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The EU investigation of F2P games risks being an over-reaction that will have unintended consequences
by Nicholas Lovell on 02/28/14 11:31:00 am   Expert Blogs   Featured Blogs

The following blog post, unless otherwise noted, was written by a member of Gamasutra’s community.
The thoughts and opinions expressed are those of the writer and not Gamasutra or its parent company.

 

This post originally appeared on GAMESbrief.

The European Union is investigating the growth of free-to-play games, and whether certain practices are misleading advertising.

The investigation follows the publication of the UK’s Office of Fair Trading’s guidelines on In-App Purchases and Apple’s settlement of a class action , both of which I welcomed as bringing clarity and responsibility to the IAP industry. I’m delighted to see that the EU states that “the principles on online games and in-app purchases which the UK Office of Fair Trading published on 30 January 2014 are consistent with this action. “

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The EU seems to be focused on four issues: free must mean free, and not include any optional IAPs;  games that are likely to appeal to children must not have direct exhortations to buy such as “Buy Now” or “Upgrade Now”; IAPs should not be possible without explicit consent; developers must display an email address where customers can ask questions.

There is merit in ensuring that existing consumer protection laws are applied within this new and developing sector. Creating a set of new rules for this segment seems a strange over-reaction to me.

(As an aside, I find the cheering from certain sectors of the games press and public over governmental involvement in video games bizarre. These audiences have fought tooth and nail to keep government interference away from *our* industry, particularly about violence in games and how it is up to parents, not nanny states, to take primary responsibility for protecting children while allowing adults access to whatever they want. But when the issue is about F2P titles which have taken our industry from niche to mainstream, from consoles to smartphones and tablets, from “games for gamers” to “games for everyone”, they are all in favour of ill-informed government intervention “to protect the children”.)

I think that the focus on the word “free”, and the requirement that a game that is marketed as free have no ability for players to spend money within it, shows a lack of understanding of how the digital world works. Further than that, it risks setting a precedent that will affect many businesses that do business over the web.

Free should mean free

In his book Predictably Irrational, behavioural psychologist Dan Ariely has shown how significant the price point “free” is. When we don’t have to pay any money (even as little as a penny), we are much more inclined to take something, to try something, to download something. This is the heart of why mobile games fell in price to free so fast (that and the fact that Steve Jobs wanted as much free software available on his platform to help shift high margin smartphones).

But it is not just mobile games that are free. I read the Financial Times for free. Only I don’t. Because I only get 8 articles a month before I have to subscribe to read more. Is that misleading? Should it be banned? I listened to Spotify for free for a year, accepting the ads as the price I paid for being a cheapskate before I upgraded to Spotify Premium from within the app. Should that be banned? I use Skype for free all the time, but I’ve upgraded to the premium service so that I can call people on their landlines from the service. Should it be illegal to call Skype free, when the majority of users use the service entirely for free all the time?

Free is good for consumers. Instead of everyone paying the same amount of everything, regardless of its usage, many, possibly most, consumers can a vast range of services and entertainment products for free. Many of them continue to enjoy them for free, getting great value, for the entire time that they use them. Some, usually heavy users, go on to spend on the product, which is how the company behind it can afford to make it available for free for the vast majority. Provided that informed consent is given, this is a win all around.

Free is free for nearly everyone

According to Tommy Palm, games guru at King, 70 per cent of people who have finished Candy Crush Saga have never paid a cent. Accepted wisdom suggests that fewer than 5 per cent of the audience pay for any given game. That figure is 4 per cent across all of King’s 350 million MAUs. Recent data from Swrve suggest that 98.5 per cent of players don’t pay any money on their mobile games in a given month. So for the vast majority of users, free does mean free. That doesn’t seem misleading to me.

But won’t someone think about the children?

So now we come to the tabloid defence: there have been cases of children spending money they shouldn’t, so we should legislate to protect adults and children across the board, regardless of the consequences. If this was happening in any other segment of the games industry, gamers and the gaming press would be up in arms. But because it is happening in free-to-play, we’re all in favour of it?

That’s just silly.

