Turning Free-To-Play Into Play-To-Earn
What Are The Biggest Practical Hurdles Stopping Teams From Turning Their Successful Free-To-Play Games Into Play-To-Earn Games?
Congratulations! You own a successful Free-To-Play game, and you've heard about this new market opportunity called "Play-To-Earn". What's stopping you from making your successful Free-To-Play game a successful Play-To-Earn game as well?
That's the thought experiment I've been considering recently, and that this article shares my thoughts about. As always, I've taken a first-principles approach, so let's start right at the beginning with:
Issue 1: Why bother?
It's a reasonable question, right? I mean, for the purposes of this thought experiment we'll be assuming the business already has a successful game that generates, say, £1M of free cash flow each year. Why not just do nothing, or use the money to make another successful Free-To-Play game, or something like that?
Doing nothing usually isn’t an option, since markets and audiences change all the time. Doing nothing is typically the most dangerous business decision to make, since it almost guarantees the product will fail eventually. Maybe not this year, or next; but sooner or later someone is going to provide a better experience or a better value proposition and customers will vote with their feet. That’s why doing nothing is rarely an option and doing something is so important for businesses to remain relevant and profitable.
But even once we’ve ruled out doing nothing, “something” is a very, very big set of options to consider. Generally speaking businesses will tend to invest in opportunities that allow them to leverage their existing competitive advantages; so, in the games industry specifically, Indie Games teams will most often invest in new Indie Games, Free-To-Play teams will most often invest in new Free-To-Play Games, and so on. New markets cause disruption though, and it’s this disruption that usually provides the opportunity for new entrants to come into a market and shake things up as we’re seeing in the Play-To-Earn space at the moment.
The reasons and implications behind that are too large to explore in this article, so for now we’ll simply assume, for sake of argument, that some successful Free-To-Play business has arrived at a compelling reason to want to turn their existing Free-To-Play game into a Play-To-Earn game.
What are the practical hurdles getting in their way?
Issue 2: Why don't we just make the 'Premium' in-game currency tradable?
In almost any Free-To-Play game there's already going to be at least one Premium currency that players need to purchase with Fiat currency (£/$/€/etc). And if the game is successful (i.e. generating >£1M free cash flow per annum) then we can be certain players already purchase that Premium currency in order to access all the other purchasable resources the game has to offer. So why not just tell players "we've created a Premium currency banking service that will now buy any Premium currency from you that you don't want." What would the effect of such a design change be?
My guess is that it might increase the game's average purchase metric, since there would now be less risk for the player given the ability to sell as well as buy. So if a game charges £0.10 for each unit of its premium, “Platinum” currency, and its minimum purchase is "10 Platinum for £1", then that might have been my choice when I monetise for the first time in the game, since that minimises my economic risk.
As a consumer, the way I calculate that is as follows: Worst case, if I don't continue playing the game for any reason, I've only 'lost' £1. However, the downside of that is that most games offer discounts on the purchase of higher amounts of Premium currency, such as 10 Platinum for £1, or 100 Platinum for £9. Therefore although the total amount I spend is nine times higher (£9 instead of £1) the cost of each unit of Platinum is 10% lower (£0.09 instead of £0.10). So there's an economic calculation each player does to decide which purchase to make, and in any successful Free-To-Play game there will be a well-defined ratio between the number of players who choose to buy Platinum for £0.10 versus those who buy for £0.09. Let's assume it's 99:1 in favour of players choosing to purchase 10 Platinum for £1.
If the promise to buy back any unused Platinum changes the economic risk calculation for players, to the point where it moves them from purchasing 10 Platinum for £1 to 100 Platinum for £9, then that ratio change will result in increased income for the business.
For example, if the 99:1 ratio above were to become 95:5 as a result of offering to buy back unused Platinum, then the income from 100 players would change from £108 (99x£1 + 1x£9) to £140 (95x£1 + 5x£9), a potential 30% jump in revenue. The additional security of being able to get money back out of the system may also increase the total number of players making a purchase in the first place, and again that could also amplify the total revenues still further. This would appear to be a “win” for both the players and the business, since there’s an added benefit for each party.
Clearly any expectations would need to be tempered somewhat, since the offer to buy back Platinum would also introduce a new ratio, which is the ratio between Platinum purchased to Platinum refunded.
There is, of course, an assumption that would need to be tested here. Specifically that offering to buy back premium currency on a Free-To-Play game would increase the average purchase price and/or increase average revenue per user materially.
