'Time-selling' strategy gains ground

A woman is about to purchase an in-game item on a free-to-play game she downloaded on her smartphone. This marketing strategy of providing games for free and instead granting value to time and merchandizing it has increasingly been popular in the content industry, especially among game businesses. / Korea Times photo by Yoon Sung-won

By Yoon Sung-won, Park Jin-hai, Kwon Ji-youn

It has been more than a year since Kim Yoon-jeong, a 34-year-old office worker, became a fan of smartphone games.

For Kim, who was not much of a gamer before, they were a perfect pastime not only because of ease of play, but also because the games allowed players to instantly compete with their friends through social networking.

But the most important thing that led Kim to become a fan of smartphone games was that most of them are free of charge.

"At first, I wouldn't have downloaded a paid game application even if it cost less than 10,000 won," she said. "Then it became tempting for me to try various games without having to pay for them."

After a year Kim confessed she does not hesitate to spend tens of thousands won a month on smartphone games. Actually, she isn't paying money to play the games. Instead, Kim she pays for in-game items which help her "play better."

"It's like buying my own time. I bought some items that shorten the time I had to wait for another round. That way, I don't need to wait for long like I used to do when I was only playing the game for free," Kim said.

"Basically, everything in these games is offered free of charge if I have time and patience. Once I realize the fun of these games, it became easier to decide to pay some money to better enjoy them."

This marketing strategy, granting value to time and merchandizing it, has increasingly been popular in the content industry, especially among game businesses. The "time-selling strategy," which is dubbed as the next generation "free-to-play charging policy," has been successful in generating more profits by penetrating into young consumers' spending patterns.

Korea's major broadcasters and cable companies provide video-on-demand (VOD) services. Viewers who want to watch the latest VODs must wait three weeks or pay 700 to 1,000 won for each show or a monthly subscription that costs 10,000 won or more.

"As a private company, we needed to think about gathering revenue although most of the social network games, such as Anipang, are available free of charge," a SundayToz staffer said. SundayToz is the developer of the social network game Anipang, which generated billions of won in daily sales at its peak.

"To do that, we try to influence the psychology of our consumers. If they wait, they can play the game for free. If they interact with their peers in their social network on Kakao Talk they can play the game. If they do not want to wait, they can purchase items to get ahead."

The staffer emphasized that the key to this approach is not to hamper the game experience of free users.

"However, we do not compromise the quality of our services, because that would affect its spread. Because we are providing free-to-play games, free games must be of the same quality as pay-to-play games."

Park Byung-ho, a professor at the Korea Advanced Institute of Science and Technology (KAIST) College of Business, said that the advent of new revenue models like the free-to-play mechanism in the content industry was inevitable.

"Though free distribution of content such as games, cartoons or news articles is all-pervading through the Internet, the traditional free content distribution system will be difficult to sustain," Park said. "This is because the production of quality content is labor intensive and therefore, if it is provided free of charge, it will quickly reach a limit."

Although he pointed out that rampant illegal duplication is encouraging people to recognize content as free of charge, Park said that such recognition has now become a global trend that businesses must consider since they are supposed to follow the needs of consumers.

"All people like things that are free and it's not a cultural problem limited to Korea," Park said. "This concept, namely ‘freemium,' is also common in the U.S. It's about lowering the barrier of entry."

As the concept of "creating added value from time" has gained popularity in the global online content industry, other industries have started to introduce it as well, though not all of them are welcomed by consumers.

Terrestrial media firms recently came up with a new plan to sustain their viewership, which will in the long run, expand their revenue.

Korea's major broadcasters and cable companies that provide video-on-demand (VOD) services, agreed in August to extend the "holdback period" for terrestrial broadcasting programs from one week to three weeks.

The holdback period refers to the time period that media content is held before it is serviced for free through reruns. Thus, viewers who want to watch the latest VODs must wait three weeks or pay 700 to 1,000 won for each show or a monthly subscription that costs 10,000 won or more.

Some industry watchers who advocate this new plan said that it is considered a natural flow of the industry that reflects viewers' lifestyles as the VOD service has changed from a supplement to terrestrial broadcasting to a sustainable revenue source that can even substitute for regular broadcasts.

But consumer groups voiced dissatisfaction over the new charging policy for what used to be considered "free."

"Broadcasting companies say that levying charges for content makes the quality of their service better. But, it is like viewers are in the middle of a war between two giants, terrestrial broadcasters and cable providers, where only viewers lose and bear the fallout," said Lee Ju-hong, director of the Green Consumer Network.

According to Lee, it is another clever marketing gimmick that could fatten the pockets of content providers such as cable services and IPTV as well as terrestrial broadcasters. Since both of them predict the extended holdback period will create more revenue from VOD sales.

In the current system, broadcasters take 65 percent of the revenue from VOD sales, while cable channels take the rest.

Customers, who subscribed to IPTV or cable channels, claim that extending the holdback period without their consent is tantamount to a breach of contract.

"They subscribed to their service, assuming that they could see VOD free after one week. But, even if the service providers change the conditions of the subscription, customers' hands are tied," Lee added.

"Since, VOD and holdbacks are not included in the articles of subscription, it is not regarded as a breach of contract. So, customers if they want to cancel the subscription, they have to pay a penalty. I believe that is wrong," he said.

A staffer at a local game company, who asked not to be named, pointed out that "time-selling" marketing strategies cannot succeed if they fail to provide benefits to consumers.

"Though global content industries, from game to media, have introduced new revenue models based on the concept of time-selling, they may face consumers' resistance unless they provide certain benefits that reflect consumers' needs," he said.

"Consumers have became smarter and their choice has grown wider as platforms are diversified. Content providers will have to study their customers harder in order to get them to open their wallets," he added.