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The EU investigation into F2P games is unlikely to change anything of substance

By on February 28, 2014

The European Union is investigating the growth of free-to-play games, and whether certain practices are misleading advertising.

The investigation follows the publication of the UK’s Office of Fair Trading’s guidelines on In-App Purchases and Apple’s settlement of a class action lawsuit, both of which I welcomed as bringing clarity and responsibility to the IAP industry. I’m delighted to see that the EU states that “the principles on online games and in-app purchases which the UK Office of Fair Trading published on 30 January 2014 are consistent with this action. “

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The EU seems to be focused on four issues: free must mean free, and not include any optional IAPs;  games that are likely to appeal to children must not have direct exhortations to buy such as “Buy Now” or “Upgrade Now”; IAPs should not be possible without explicit consent; developers must display an email address where customers can ask questions.

There is merit in ensuring that existing consumer protection laws are applied within this new and developing sector. Creating a set of new rules for this segment seems a strange over-reaction to me.

(As an aside, I find the cheering from certain sectors of the games press and public over governmental involvement in video games bizarre. These audiences have fought tooth and nail to keep government interference away from *our* industry, particularly about violence in games and how it is up to parents, not nanny states, to take primary responsibility for protecting children while allowing adults access to whatever they want. But when the issue is about F2P titles which have taken our industry from niche to mainstream, from consoles to smartphones and tablets, from “games for gamers” to “games for everyone”, they are all in favour of ill-informed government intervention “to protect the children”.)

I think that the focus on the word “free”, and the requirement that a game that is marketed as free have no ability for players to spend money within it, shows a lack of understanding of how the digital world works. Further than that, it risks setting a precedent that will affect many businesses that do business over the web.

Free should mean free

In his book Predictably Irrational, behavioural psychologist Dan Ariely has shown how significant the price point “free” is. When we don’t have to pay any money (even as little as a penny), we are much more inclined to take something, to try something, to download something. This is the heart of why mobile games fell in price to free so fast (that and the fact that Steve Jobs wanted as much free software available on his platform to help shift high margin smartphones).

But it is not just mobile games that are free. I read the Financial Times for free. Only I don’t. Because I only get 8 articles a month before I have to subscribe to read more. Is that misleading? Should it be banned? I listened to Spotify for free for a year, accepting the ads as the price I paid for being a cheapskate before I upgraded to Spotify Premium from within the app. Should that be banned? I use Skype for free all the time, but I’ve upgraded to the premium service so that I can call people on their landlines from the service. Should it be illegal to call Skype free, when the majority of users use the service entirely for free all the time?

Free is good for consumers. Instead of everyone paying the same amount of everything, regardless of its usage, many, possibly most consumers can a vast range of services and entertainment products for free. Many of them continue to enjoy them for free, getting great value, for the entire time that they use them. Some, usually heavy users, go on to spend on the product, which is how the company behind it can afford to make it available for free for the vast majority. Provided that informed consent is given, this is a win all around.

Free is free for nearly everyone

According to Tommy Palm, games guru at King, 70 per cent of people who have finished Candy Crush Saga have never paid a cent. Accepted wisdom suggests that fewer than 5 per cent of the audience pay for any given game. That figure is 4 per cent across all of King’s 350 million MAUs. Recent data from Swrve suggest that 98.5 per cent of players don’t pay any money on their mobile games in a given month. So for the vast majority of users, free does mean free. That doesn’t seem misleading to me.

But won’t someone think about the children?

So now we come to the tabloid defence: there have been cases of children spending money they shouldn’t, so we should legislate to protect adults and children across the board, regardless of the consequences. If this was happening in any other segment of the games industry, gamers and the gaming press would be up in arms. But because it is happening in free-to-play, we’re all in favour of it?

That’s just silly.

I believe that mature adults with informed consent should be able to spend as much or as little money as they like. There are some things that I would like to see changed to protect children (and adults) from rash decisions. I would like it to be easy to require a password for every single purchase. I would like iOS and Android to ship with a Kid’s Mode just like Airplane Mode that makes it easy to switch off access to the AppStore, to the browser, to YouTube, to my email or Messaging system and to a number of other configurable settings so that I can hand my smartphone or tablet to my children to enjoy Hay Day or Pocket Trains or Harbour Master (all of which they love) with no fear that they will access the AppStore or send an awkward email to a client. I would like games makers to adhere to the existing laws on unfair sales practices such as time-pressured selling and the appropriate use of discounts.

What I don’t want is for the games industry and consumers to encourage kneejerk intervention from ill-informed politicians because they don’t like the way the market is changing.

What will happen?

My prediction is that we will see some changes. Most will be for the good. Giving consumers an easy way to complain to developers will be good. Raising the issue of informed consent so that OS makers and responsible game developers follow existing guidelines to protect consumers from high pressure sales techniques is good. Making password protections easier to use will be good.

Others will be silly. If the “but what about the kids?” reaction takes hold, we will see a lot of games change their art style so that that argument goes away. Expect to see more dystopian environments. More games with breasts in them (because that makes them “Mature”). And expect Clash of Clans to be relaunched as Clash of Motherfuckin’ Clans, because that can’t be aimed at kids, right?

The phrase Free-to-Play might go away, because it has become politicised. I suspect that the “free” will stay, because it is a true reflection of the experience for the vast majority of players. It may change to “free-to-download” or to “free-to-start” (as Iwata-san has suggested), but it seems unlikely to me that the word “free” will go away.

What I don’t expect to happen, and what I will fight tooth and nail to stop, is the idea that there is an “appropriate” amount that a mobile game can charge. That a mobile game should have a legal “cap” of, say, EUR30 that can be spent in it. That mobile games should, by law, cost less than a console game, because console games are “better”.

Price fixing, government intervention and kneejerk legislation are bad. They are bad for industry. They are bad for consumers. In the long run, they stifle innovation and they will have unintended consequences for the whole industry (and indeed any digital business that figures out how to give their core product away for free with an upsell opportunity. Or, in other words, all of them).

The fact that this issue is being raised is good. Let’s address it within existing frameworks. Cheerleading for heavy-handed government intervention is a big mistake.

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
  • Eric

    The protect the kids argument is stupid… Any consumer can get his money refunded by Apple or Google Play, no questions asked. I’ve seen it happen. So if a kid spends 300$ in a game the parents need only to file a complain and “BOOM” they get refunded the whole amount. It happened for one of our game and it’s ok.

  • Iain Hunter

    I think the question the industry needs to ask itself is really around addiction. The fact that big spenders are generally referred to as whales implies casino like gambling and doesn’t create a great image. Are players spending upwards of $50 per month genuinely enjoying the experience or are their addictive personalities being exploited? If it’s the latter we’re in trouble and the industry would be well served to address the concerns head on rather than saying it’s up to “mature adults” to make up their own mind.

    If games start having to display a gambleaware logo on the front it’s going to kill the industry.

    I discussed this in depth back in Oct on my blog

    http://iainhunter.wordpress.com/2013/10/10/f2p-whales-addicts-and-dirty-secrets/