F2P: Free to Play or Forced to Pay?
How web3 games can learn from the F2P systems that defined an entire era of gaming
In 2018, Senator Orrin Hatch famously asked Meta CEO Mark Zuckerberg: “How do you sustain a business model in which users don’t pay for your service?” Mark paused briefly, then responded with what is now an all-time classic quote:
“Senator, we run ads.”
In 4 words, Mark captured the core essence of Facebook’s business model. As someone who covers gaming, I couldn’t help but chuckle at this dialogue because the same question can also be applied to free-to-play (F2P) games. And the response? Just replace ads with gachas!
I’ve outlined in a previous post why the F2P model is so powerful. Today, I want to explore the specific tactics and systems that F2P games leverage to drive billions in consumer spending. In fact, F2P games brought in ~$100 billion (!) in revenues last year1, so they must be doing something right.
The goal is to then apply some of these insights to web3 games, which were founded on the following principles:
Blockchain-managed ownership of digital assets, independent of the game itself and (having the potential to be) interoperable across different ecosystems.
Composable ecosystem that allows developers to create new gameplay mechanics on top of existing ones.
Transparent governance structures with more aligned incentives between developers and the community.
While this vision has been derailed by P2E speculation and bad actors, my belief is that more immersive content + more robust systems can set us back on the right path. I’ve always thought that web3 games have a huge opportunity to learn from powerful F2P systems that have been refined and optimized over many years. Let’s dive in!
Energy / Fatigue systems
Energy and fatigue systems (also sometimes called stamina) have been staples in F2P games since their inception. Today many different variations, both direct and indirect, exist across a broad spectrum of games. Some notable models that come to mind:
Candy Crush Saga (2012): Players start with 5 lives (i.e. energy) which regenerate at a rate of 1 per hour. If players pass a level, they get to continue playing. If players fail a level, they lose 1 life. In this model, content is gated by energy (if you run out of lives, you can’t play unless you acquire additional lives — either by spending or through other means).
Clash Royale (2016): Instead of an explicit energy resource, progression is gated by the amount of rewards players can obtain. Each time a player wins a match, he or she is rewarded with a reward chest. These chests take a set amount of time to unlock (3, 8, 12 or 24 hours depending on rarity / type) and only 4 chests can be held at any given time. Rather than limiting gameplay like with Candy Crush, this model limits reward acquisition instead. Players can technically play as much as they want.
Genshin Impact (2020): Genshin uses an energy resource called resin (capped at 160, replenishes at a rate of 1 per 8 minutes). Resin is consumed to open the reward chests following a boss fight or dungeon completion. Similar to the Clash Royale model, the content itself isn’t gated by resin, only specific rewards are. Additionally, there is a plethora of content that doesn’t require any resin (e.g. quests, daily commissions, Spiral Abyss, general open world exploration).
With how popular energy systems are, it begs the question… why do games implement these systems in the first place? More specifically, what is the benefit of controlling the pace at which players can progress in a game? It may seem counterintuitive at first that developers would want to limit gameplay, but these systems actually make sense when viewed in the grand scheme of the games-as-a-service model that the top F2P games employ. Let’s briefly walk through some of the pros / cons.
Pros:
One important benefit is that developers can artificially elongate the retention curve. By capping content consumption over a certain period of time, players are compelled to come back constantly if they want to progress. Without a cap, players can theoretically blitz their way to end-game in a short period of time, leading to faster churn.
It also encourages active and consistent engagement with the game (a day not spent playing means wasted energy).
Higher retention consequently gives developers more opportunities for monetization (through events, promotions, new content releases, or other means).
Prevents player “burnout” from extended exposure to the gameplay loop (i.e. progression outpacing new content releases).
Ability to monetize energy for hardcore players (e.g. selling an energy or fatigue-replenishing item in the cash shop).
Helps synchronize progress across the player base (hardcore players won’t have an overwhelming advantage over casual players, assuming the same starting point).