With Platinum offered at a discount for bulk purchases (£0.09/unit rather than £0.10/unit), it wouldn't make sense to repurchase the Platinum for more than the maximum discounted rate, since if the business offered to repurchase the Platinum at the base rate of £0.10/unit then players could simply buy Platinum in bulk at £0.09/unit and resell it to the business for £0.10/unit for a profit to themselves and a loss to the business. But with the newly introduced bank acting as a currency exchange it immediately becomes clear that some sort of commission fee would be required to offer the buyback security to players while also protecting the business. The worst-case scenario is when a player wants to sell back 100% of the Platinum they purchased.
Technically, it would be possible for the business to record the unit price of the Platinum at the time the player purchases it, to offer them an equivalent price for repurchase. In that instance the business may be able to check that the player paid £0.10/unit at the time of purchase and offer them a correspondingly high repurchase price, say £0.09/unit for sake of argument. Whereas, in the case of a player who made a bulk purchase at £0.09/unit the business could be aware of that and offer them a correspondingly lower repurchase rate, say £0.08/unit for sake of argument. That could work providing that all Platinum transactions purchased by each player were accounted for discretely, so the business could offer the optimal rate. Under that design a player who purchased £1 (£0.10/unit) of Platinum could expect to receive up to £0.90 back, and a player who purchased £9 (£0.09/unit) of Platinum could expect to receive up to £8 back. Not quite the perfect “100% guarantee” players may ideally desire, but certainly much better than the current “0% guarantee” they actually have at present. Such are the costs of providing services in the real world unfortunately.
Taking that all together then, the essential ratios to monitor are as follows:
Number Of Purchases Per 100 Users;
Average Value Of Purchase Per 100 Purchases;
Average Value Of Repurchases Per 100 Purchases;
Total Net Revenue Per 100 Purchases.
And here's an illustration of how introducing a banking facility to repurchase premium Platinum currency from players may look in practice:
Number Of Purchases Per 100 Users
Without Refunding: 99:1
With Refunding: 97:3
Value Of Purchases (10 vs 100 Platinum) Per 100 Purchases
Without Refunding: 99:1
With Refunding: 95:5
Number of Refunds Per 100 Purchases
Without Refunding: 0
With Refunding: 99:1
Total Net Revenue Per 100 Purchases
Without Refunding: £108
With Refunding: £131
Total Net Revenue Change
Without Refunding: 0%
With Refunding : 21%
Making the existing 'Premium' currency of a Free-To-Play game exchangeable through a banking mechanism, such as this, certainly alters the Value Design of the game in ways that could well have material benefits for players and revenues. That may be amplified further still by making it tradeable with other players as well as the bank. Regardless though, the key reason it's not possible to simply make the Premium game currency tradeable to create a Play-To-Earn version of a Free-To-Play game, is because it doesn't immediately bestow any sort of meaningful "earning" mechanism on the game. The only difference is that it would now be possible to turn the Premium currency back into Fiat currency if desired. That one change alone doesn’t make it possible for players to “earn” Premium currency through their in-game activity, as would be required by any Play-To-Earn game.
Issue 3: Why not just extend the two-way trading ability to any resources the player can purchase with their Premium currency? That should make it properly Play-To-Earn, right?
For this section I’m going to base my assumptions off the following Free-To-Play game economy. It’s typical of the sort of model that could be found in most standard MMORPGs today:
In this scenario it's clear there are two separate economic areas: the "Platinum" economic area and the "Gold" economic area. The rules of each economic area are very different, as are the trade routes between them. For the Platinum economic area (PEA) the rules are "Platinum can only be purchased in exchange for Fiat, or earned through rewarded advertisements. It can be converted into all other in-game items, including Gold." Whereas, for the Gold economic area (GEA) the rules are "Gold can be acquired by completing quests, defeating enemies, or selling game items. It can be converted into all other in-game items, excluding Platinum and its derivatives."
Assuming that the repurchase mechanism would already be in place for converting Platinum back into Fiat, then whether the game could be considered Play-To-Earn or not would depend on a player's ability to either convert Gold into Platinum, or the addition of a second mechanism to allow their Gold to be converted directly into Fiat.
What would the implications of such a change be to the kind of economy outlined above?
To keep things as simple as possible, for now I'll assume that all Fiat transactions will be processed through the repurchasing of Platinum, so that the only additional change to the Value Design at this stage is to allow Gold to be exchanged for Platinum.
The first consideration would be the total stock of Gold available to convert into Platinum, since any Gold in existence when its convertibility to Platinum is introduced would immediately create a potential liability for the business over and above what it could meet from its future revenues. For this reason it would be important to know that amount accurately, and the easiest way to do that would simply be to start with a clean slate. That way the business could be sure the potential liability at the launch of its Play-To-Earn version would be zero.
This solution would work fine if 100% of players were new to the game, but the premise for this thought experiment is to start with an already successful Free-To-Play game, and that implies many existing players who may already have accumulated large stashes of gold.
