique users. Nine million of those play the game for free; 1 million of them subscribe each month. The company doesn’t spend money on advertising: the free service *is* the advertising.

The shareholders have taken out over £31 million in dividends in the last four years and the company still has nearly £15 million in cash in the bank.

Still need convincing that free works?

About Nicholas Lovell

Nicholas is the founder of Gamesbrief, a blog dedicated to the business of games. It aims to be informative, authoritative and above all helpful to developers grappling with business strategy. He is the author of a growing list of books about making money in the games industry and other digital media, including How to Publish a Game and Design Rules for Free-to-Play Games, and Penguin-published title The Curve: thecurveonline.com