Fairly easy to implement.
Cons:
Can make it harder for new players to catch up. However, this is usually mitigated by releasing generous starter bundles for new players (or special incentives and events targeted at newer players).
Players may find it frustratingly inconvenient if they can’t play on a fixed schedule (holiday periods, erratic work schedules, etc.). Can be partially mitigated through excess energy carryover systems (e.g. Genshin’s condensed resin).
Not meant for games with no defined progression (e.g. competitive PvP games like League of Legends or Overwatch).
As seen above, energy systems have evolved considerably since the very first iterations seen in F2P games, pivoting from more restrictive models that punished players for losing to more flexible models that prioritize aligned incentives. Many modern MMOs (even non-F2P games) have adopted similar systems to manage content pacing, such as Final Fantasy XIV providing experience rate boosts that accumulate based on how much time the player has been logged out. However, it bears mentioning that long term retention will ultimately still depend on the quality of a game’s content; in my view, energy systems are just effective tools that developers can utilize to reinforce a healthy gameplay cadence for its player base.
What about web3 games? Would they also benefit from energy systems?
When designed thoughtfully, I believe energy systems can absolutely still be effective in web3 games with defined progression. In fact, we need to look no further than Axie Infinity - Origin’s stamina system to find one. For those unfamiliar with Axie Infinity - Origin, it’s a F2P2E (free to play to earn) game featuring collectible pets called Axies (think Pokemon) that players can take to battle with other players in the Arena and earn rewards (e.g. SLP tokens which are used to upgrade or breed more powerful Axies). Put simply, players progress by winning in the Arena to upgrade their team of Axies, so that they can fight in higher ranked matches to earn even more rewards. Axies may also have utility in future content such as the new Land system.
Below is the description of Axie’s stamina system from their official website:
As long as you have Stamina, each Ranked match in Arena will consume 1 Stamina and grant you extra rewards per win with respect to your current Rank. Your stamina is recovered at 00:00 UTC everyday. Total Stamina (capped at 60) can be increased by collecting more Axies according to the following formula:
Total stamina = 0.5 x Number of Starter Axies + 3 x Number of Blockchain Axies
Putting aside the game’s challenges, I think Axie’s current stamina system is actually quite robust (though admittedly it has already gone through several iterations):
Similar to modern energy systems, it time gates progression, not gameplay. Players can still battle in the Arena without stamina — it just wouldn’t net them as many rewards.
The stamina cap scales with how invested a player is in the game. This creates additional utility for holding Axies. The more Axies players own, the faster they can earn / progress.
Low cap coupled with high refresh rate encourages high frequency engagement; this model is commonly seen in hypercasual / casual games and thus well suited to Axie.
The stamina system in Axie Infinity achieves many of the same benefits as its web2 counterparts, with one important addition — controlling inflation by limiting SLP token emissions. Contrary to many web2 games which have closed economies, balancing currency emissions and sinks is critical to sustaining a token-based open economy over the long term. Based on observations from other large open economies (e.g. MMORPGs), I believe energy systems can be one potent tool that helps web3 game developers accomplish this goal.
Side note: I plan to write about how the top games today create currency sinks in a future post, so stay tuned!
Gacha systems
It’s nearly impossible to mention F2P without bringing up gacha (e.g. loot boxes or character summons), as they have been inextricably linked since the inception of F2P games. While contentious, most modern F2P games are designed with some form of gacha-based monetization in mind.
So what exactly are gacha systems? To put it simply, it’s a monetization mechanic where players spend some form of currency to acquire a randomized selection of digital assets. Effectively, players are gambling for a chance at obtaining rare digital items that enhance their gameplay.
But why not just sell the rare item directly and price it based on its expected cost? Well, game developers have discovered through extensive testing that gacha mechanics better entice consumers to part with the money in their wallets. The chance (however low) at obtaining a rare item with only a few pulls serves as the carrot on the stick that pushes consumers to spend. Furthermore, gacha systems act as a quasi price tiering mechanism that smooths out the demand curve. Consider the following hypothetical scenario:
Assume legendary item A has a 1% probability to drop from the gacha, which costs $2 for each pull.
