What's next in free-to-play games?

SAN FRANCISCO--Fully 95 percent of all mobile games in the future will be free to play, predicted one top industry player here at the GMIC show. But what exactly does that mean for the mobile gaming market and the players still hoping to cash in on the space?

That was the topic tackled by a handful of mobile gaming executives and veterans during panel discussions here. The general consensus was that freemium, free-to-play games are here to stay and that the percentage of paid games will continue to shrink in the months and years ahead. And that trend will essentially shut indie developers out of the mobile gaming market, since they don't have the cash to build and maintain free-to-play games. But mobile gaming companies seeking new revenues likely will need to stretch the freemium gaming market into a wide range of new genres, thus breathing new life into a market currently dominated by the likes of "Clash of Clans" and "Candy Crush Saga."

Mega-games like Candy Crush Saga currently dominate the freemium gaming market.

Free-to-play mobile gaming expected to grow drastically

Kristian Segerstrale, cofounder and partner of Initial Capital, predicted that 95 percent of all mobile games will eventually be free to play. He said this trend will dramatically expand the market for mobile games by making it simple and easy for users to try new games.

"On mobile, free-to-play is certainly going to eat everything else," agreed Chris Carvalho, COO of mobile gaming giant Kabam, which offers titles including "Kingdoms of Camelot" and " Dragons of Atlantis." Interestingly, Carvalho said the cost of creating a mobile game continues to increase alongside the size of the industry. He said Kabam's first mobile games cost around $500,000 to build and distribute, and today that number is closer to $5 million per game.

To put that figure into perspective, Ed Fries, the co-creator of Microsoft's (NASDAQ:MSFT) Xbox, said the console's first games in 2001 also cost around $5 million to $10 million to create.

Not surprisingly, Lei Zhang explained that the cost to build free-to-play games is squeezing smaller developers out of the market. Zhang is the U.S. GM of Asian gaming company Chukong Technologies.

Moreover, Dave Roberts, CEO of PopCap Games, said the mobile gaming discovery problem "is so much worse" now than it used to be. He said it's extremely difficult to draw users to a new game in an app store with over 1 million other apps, unless a company is willing to spend significant amounts of money on marketing.

"The land rush is over," he said.

Devs use new tactics to draw consumers

Kabam's Carvalho noted that the company has used well-known brand names to help it rise above the noise. For example, he said the company has made over $100 million from its Hobbit-branded game.

Kabam's Hobbit-themed game has generated over $100 million for the company.

Although most agree that the freemium, free-to-play model for mobile gaming will continue to gain traction, gaming executives also agreed the market won't stay still.

"I do think it's going to evolve," said PopCap's Roberts said. He said it is "hard to imagine" a big, story-driven game like "Grand Theft Auto 5" moving to the free-to-play model, but "I wouldn't be shocked if it happened."

Similarly, Kabam's Carvalho said no developer has yet figured out how to bring in-depth, story-driven games to the free-to-play market--but he said "that could be the next big thing."

"I mostly worry about stagnation from a creative point of view," said Fries, the co-creator of the Xbox. He said the free-to-play model makes game creation difficult because it requires game developers to pay careful attention to the business model of the game instead of the game's mechanics and like-ability. "Developers don't like to think about monetization when they're building something fun," he said.

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