Laurentian U. professor pulls back the curtain on the economics of free video games

Have you ever wondered how the developers behind free games like Fortnite, Pocket Run Pool and Roller Splat are able to survive?

Laurentian University professor Aaron Langille spoke with the CBC's Morning North to break down the new economic models that have sprung up with the proliferation of free video games on smartphones, tablets and personal computers.

Langille, who also develops his own games in addition to teaching students about them, says the model is counterintuitive in some ways.

"Here you have a game that you can download and play in perpetuity for free. And yet these these companies are making millions and millions of dollars," he said. "A game like Fortnite has 40 or 50 million active users. I mean, if you can find a way to part say 10 percent of those players with a dollar that's four or five million dollars right there."

Langille said that when a game like Fortnite catches on with the game-playing audience, the potential for huge profits becomes real for developers.

"If you can coax them into a buck or two, a huge number of people can produce a huge number of dollars even if the payment is relatively small."

Langille also offers up some new terms used when discussing the economics of video games.

Emote:

Langille said a common element of free games is encouragingpeople to part with their money by buying up in the game world. Players familiar with Fortnite will understand the term Emote, Langille said.

"One of the things that they might do is offer cosmetic upgrades, things that change the costumes of your characters or things that change the way your characters move or the way that they react. Usually that's called an Emote."

"Or they can offer you things that give you a competitive advantage. So items or skills or speeding up the development of your work force, whatever the case may be, they can offer you that as well for in-game payment."

Whales:

While many users are satisfied with playing the free versions of games, even with the annoying pop-up ads prompting you to upgrade, Langille said developers still rely on people who spend huge amounts, much more than the average user.

"Another way that they tend to make their earnings from their players is through what we would colloquially call 'whales,'"Langille said.

"These are people that for whatever reason have a bit of money to spend and choose to spend it on the game and usually gain a competitive advantage."

"It's a term that's taken from casinos, where we might go to a casino and spend 20 or 30 dollars and decide 'that's enough to lose' and then leave, where there are people that would spend tens of thousands of dollars in an evening."

"And those are the people that really keep the casinos afloat, not the people spending 20 dollars in a slot machine."

"They're willing to pay because they get they get a competitive advantage and they want to be player number one on the list," Langille said.

"Not all games have this competitive advantage model but some that do tend to attract people with money to spend, and spend it they do."

"It's easy to kind of tilt your head and wonder what what's going through these people's minds. But from a free player perspective...these people that pay the exorbitant amounts of money keep the game going."

Grinding:

One high-profile case where the developer earned critical backlash from the gaming community was in the case of Star Wars Battlefront 2, a game developed for PCs, XBox and Playstation, Langille said.

Offering players the option to pay for a competitive advantage backfired on the game's publisher, Electronic Arts.

"In this case it was about 90 bucks to buy the game and then to get most of the good playable characters...to unlock Darth Vader, for example, you had two choices."

"One was to do what we would call 'grinding' which means working really, really hard for very little output for a long time and then you would eventually receive Darth Vader in your collection of players."

"The other option was to pay. And people were paying upwards of five or six hundred dollars to a game that they had already paid a hundred dollars to have," Langille said.

"People were not happy. They weren't happy and that game took a very serious hit to their player base."

To unlock the full interview with Aaron Langille, click the audio link below.