The simplest design solution for this would be to convert any existing Gold into a new token (e.g. Silver) that could continue to be used for all the same activities Gold was used for previously, such as purchasing weapons, armour, potions, crafting ingredients, etc., but which can't be used to purchase Platinum. That would create the desired economic solution of guaranteeing a zero liability at the game launch, while allowing existing players to retain the benefits they already had from their participation in the Free-To-Play version. However, any design solution that implies any sort of ‘devaluation’ of a player’s existing in-game assets, such as converting Gold to Silver, is unlikely to be welcomed by players, since it feels like taking away something they already ‘earned’.
In such cases it would be better to consider alternative design solutions, such as where the ability to convert Gold to Platinum is not permitted, but all the in-game Gold sources are diverted to become Platinum sources instead.
Doing this would allow existing players to retain the Gold they’ve already earned, without it feeling "devalued" by being forced to convert it to Silver or any other type of alternative token. Most importantly, this type of solution would still ensure that the potential liability on the business at launch is zero.
This is a practical example of why I believe it’s so important to be intimately familiar with all aspects of the Game Design Prism, before tackling a design challenge such as this. That’s because the impact of an ideal solution would need to be evaluated through all the lenses, and particularly the Value Design and Experience Design lenses to arrive at a scenario that solves well for both. Otherwise it would be possible to choose a design that solved the economic problem without addressing the user experience, or wider implications for the game.
This is one reason why less experienced game designers can sometimes end up choosing sub-optimal solutions when attempting to solve these complex issues. The best solution for any given problem can look very different depending on which part of the Game Design Spectrum one is looking through. Certain solutions that would work well in one area create problems in another area and there’s rarely a ‘one size fits all’ solution to choose. For example:
Value Design Solution: Keep existing "Platinum/Gold" economic model to allow Gold to be exchanged for Platinum, but ensure all players start with zero balances
Experience Design Solution: Best presented as "a new land to explore", with new maps, new enemies, new quests, new everything, to ensure existing players don't feel negatively disadvantaged
Project Implications: Considerable investment required to build so much new content
Or…
Value Design Solution: Keep existing "Platinum/Gold" economic model, with no ability to exchange Gold for Platinum, but make Gold sources generate Platinum instead.
Experience Design Solution: Could feel okay, even with existing content (maps, enemies, quests, etc.), since it doesn't feel like anything has been taken away, and the ability to earn Platinum has now been added.
Project Implications: Modest investment required since little new content required to implement
As can be seen from these two examples, there is no single “correct” solution to this problem. Each is valid and determining which is “best” depends on appreciating the big picture, such as the business priorities, the budget available, and the type of experience to be delivered for players. In practice there would likely be many more potential solutions for any given design problem, which is why having clarity around the project direction from the outset and maintaining it throughout development is so crucial.
Issue 4: If we accept it will be possible to accommodate the potential economic effects of any existing stocks of gold, would the rest of the game’s economic model still be fit for purpose?
In my previous article on Arcade Tokenomics I showed that the critical metric to measure for a tokenised arcade game was "Points Per Minute", since it would be necessary to balance this across multiple games in order to give players the ability to move value between them fairly. On reflection, I see no reason that this basic "reward per unit time" formula would not apply as well to a Free-To-Play game as it would a classic Arcade game. So I believe that would be as good a place to start considering the problem as any.
Furthermore, in my article on Tokenising Atari's Pong I explored the economic effect of adding a Play-To-Earn token to a previously non-Play-To-Earn game. In that I identified that the key variables to consider when designing the game's Tokenomics would be:
The value of a token;
The total number of tokens;
The conditions of token issuance, including rate of issuance;
The conditions of token redemption, including the rate of redemption;
Let's assume we know the overall framework we eventually want the revised game to sit within, and that we want it to be able to support the buying and selling of some sort of game specific token, along with the potential to make in-game items tradable between players and moveable between games in the long term, once an appropriate mechanism for this can be found.
As well as this, the ideal Play-To-Earn game environment would likely include achievements that would not be tradable, but would still have some type of cross-game functionality. It would therefore be necessary for all this additional functionality to sit within a larger "Publishing Portfolio" framework with its own token that could be converted into any game specific token within the portfolio, visualised as follows:
The first question becomes whether either of the existing Platinum or Gold currencies in our example game fulfill the requirements of the game specific token this publishing model requires?
A generally accepted feature of all game specific tokens in Play-To-Earn games is that they must not be possible to earn directly from within the game. Doing so would impose an unlimited supply of the game specific token, which then creates an economic problem if that unlimited token supply is linked directly to the limited real-world value being generated by the game itself.
For this reason there needs to be separation between any unlimited game resources that can be earned (often termed Grind Currency) and the game specific token required to unlock progress, features, and items within the game.
