Or, in other words, how companies or people can make money while providing a product to an audience for free. And no, the answer is not going to be advertising. Advertising may help, but, honestly, that's a cop-out answer. And since when did 'Wayward Letters' ever do something half-assed*? So, I'll be looking at three different things that are free to anyone, but still survive or even make a profit. Specifically, I'll be looking at Wikipedia, webcomics, and League of Legends. In that order. I was going to do a thing about League of Legends compared to Battlefield Heroes, and how the former thrives while the latter starved, but apparently BFH is going strong, somehow. Don't get me wrong, it's a fun game, but I think it messed up its pricing system a while ago. Anyway - I'm ranting. Go to the next paragraph*.
Wikipedia is the most-used encyclopaedia in the world today. This is a fact. Do I even need a source? Probably not. Am I going to give one anyway because it's just good scientific practice. Yes. Moving on. Not only is it the most-used encyclopaedia, it is the biggest by a huge margin - being 50 times bigger than the second-placed Encyclopædia Brittanica, which you may remember stopped releasing print editions because they just stopped being cost-effective. To top it all off, it is impressively accurate,
with reports regularly showing its accuracy comparative to other encyclopaedias - and even textbooks! It's also free, and user-edited.
Think about this business model for a second. Almost anybody can generate content for Wikipedia, and people can access it just as easily. It's surprising that it hasn't just been taken over by trolls - but at the heart of Wikipedia is a genuine love of knowledge and information. Wikipedia has become self-sustaining and ubiquitous: it's the 6th biggest website on the internet, losing out only to Facebook, Google, YouTube, Yahoo, and a Chinese search engine, Baidu. It's rather remarkable, considering it doesn't used ads.
So how does a website sustain itself without resorting to ads or selling things? Well, if you've ever been on Wikipedia, you'll see them semi-regularly asking for donations. And it works. The internet is a curious thing - it loves getting things for free. I believe much of this stems from people pirating things they can't get for free. That's the reason Steam and iTunes and Netflix got so popular; the service is as good if not better than many pirating sites, and you get to actually get it all legitimately. That's why people like Wikipedia - it's free, but because people like it, it makes money. This leads me to my rule of free things: Their real product is goodwill. What they provide is just a way of producing goodwill.
Let me go into this now, to explain. Take Coca-Cola. Their product is not goodwill. It's Coca-Cola. They get goodwill by making their product. If people stop liking the drink Coca-Cola, their sales will plummet. If they start giving out Coca-Cola for free, their profits will plummet. They rely on selling their product. They gain their goodwill and profit by selling a product. For Wikipedia, they give out information for free. People can just use the information and not give a single cent to Wikipedia. Wikipedia requires goodwill outside of the created product. As such, they live off that created goodwill. And you know what - now they're essentially the best general encyclopaedia, not just in the world, but I would argue, human history.
I'm going to continue to use this goodwill idea in my next example: webcomics. Before the internet was even a twinkle in Tim Berners-Lee's eye and the superinfo highway was still drifting out in space*, comics were syndicated in newspapers and the like: the authors would sell their hard-earned work to newspapers, and thus make money. Now, with webcomics, people put their webcomics out into the world, without any particular expectation that they'd make a cent. I've mentioned before that the internet is just good at allowing people to create and distribute content, and this is what webcomics are for. People like showing other people what they've created*.
But how do webcomic creators make money? Well, some from advertising, but that's not what all webcomics do. xkcd sure doesn't. So how do they make money? Well, Randall Munroe, creator of xkcd, has a store that yours truly may have bought from on occasion. But I didn't have to. xkcd is free. So how does Munroe keep making money?
Well, he provides an excellent product that people enjoy. It's the goodwill of creating something so enjoyable that keeps him in business. It's the goodwill of people who like his comic enough to want to buy things from the store. Some may say that webcomics are only used to sell things from the store, and while that may have a kernel of truth in it, most, if not all, webcomics are created in a spirit of fun and a willingness to share content. The ability of the creator to provide a great product drives the store to creation as people demand to buy things from the webcomic.
The webcomic itself is what people flock to the website for. It's what people love. They buy the merchandise, like shirts or books, that they think is cool. It supports the creator, and you get an awesome thing. Everybody wins!
I do want to clarify here that goodwill is not always the pure reason people support free things. It's often people buy something cool related to the free thing. But it's the goodwill created by the author and their primary product that gives that cool, yet secondary, thing its value.
