Sony, Warner Bros. Drop Subscription Fees and Move into Selling Virtual Goods

Today, the Wall Street Journal published an article titled, First, Give Away the Game which focused on the growing adoption of the free-to-play business model in the Western market with major companies like Sony and Warner Bros. The model not only removes barriers to entry for gamers, but also provides them with the ability to self-select into an optimal price point resulting in a compelling high-margin business for game publishers and developers.

Sony plans to release a F2P version of “Everquest II” and Warner plans to release “Lord of the Rings Online” by the fall abandoning a $15 dollar a month subscription fee. Players will now buy virtual goods and items upgrades incrementally through micro-transactions.

Although the price point on many virtual items often seem small—$1 or $2 for many items— publishers are discovering they can really add up. Across the 145+ titles we power e-commerce for we see an average of 10% of players purchasing virtual goods spending at an average of $28 a month. “There’s no cap on what the user will spend on micro-transactions, unlike a traditional subscription model,” says Andrew Schneider, Live Gamer’s president and co-founder.

This published story follows last week announcements of new partnerships with EA, THQ, and Real Networks’ Gamehouse only solidifying that major Western publishers and IP holders are rapidly adopting this model. Total virtual goods sales this year are expected to reach $1.7 billion in the U.S., up from $278 million in 2008, according to ThinkEquity LLC.

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To read the Wall Street Journal article in full click here