Applying this requirement to our example Free-To-Play game economy outlined above (in Issue 3) actually suggests a more appropriate solution than the two I initially discussed above before considering the wider publishing framework. Those solutions meant either making Platinum the "Grind Currency" or keeping Gold as the Grind Currency and letting players convert their Gold into Platinum.
I had initially assumed this would be a simple currency conversion, with X Gold being exchanged for X/10 Platinum (or whatever other ratio the market decided appropriate), as would be the case in a typical exchange rate scenario. However, the introduction of a separate game specific token provides an alternative design option that is much better suited to a game environment. Instead of making the conversion of Gold to Platinum a straight currency conversion it would instead be possible to require an additional ‘catalyst’ token to facilitate the transaction. This would make the equation formula: (X Gold * Y Game Specific Tokens) = Z Platinum.
This one change solves several tricky design issues at a stroke.
First, it requires no changes to the existing economic model of the Free-To-Play game. Players can continue playing just as they did before by choosing to ignore the Game Specific Token entirely if they want, which satisfies the Value Design requirement.
Second, since it only adds functionality and doesn't require the attributes of any existing game items or features to be reduced or compromised ('nerfed' in gaming parlance), it satisfies the Experience Design requirements perfectly as well.
Thirdly, it solves the problem of what to do with players who already have hoards of Gold saved from years of previous play. Regardless of how much Gold they have, they would still require the Game Specific Token to convert it to Platinum, and since the Game Specific Token would be an entirely new feature, its value, supply issuance, and redemption would be flexible and could therefore be defined in line with the requirements I outlined in my article on Tokenising Atari's Pong.
Fourthly, since the Game Specific Token would add functionality without interfering with the existing game economy, any economic value arising spontaneously as a result of its use (as also described in my Tokenising Atari's Pong article) would be entirely in addition to the existing revenues already being generated by the Free-To-Play version.
Furthermore, as I discussed in my last article about Tokenising Existing Free-To-Play Games, because this approach utilises an existing Free-To-Play game rather than creating something new, it would be possible to safely test and optimise any Play-To-Earn Tokenomic designs before public launch by feeding player data from the live game into the development version, to model outcomes.
This would make it possible to iterate different Tokenomics systems and optimise their designs to balance all key variables before exposing it to valuable, paying customers. It seems to me that approaching the problem in this way would enable the business to deliver an optimal outcome for both existing players and new players, while minimising potential risks and maximising potential returns for the business. A proper, Win/Win/Win outcome for all concerned.
Issue 5: So if having a Game Specific Token works so well, why is a separate Platform Token needed at all?
The potential of a Platform Token becomes clear when we zoom out from looking at an individual game with its own Game Specific Token, to consider a wider portfolio of otherwise unrelated Play-To-Earn titles. A Platform Token provides a way to incentivise and reward loyal players in additional ways, such as additional content, access to VIP tournaments, competitions, etc., right across the whole portfolio of games.
In this way a player who converts some of their Game Specific Token into Platform Token might benefit from, for example, an experience point multiplier that increases the issuance of experience within every game they play across the entire portfolio. Or it may increase their chance of finding certain items they need to unlock certain achievements. These type of options provide a mechanism for Play-To-Earn publishers to gamify the entire platform stack in ways that companies have only toyed with in the past, but haven't fully explored. For example Microsoft with its Gamer Score, Valve with its Steam Levels, etc. By combining Game Specific SubTokens with a single Platform level PubToken in this way, an ecosystem is created that allows players to enhance their experience within their favourite game and also access wider benefits across other games as well.
If managed carefully it should provide an innovative and powerful way to incentivise positive community behaviours that enhance everyone's player experience, while also building additional value for the business.
Summary
In summary then, what's stopping anyone converting a successful Free-To-Play game into a successful Play-To-Earn game as well?
Certainly nothing fundamental as far as I can tell. It’s not so straightforward to implement that it might be considered a ‘no brainer’ investment, in the way that converting a successful PC game to console or mobile might be. As I have shown above, there would undoubtedly be many design modifications required, some of which may be quite challenging to resolve in ways that respect both the business and the player; however, based on what I’ve outlined here and in my previous articles, it would appear the majority of the barriers are to do with opportunity costs, market uncertainty, player perceptions, and other “macro” aspects of the business environment that are little or nothing to do with the actual game design and development issues themselves.
For any teams out there with existing, successful Free-To-Play games, it would appear that the decision to turn them into a Play-To-Earn game wouldn’t be limited by any game design or development challenges, just the opportunity cost of what they could be doing with the investment required instead.
If I were a Free-To-Play company right now, I’d certainly be keeping a close eye on the Play-To-Earn space as it matures over the next 12-36 months.