I believe that mature adults with informed consent should be able to spend as much or as little money as they like. There are some things that I would like to see changed to protect children (and adults) from rash decisions. I would like it to be easy to require a password for every single purchase. I would like iOS and Android to ship with a Kid’s Mode just like Airplane Mode that makes it easy to switch off access to the AppStore, to the browser, to YouTube, to my email or Messaging system and to a number of other configurable settings so that I can hand my smartphone or tablet to my children to enjoy Hay Day or Pocket Trains or Harbour Master (all of which they love) with no fear that they will access the AppStore or send an awkward email to a client. I would like games makers to adhere to the existing laws on unfair sales practices such as time-pressured selling and the appropriate use of discounts.

What I don’t want is for the games industry and consumers to encourage kneejerk intervention from ill-informed politicians because they don’t like the way the market is changing.

What will happen?

My prediction is that we will see some changes. Most will be for the good. Giving consumers an easy way to complain to developers will be good. Raising the issue of informed consent so that OS makers and responsible game developers follow existing guidelines to protect consumers from high pressure sales techniques is good. Making password protections easier to use will be good.

Others will be silly. If the “but what about the kids?” reaction takes hold, we will see a lot of games change their art style so that that argument goes away. Expect to see more dystopian environments. More games with breasts in them (because that makes them “Mature”). And expect Clash of Clans to be relaunched as Clash of Motherfuckin’ Clans, because that can’t be aimed at kids, right?

The phrase Free-to-Play might go away, because it has become politicised. I suspect that the “free” will stay, because it is a true reflection of the experience for the vast majority of players. It may change to “free-to-download” or to “free-to-start” (as Iwata-san has suggested), but it seems unlikely to me that the word “free” will go away.

What I don’t expect to happen, and what I will fight tooth and nail to stop, is the idea that there is an “appropriate” amount that a mobile game can charge. That a mobile game should have a legal “cap” of, say, EUR30 that can be spent in it. That mobile games should, by law, cost less than a console game, because console games are “better”.

Price fixing, government intervention and kneejerk legislation are bad. They are bad for industry. They are bad for consumers. In the long run, they stifle innovation and they will have unintended consequences for the whole industry (and indeed any digital business that figures out how to give their core product away for free with an upsell opportunity. Or, in other words, all of them).

The fact that this issue is being raised is good. Let’s address it within existing frameworks. Cheerleading for heavy-handed government intervention is a big mistake.


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Comments


Bob Fox
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There is no over-reaction at all, this is just a knee jerk response from you. 99% of F2P games make over 50% of their profit from less then 1% of players.

This is what we'd call fraud, especially when those less than 1% of players have no idea how computers or technology works. I've seen people spend $400 on candy crush. The whole F2P model is driven by stupidity. Not in providing anything. As a tech literate person I would never pay for any F2P game and people who do are gullible and tech illiterate and are being milked for as long as they can.

The whole model requires huge scale to even function profitably and that right there is a red flag. If 98% of people who played your game wouldn't even buy it, what does that say about your practices? It says a hell of a lot.

Even path of exile is using marketing speak to basically rake players over coals. If you're paying for a game, you better get to own it at some point. Especially since all these DRM'd games will up and disappear the moment they stop making profits.

We've already seen all sorts of crap with game pubs shutting down games. This will be even worse for F2P games that start to wane.

Nicholas Lovell
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So Dropbox is fraud?

Kyle Redd
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@Nicholas

Dropbox posts it's list of prices for all it's available offerings, whether you have installed the software or not, right here in plain English: https://www.dropbox.com/upgrade

Please show me where I can find a similar list of prices for all the available offerings in F2P games.

Alfa Etizado
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I know I've spent waaaay over $400 on several types of games, never on a F2P game though, nor a cent spent on IAP. A console alone costs that and it has no games, it just lets you play them. The whole AAA industry requires a huge scale to even function profitably. A lot of people pirated Assassin's Creed, a lot of people rejected it entirely, does that mean the ones who bought got duped?

The fact that supposedly only 1% spend money on F2P games (would like to see where you got that figure that applies to every F2P game) doesn't mean it is a fraud. Nothing about that means it's a fraud. When you say it is a fraud you consider yourself a better judge of how people spend their own money, which is somewhat arrogant, specially if you spend money on video games yourself.

Ian Griffiths
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"99% of F2P games make over 50% of their profit from less then 1% of players. [...]
This is what we'd call fraud"

This may be what you consider fraud that doesn't mean that everyone, most notably the law, agrees. Fraud is where consumer is lied to about a good or service that they have purchased and in 99.999% of cases that isn't the issue, very few free-to-play games actually defraud their players as that would be illegal.