This is epitomised by the game League of Legends. For those who don't know, League of Legends is a MOBA style game where 10 people battle it out on 5 by 5 teams using champions and abilities - it's difficult to explain, but TotalBiscuit, the games reviewer of note, did an excellent video describing it. It's somewhat outdated, being over two years old, but it's a nice little introduction to League of Legends (which I will henceforth refer to as League or LoL, just because, come on, that's a whole three words I can't be bothered typing out).
It's also incredibly popular, reportedly becoming the #1 most played game in the world, outstripping World of Warcraft and Modern Warfare 3. It's also, if you wish, entirely free to play. If you want to give it a shot - and I highly recommend it, it's a very exciting and a very fun game. In fact, if you live in North America or Australia (where I live), then may I provide my referral link, which gives me some bonuses if you get to Level 10. Or, just go to League of Legends' official website and sign up from scratch, but, this way I can get a little something out of it on top of everything. Help a blogger out, you know?
In all seriousness though, for those who don't know, LoL has an interesting pricing system. Like many free-to-play systems, it has two currencies. It has IP, or Influence Points, and RP, or Riot Points. Influence Points are only earned by playing matches, whether they be against AI opponents or human opponents, and Riot Points can only be bought with real money. Like many free-to-play games, there are things you can buy only with one currency. Unlike many other companies, however, Riot Games - the company who makes LoL - has put in place an interesting system: everything competitive can be permanently bought with IP. Not rented, but yours. Forever. The only thing RP buys that IP can't that can even be considered slightly competitive is IP boosts, and these are not efficient things.
So what does RP get you? Well, it can get you champions - but these can also be bought with IP, and often more efficiently than RP can. So what can RP that IP can't? Skins. That's pretty much it. Also name changes, and rune pages* are remarkably inefficient to buy with IP, but apart from that, it's skins, which are just ways of visually changing your champion. To take one more prominent example: there's a popular champion called Cho'gath; a red demon monster from what is essentially hell. His primary goals are destroying the world and killing other champions. He is not a particularly friendly champion. However, you can buy a skin that turns him into a gentleman with a top hat, monocle and suit and makes him speak in an upper-class faux-British accent instead of some reverberating demonic scream. It's a popular skin.
So how does Riot get people to buy skins even though they are completely visual and in no way competitive? Well, firstly, they're almost universally damn awesome. But secondly, and just as importantly: Riot makes people want to play League, and it makes them want to play their favourite champions. It hooks you on certain champions by having a weekly rotation of champions that you can use completely free, without needing to buy them. They also consistently have sales on champions and skins. So for one, you find champions you want to play, and then you get hooked on them, and then you want to differentiate yourself from the crowd, because this is your champion. Also, on top of that, you see champions and skins you were thinking of getting, and are on sale - but only for a limited time*!
They also make pretty much all the champions unique, and at the very least playable. At the professional level, there are, of course, champions that are used much more than others, but at the level most people play, almost all champs are usable, and usable well. They all consistently buff and nerf champions in order to try and keep them all on that level of fun and usability. As a result, people enjoy that Riot are constantly involved in making every champion viable and fun, and feel involved with the company. This is an action that both improves League of Legends gameplay and generates goodwill. I think the fact that Riot does this is underrated, and I think Riot made a very good decision by doing this.
So, to sum up: players find the champions they like, whether they be in the free weekly rotation or otherwise, then learn the champ, enjoy the champ, start to use the champ in matches with players, and customise their champ to show it is your own, not necessarily in that order. Riot Games makes that happen. I could also go into the availability of RP (you'll find RP cards in pretty much every game shop nowadays) and the increasing popularity of online competitions (the winners of League's Season 2 Championships got a million dollars - Riot probably made that back in advertising and RP sales), but, that's the pricing system in a nutshell. This all adds up to a game that is nominally free, but gets you to consistently spend money anyway. This comic by Penny Arcade* really sums up the experience.
Now: we come to our conclusion. Companies that offer free content are in the business of producing goodwill, for it is the goodwill of the consumer that keeps the company in business. Wikipedia provides what is pretty much the best encyclopaedia out there, and stays in business with donations just because of how awesome and available it is. Webcomics make content that people really enjoy, and provide supplementary merchandise like shirts that the comic's creators will know their customers will also really enjoy based on the webcomic. Riot Games creates an awesome game with League of Legends, makes pretty much every champion in the game fun and viable, then gives you the chance to customise the champ and make it yours.
And, as you can guess, that's the end of this post. Do I regret waiting over three weeks to post this? No. It's 'Wayward Letters.' You should be used to this by now. As always, I hope this was entertaining for you, and that it was just a little enlightening. Cheers.
AB