Expected cost of obtaining legendary item A through the gacha is therefore $200 or 100 pulls. If a player has a $20 budget, he/she would be priced out if the item was only sold directly in the cash shop for $200.
With a gacha system, the player can now choose to roll the dice by purchasing 10 pulls. In the event he/she gets lucky, there is the potential to acquire the asset for $20 (or less).
Even if the player ends up not getting the item in 10 pulls, what ends up happening is the “sunk cost effect” pushes the player to keep spending until he or she eventually obtains the item.
With this simple gacha system, you’ve now converted a player who would’ve been otherwise priced out to potentially pay full price (or more, depending on luck) for legendary item A. Kind of brilliant, if you ask me.
While gacha systems are extremely powerful, they are deceptively difficult to design — it requires the developer to maintain a delicate equilibrium between monetization and player satisfaction. Similar to energy systems, gacha systems have also gone through several iterations. Earlier versions were very basic (a seasonal item pool where each item has a defined percentage rate of acquisition). Modern gacha systems, however, can get much more complicated with many bells & whistles. For example:
Fire Emblem Heroes (2017) — system that groups 5 pulls together and progressively lowers the cost of pulls in the same group (first pull costs 5 orbs, second to fourth pulls cost 4 orbs, and the fifth pull costs 3 orbs).
Pokémon Masters (2019) — offers one discounted pull on a daily basis that can only be purchased with fiat.
Genshin Impact (2020) — pity system in which the rarest items are guaranteed after a certain number of pulls. The probability of obtaining the best characters increases linearly to 100% after a certain # of pulls.
Building an effective gacha system boils down to (1) thoughtful item pool selection and (2) positive synergy with the core progression loops. While there is no universal formula for success, below are a few common best practices observed from top games:
Include sufficient value in the item pool — each pull should reward players with meaningful items / upgrades used for progression.
Ensure there is enough depth in item design. Duplicate items from the gacha should still provide utility (e.g. upgrading a character or unlocking a skill).
Refresh item / character pools constantly, either on a regular cadence or tied to events / patches.
Gacha pulls should also be earnable through natural gameplay (without spending fiat). This shifts the narrative away from “pay to win.”
Build in a pity system so the rarest items are guaranteed after a certain number of pulls (i.e. light at the end of the tunnel).
The bottom line — many F2P games have demonstrated that a well-designed gacha is one of the most powerful monetization systems in gaming. The more interesting question is... can web3 games also take advantage?
I realize I run the risk of getting crucified by the gaming community for saying this, but the answer is: Yes, I do see the potential for gacha in web3. Let me explain.
At its core, gacha systems accomplish two things: (i) incentivizing player spending by smoothing out the demand curve and (ii) broadening the scope of gameplay and increasing player engagement.
For example, let’s say you want to build a Blackwing deck in Duel Links (trading card game). When pulling for your favorite Blackwing card in the gacha system, you also end up pulling a rare Crystron card because they were part of the same pack. Now you’re thinking — hey, maybe I should build a Crystron deck next. At this point, the gacha has induced you to engage in new content (which drives retention) and also created an addictive spending cycle.
When thinking through the biggest challenges web3 games face today, lack of effective distribution and deficiency in token demand generation mechanisms come to mind.
Web3 gaming marketplaces like Fractal and AQUA will likely have an important role to play in improving discoverability and accessibility for web3 games (esp. the long tail).
On the other hand, gacha systems can be very compelling token sinks in web3 games, because of its addictive properties and ability to guide players to other sinks. For example, a new cosmetic gacha system could drive more breeding in Axie Infinity (one of its main SLP token sinks). Hypothetically, if a player pulls a goggle cosmetic that synergizes best with aquatic Axies, he or she would be enticed to breed more aquatic Axies to make the best use of that cosmetic.
