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Hardcore players pay dearly for 'freemiums'

Published on Mar 10, 2014 9:20 AM
King Digital Entertainment, the makers of Candy Crush, raked in US$2 billion (S$2.5 billion) last year from its players. But the fact that so few are paying raises concerns about the gaming industry’s reliance on addicted gamers. -- PHOTO: AFP

If you have always wondered who buys those little power-ups and lives in Candy Crush Saga, a new survey has provided an answer: nearly no one.

A report from Swrve, a company that helps developers design mobile apps, found that only 1.5 per cent of mobile game players spent any money at all on their phones and a minuscule 0.15 per cent of those who did are responsible for coughing up 50 per cent of all revenue.

While the drastic inequality has worrying implications for developers, it also shines an unflattering light on mobile game addiction.

At the heart of the problem is a business model known as "freemium" - give your app away for free but design to compel users to pay for little boosts.

The fact that so few are paying in what is a multi-billion-dollar industry raises concerns about the gaming industry's reliance on "whales" - the addicted gamers who pay again and again to get ahead.

The new numbers paint a picture of exploitation, Mr Ramin Shokrizade, an economist with online game developer Wargaming, tells The Sunday Times.

"I would say that any time you sell a non-luxury product that is designed to trigger addiction mechanisms - using reward removal as an example - and you see a very small percentage of people are vulnerable to the model, then I would classify these products as predatory," says Mr Shokrizade, who has written extensively about the tricks used by mobile game-makers to extract money from users.

He adds that the industry has identified a "small but significant vulnerable population that can be exploited".

More worrying is that the mobile industry is also starting to target younger children with products like the recently launched Fisher-Price baby seat with iPad holder.

But counsellors, parents, governments and even some within the gaming industry are starting to push back.

In terms of government action, last week, the European Commission called for talks with Apple, Google and other app developers about better consumer protection from "unexpected costs" derived from using in-app purchases on their mobile phones.

"Misleading consumers is clearly the wrong business model," says the commission's Justice Minister Viviane Reding. "The European Commission will expect very concrete answers from the app industry to the concerns raised by citizens and national consumer organisations."

The talks come a month after Apple settled a lawsuit with the American Federal Trade Commission by agreeing to refund at least US$32.5 million (S$41.2 million) to parents who did not authorise hefty purchases racked up by their children on their iPhones and iPads.

The settlement is the first punishment handed to a major tech company for such an infraction.

Before regulation kicks in though, Dr Kimberly Young, a psychologist specialising in Internet addiction, says there is a need to educate parents and users about how to use technology responsibly.

"Don't use technology as a babysitter - that would be one of the main things for parents," she says, adding that she would not hand over an iPad to children under the age of five. And it isn't just about age, she says. Parents need to better understand what benefits their children are getting.

"The kid may be using a math game on the iPad but is it teaching him higher-order reasoning or is it just rote memorisation?"

A few months ago, Dr Young started a treatment programme in Pennsylvania where adult patients can check themselves in and "detox" from their digital devices for three days.

"I would say these are for extreme cases. I've seen people who develop clots in the legs because they sit down too long and can't leave the computer or have to put on diapers because they can't leave to go to the toilet," she says. She did not reveal how many people have checked in.

Still, experts say the freemium model isn't about to go away. It just makes too much money.

Consider the difference between WhatsApp and Candy Crush. WhatsApp, which was recently bought in a blockbuster US$19 billion deal, reported revenue of US$20 million last year from its 450 million users.

King Digital Entertainment, the makers of Candy Crush has only one-fifth that many users. Its revenue last year: nearly US$2 billion.

Says Dr Young: "Maybe they can put warning labels on this stuff, although I know it's not going to happen."