Free video games: A business model change by sellers

A couple of months ago, we explained how sellers almost always and everywhere change pricing strategies, not buyers.

Add this story from The Economist June 28, 2008 issue to the examples cited. Millions of East Asians, like Americans, are addicted to online, “massive mutiplayer” video games.

Unlike in America, however, the Asian business model—another term for pricing strategy—is not to sell shrink-wrapped video games in retail outlets. Instead, they give away the software for free, while earning revenue from micropayments—small payments made by the more devoted players to purchase extras for their in-game characters, from weapons to haircuts.

Electronic Arts is now copying this pricing strategy with its “Battlefield Heroes” online game, which it also hopes to earn revenue from in-game advertising and the sale of character upgrades. Micropayments are also a part of Second Life as well as other social networking sites.

One interesting benefit of this business model is it takes away the worry about software piracy. In fact, the more people who download the game and play, the better.

Just another example of sellers innovating new pricing strategies. Notice they didn’t ask their customers if they could switch to this model; they just did it and allowed people to vote with their pocketbooks.

I wish PKFs would apply the same innovation and experimentation in moving away from the billable hour.

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