This is an easy one… In the coming years, we’ll see more and more games adopt a “free-to-play” model where the game itself is given out for free along with access (and, I’m not just talking about the casual games space). Revenue will be generated via the sale of in-game goods, premium services or supported via ad dollars.

I’ve been pointing to Korea as an example of this since I was there in the fall of ‘05 and was stunned by their business developments. They are even starting to abandon the transitional MMO subscription model in favor of micro-transaction based revenue. Korea got there faster than the rest of us since they had to be smart about ways to make money in a market with rampant piracy of retail/boxed product.

Other examples of this would be Second Life, with a rich internal player-to-player economy. It is free to play, but you need to pay if you want some virtual real-estate. Runescape is an ad-supported MMO that’s free. Runescape has over 9million active subscribers! Also, Activision recently announced that it has generated $1million dollars from downloadable content for Call of Duty 2 on Xbox 360.

At what point does it become more profitable for Activision to give out the game for free and put more effort (marketing and game design wise) to encourage the sale of in-game content?

(Oh, and as this post was idling in draft mode, the fine folks at Terra Nova have written a post titled “How will ‘free-to-play’ business models affect the gaming landscape in the West?” I haven’t had the chance to read it yet, but I’m sure it’s good - those guys are so smart :)