Since web3 games are such a new concept, we have yet to witness a well-funded web3 game operate a sustainable token economy with gacha over the long term. However, I have been seeing more developers experiment with innovative gacha models such as the one depicted below. Meta Livly plans to implement two systems aimed at distributing gacha earnings back to players:
Gacha Mining. Players can purchase NFTs that grant the right to receive a distribution of gacha sales revenue. Players can thus invest in different gacha themes prior to release.
Item Staking. Allows duplicate items from the gacha to be “staked” in the Digital Data Lab (see below diagram). Each item has a score depending on rarity, and rewards for staking are given to players who achieve the highest scores (i.e. players who’ve staked the most).
You also have games like Ni No Kuni: Cross Worlds where the gacha system doesn’t act as a direct sink for the in-game tokens (Territe / Asterite), but purely as a distinct monetization tactic. At the end of the day, given how powerful gacha systems are, I would not be surprised to see an increasing number of web3 games implement some version of it going forward.
Season Passes
Season passes (also called battle passes) were introduced in the early 2010s, and gained initial traction with skill-based competitive games that lacked a full-fledged progression system (e.g. Fortnite, PUBG). Since then, we’ve seen season passes extend into other genres such as RPGs (Lineage, Genshin), and sometimes in conjunction with gacha systems as well.
A season pass is a system that provides tiered rewards to players for completing specific tasks/challenges within the game. A full rundown of all the different types of season passes can be found here. The least controversial out of all the F2P systems mentioned in this post, season passes mainly serve two purposes:
Provide a recurring revenue stream (subscription-like) for the developer.
Foster recurring and sustained engagement with the game
For example, Genshin’s season pass (Figure 3 below) enables players to earn BEP points for completing tasks like logging in, mining ores, daily commissions, fighting world bosses, etc. The points are used to level up the season pass, which provides rewards at each level. Players can upgrade the free season pass (Sojourner’s) to a paid version (Gnostic Hymn) for additional rewards. Players can also purchase levels directly if they want to skip ahead.
Given these properties, I’d expect season passes to be aptly congruent with web3 games.
Developers can reward players for participating in the intended progression loops. This implicitly makes alternative (and perhaps unhealthy) methods of gameplay (e.g. P2E farming) less attractive.
Easy way for developers to feed new content to its player base. You have an exciting in-game event coming up that you want players to experience? You can incorporate it into the season pass (e.g. win 5 matches on the event map) to drive engagement. Can also be used to direct players to token sinks to balance out the economy (e.g. Axie’s special breeding events).
As a result, a few web3 devs have jumped on the train, and seen initial success integrating season passes into their games:
Blankos Block Party (battle royale developed by Mythical Games) — Party Pass which includes daily, weekly, and seasonal challenges for players. Collect enough points, and players will be able to mint a special Blanko NFT.
Mini Royale: Nations (browser-based P2E shooter from Faraway, a studio backed by Sequoia, a16z, Lightspeed, and others) — battle pass system that grants additional rewards to premium NFT holders.
In summary, I’d encourage web3 game developers to consider season passes as another tool to help them balance the economy, retain users, and diversify their revenue streams.
Final Takeaways
Over the past 2 years, web3 gaming has gone through many ups and downs (probably more down than up these days); however, once you filter out the noise, the core principles that they were founded on — real ownership, composability, and aligned incentives — continue to reinforce my belief system in the space.
As more game developers venture into web3, my hope is that they won’t ignore the powerful F2P systems that ushered in the era of tremendous growth for gaming we’ve seen in the past decade. These systems (and my post was by no means an exhaustive list) have been rigorously tweaked and improved upon over many years, and I believe that web3 games can greatly benefit from many of these design principles.
Thanks again for reading! Please feel free to leave a comment below as I’d love to hear your thoughts or feedback, including any specific topics you’d like me to cover next.
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According to data from SuperData.