In a recently released investors report, Square Enix president Yosuke Matsuda makes a case for free-to-play games, pointing to the "flexible pricing models" as a lucrative option for "HD games." Forget disc-based games.
A segment of the annual report is Matsuda explaining the entire concept of F2P, in which he clarifies that sales tend to be based on in-game, virtual items and not physical discs. As such, he argues, F2P is much more "adjustable" based on player demands, with fewer distribution restrictions. Matsuda sees a change in the industry and what players want, noting that F2P is, indeed, the more appealing future here for everyone.
Next, let me comment on the earnings model. In the online game area, including games for mobile devices, flexible pricing models represented by free-to-play (“F2P”) have become mainstream. Sales units of F2Pbased games are not physical discs, but rather are in-game items or virtual currency. Therefore, the F2P model is flexible in that earnings are adjustable according to players’ demand without any restriction on distribution of game products. My aim here is not to discuss the dichotomy between F2P and the fixed pricing model, but I would like to put emphasis on the major transformation of the game-playing environment in these days and big changes in consumer preferences regarding games. Devices for playing games are undergoing a rapid evolution and customer requirements for game experiences are becoming diversified accordingly. Consequently, the time has come for us game makers to take more flexible approaches in offering games and to devise various earnings models conforming to customers’ game-playing environments, moving away from the limited outlet of disc-based distribution of games. In this current of change, it is extremely important for the HD games category to enable transition from a disc-based earnings model to a more flexible one. This will define the future way we pursue HD games development.
Afterwards, he goes on to mention portable devices like smartphones and tablets, which are "progressing at an amazing pace." Consoles, too, are "becoming smarter as well," and Matsuda believes that eventually all these devices will either converge or diverge. Regardless, he thinks that the F2P model is ideal for distributing games on any platform.
That said, all of this "is a new challenge" for Square Enix, requiring a "new skill set." If the company can overcome these challenges, however, Matsuda expects new business opportunities.
Matsuda brings up a good point, in that F2P is really that much easier for both consumers and publishers. Does this mean disc-based games are on their way out?