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Move over Freemium: Paymium is the New Game in Town

By on October 20, 2011

This post was originally published as part of a regular column on Gamasutra.


Freemium or free-to-play have been the business model buzzwords in games for the last two years. We’ve begun to move from the kneejerk reactions (“they’re not even games”, “people who play them are stupid”) to an emerging acceptance that freemium games are a viable business that can also support fun, engaging games.

I also think that we’re moving beyond freemium.

A recent report from Distimo was widely reported as saying that In-App Purchases accounted for 72 percent of revenues on iOS devices. Given that only 4 percent of games on iOS devices even have IAP, that was an amazing stat.

The press reports were not entirely accurate. Distimo actually said that games with IAP accounted for 72 percent of revenues, including the cost of the buying the game in the first place.

Enter the world of Paymium™.

What’s Better Than Free? Paid For

Mark Rein, outspoken VP at Infinity Blade and Unreal developer, has said that he could not imagine launching a game without in-app purchases that were ready on launch on iOS ever again.

Infinity Blade was a premium title that sold for as much as $5.99 on a platform where free or $0.99 have become the norm. Within two weeks, Epic had released IAP with price points that reached as high as $50.

Before long, revenues from IAP were approaching those from initial sales. It wouldn’t surprise me if Epic is now making more money from IAP than it is from initial sales of the game.

So Do You No Longer Support Free?

I remain a huge supporter of free. I believe that free is the natural price point on any platform where the price of making one more copy is as close to zero as makes no odds. There are some situations where I believe paid may, possibly, be a better solution:

  • If you have a strong brand: the primary advantage of free is that people who don’t know your IP, brand, or game can experience it easily. If you already have a strong brand, you may be able to price high. (Few brands are actually this strong)
  • If you are a marketing-led organisation: If marketing is your USP as a business, you know how to persuade gamers to part with their money for a game. It might be worth playing to your strengths.
  • If your product is the best game the world has ever seen: this is highly unlikely

In essence, you will have to spend money to market your game; the higher the barrier to entry (i.e. the price), the more likely you are to have to spend lots of money to market your game. So in most cases, I would argue in favor for free.

But whether I am arguing for free or not, I always support allowing users to spend more money in the course of their enjoyment of the game.

The internet has enabled you to find your biggest fans and let them spend more money with you. Whether your game is free or paid-for, it will have cost you money to acquire customers. Some of those customers will love what you do. How will you enable these fans to spend lots of money from you?

The screenshot of Infinity Blade’s iTunes page shows you the top in-app purchases for the game. The most popular upgrade (for a game that sells for £3.99) is £2.99. They also sell IAP for much higher rates, and in total IAP, is about half their revenue.

I believe that games should go free, or they should go expensive. Never be cheap. But always, always, always offer IAP.

Move over freemium, Paymium is here to stay.

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
  • http://twitter.com/HerrKaliban Gunnar Lott

    I don’t understand that. Isn’t offering a free service (here: a game) und then charging for extras (here: in-game-currency) the definition of “freemium”?

    What’s the difference to “paymium”?

  • http://www.gamesbrief.com Nicholas Lovell

    The difference is when the game is not free. Infinity Blade costs $5.99

  • Yohann Guerin

    So the difference between Premium and Paymium is just that Paymium inculdes IAPs?

  • http://www.gamesbrief.com Nicholas Lovell

    Yes. From a business model perspective, a flat fee (whether upfront or a sub) means that casual users have to pay the same amount of money as the most committed fan. Adding IAPs changes this.

  • Korean Wonders

    Thank you for this article and for creating a useful term (I mean it :)
    However, I would like to add to the debate by proposing to differentiate between In-App Purchases (IAP) of Consumable goods (basically in-game money) and IAP of durable content.
    When we take the example of Infinity Blade, we can see it follows the model of games like We Rule or Eliminate (which are the definition of freemium), where users can purchase in-game cash/mojo to boost the gameplay.
    In these games, you don’t purchase new actual content or functions but rather game enhancers.
    So, in that aspect, I would definitely call Infinity Blade “paymium”.

    There are also the free games that act as a free version including a single IAP that unlocks the full game, but I would not call it freemium (would you?), rather a trial version. I would call them Free+ or simply Trial apps.

    Then there are the paid games that propose one-time IAPs such as map-packs or in-game ad banner removal. IMO, these don’t qualify as paymium either but more as “Paid+IAP” in the “traditional” sense. I’d propose Paid+.

    Last, there are the paid games that propose consumable and durable IAP. What about these? Paymium+?

    Oh, and I almost forgot to mention Free+ConsumableIAP+DurableIAP. Freemium+?

  • http://www.gamesbrief.com Nicholas Lovell

    I agree entirely that a free version with an unlock of the full game is just a trial, and I agree that the terms matter.

    of course, the reality of neologisms is that they take on their own momentum. Free-2-play is not a great phrase, but we;re stuck with it.

    So now you need to keep your eyes out to see if Paid+ takes off.

  • Korean Wonders

    Thanks for taking the time to reply.

    I am not sure Paid+ or Paymium+ are the most proper expressions possible, but to me they do make sense to distinguish between games that offer just additional durable contents, like map packs or new chapters on the one hand, and games that offer consumable contents, like game money, coins, potions, on the other hand.
    The reason for making the distinction is that the business model embraced by a game influences deeply its design. 

    If we look at CityVille, it’s obvious that the Energy system (forbidding any action until the Energy gauge refills by itself or is actively refilled) is not here to make the game more fun: it’s here as a lever for virality (asking friends for energy gifts) and direct revenue (users spending cash to purchase energy items).

    Even in traditional console games, the paymium+ model recently made its apparition, I believe, with Forza 4 on Xbox360 (although there might be other titles that use this model). 
    So far on Xbox360, games proposed actual content, either avatar items, additional equipment, characters, map packs, expansions that don’t impact directly the economy of the game. 
    In Forza 4, users can buy durable content packs (new cars) that then appear in the in-game shop. There, the players can purchase the cars with game credits OR coins, which are available for purchase on the XboxLive Marketplace for real cash.

    As I have noted by playing the game for some 15 hours or so, the game seems tweaked toward pushing users to spend real cash. Indeed, with 500 cars available, purchasing all of them with in-game credits –or even just half of them–, is going to take me an insane amount of time. I currently have some 1.5 million credits in bank, and I believe I didn’t earn more than 2 (max 3) million since I started to play. Adding to this the fact that a number of cars cost more than 1 million, with quite a few in the 2.5 to 6 million range, one would really have to devote their whole gaming time to the game for countless hours if willing to unlock everything through gameplay only. For the vast majority of gamers, there will be no choice but to either give on many cars or shell out additional cash, on a game already costing $60.
    It’s not my case personally, but I know a lot of users are “completionists” and don’t feel good until they have beaten a game 100%. If they are ready for anything to complete a game, why not use the opportunity to milk them?

    Last, there are other models available, used by the likes of GREE and DeNA. Their approach of the freemium model seems slightly different from what we have been used to with Facebook and iOS freemium games. There is an insightful interview with DeNA’s director here: http://www.gamasutra.com/view/feature/6526/social_killer_how_dena_leads_.php?print=1To sum up, instead of selling items directly (which would break the game balance) they sell opportunities to get items more easily.
    Similarly, in Korean RPGs, there have been many “convenience” items, such as additional inventory space, which can be ignored but will appeal to gamers who are the most engaged in the game.

    Well, I guess that’s enough for today, I don’t mean to be trolling :)

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