Latest Analyst Commentary - All

Here is a list of monetisation models employed by popular games in China:

(Data source: company financials and briefings)

Freemium games are free of charge for casual gamers, while premium players can pay for virtual goods to enhance the gaming experience. It is a global trend that games operators have switched monetization models from subscription or Game time to microtranscations. Activision Blizzard as previously insisted that the freemium model would not be applied to Call of Duty, but, two years on from CEO Bobby Kotick's pronouncement, the model is being adopted for Asia. Also in China, nearly 90 percent of major games employ the microtransactions model, such as AION via Shanda, ZT Online via Giant, TLBB via Changyou, etc. The attraction of freemium games is the chance to sample games before committing time and money to them, particularly when a completely new game is introduced to the market. After players become more involved, they are more likely to pay for virtual items via in-game store and other related services. According to Giant and Perfect World, the pay rate increases for freemium games compared with traditional time-based game,s and the average revenue per user is more than RMB200 in ZT 2.

However, non-paying gamers may feel short-changed in games based on microtransaction models. Typically, the more players pay for items such as weapons, gems and pets, the better they can perform in the game. As a result, the satisfaction of playing games and skill-led competition may suffer, and operators could lose engagement from its non-paying userbase. Therefore, some traditional massively-multiplayer-online-role-playing games are still monetized through Game Time and subscriptions, such as World of Warcraft and Fantasy Westward Journey, and will not be changed in the near future, suggests Netease. The latter has been operated for nearly 10 years, and is one of the most popular games in mainland China, ranked by its active concurrent users and consumer spending. It is true that microtransaction model can bring large amount of cash flow back in a short period but compared with Game Time model, freemium games might find it harder to build engaged communities and maintain loyalty of keen gamers, which could shorten their life cycles. It is too early to determine the superiority of microtransaction model and the delicate balance of free/premium content integration it needs to traverse, even though it owns a significant market share.