I'd also point out that a lot of products make most of their money from their most engaged customers, not necessarily to this extent of course but nonetheless, it's not indicative of a problem itself.



"especially when those less than 1% of players have no idea how computers or technology works."

By definition they know how computers and technology work because they are using them. In any case, King had around 12 million spenders in the last quarter, do you really think none of them are tech literate? I spend money in DOTA 2 and I make games and I can tell you that there are many of people just like me.

Don't just assume the world is full of gullible idiots. A lot of people don't want to spend 12 hours cooped up in a dark room playing Skyrim, they just want to play Candy Crush for 5 minutes while waiting for the bus. Don't assume that because they don't share your tastes that they are idiots.



"The whole model requires huge scale to even function profitably and that right there is a red flag."

Many industries rely on massive volumes to function profitably, from food to fuel we see it all over the place. This is why so many industries have only a few competitors, it's just too expensive to break into and get the economies of scale to operate profitably.

Some industries are even natural monopolies, railways for example. They requires state investment because no private venture would be willing to take the massive costs involved, at a national level, to generate sufficient returns in the long run.



"If 98% of people who played your game wouldn't even buy it, what does that say about your practices? It says a hell of a lot."

This is the more crucial part of your argument above, that only a small portion of the audience pay. I'd say that you would see this with any product that was made free and had the option to pay for 'upgrades'. I'd also point to Candy Crush and say that, from their own records, around 30% of people that finish the game DO spend. So clearly people do see value in that product.


I don't think that this says much about the practices of that product. The difference with free-to-play over something like phone contracts or a cable subscription is that there is no pay wall, no cut-off point that says - you can't have this unless you spend. In many ways free-to-play is better for the consumer. Having the ability to attain something for free over spending for it will often result in huge volumes of 'free users', that doesn't mean the product is worthless. And all of that's before we consider that spending money isn't the only measure of value, for the user or the content creator.

Robert Green
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Perhaps I'm being naive, but I'm not sure you've taken the right message from this.
The link you gave above says that their first concern is that:

"Games advertised as “free” should not mislead consumers about the true costs involved"

That doesn't necessarily mean a game can't be called F2P unless it has no IAP's, it just implies that the game cannot be deceptive about the costs involved. For example, something which says "This card game is free to play, and you can optionally buy new card packs for $1.99" couldn't be said to be misleading, in my opinion.

On the other hand, a game which claimed to be free, but quickly tried to charge a player $1.99 to unlock the next set of levels, then $4.99 for the next, then $9.99 for the next, etc., might be seen to be misleading, if the consumer isn't able to tell going in how much they'll need to spend to get the full experience.
That definitely sounds like something that'd have to be considered on a case-by-case basis, so I have no idea how you create a simple set of rules to cover all scenarios.

David Lindsay
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I understand what you are saying, but predicting how much money a user wants to spend on your product isn't as easy as putting a price tag on something physical. A monetized IAP game isn't just a product, it's a vendor too. The customer can return and purchase again just like in a cafe, or a supermarket.

Putting a price on the full experience of a game is strange in that it doesn't fit the way the real money transactions actually work. Some people won't want to pay that much because they don't want to repeat the experience, while others might love the game and want to continue purchasing content or whatever it is that gives them so much enjoyment.

Listing all the prices up front in a "levels menu" is not a bad idea in theory, but I don't think this will be good for anyone actually running a business. Demanding up front payment discourages purchase to such a degree that it would destroy many developers and publishers.

The reason games introduce IAPs later (rather than up front) is because a new user of a game, or any product, is incredibly price sensitive. Showing that any paid content at all exists is likely to turn customers away without even trying a game. Demos should be free. You have to entice just like a movie trailer so that people will pay for hte movie, and the only way interactive media can do that is by getting users to interact (play the game). A game demo has to actually give users the real game experience. It's not about tricking anyone into addiction.

With such immense blossoming competition in this industry, companies simply must fight tooth and claw for attention on the minuscule App Store shelf space available. Getting customers by offering free samples is effective, but not innately deceptive.

As you say, actually defining the rules on what is or isn't okay seems overly ambitious. At least it will be very interesting to see the results.

Robert Green
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I think perhaps you've read too much into what I said. I'm not suggesting that a game needs to guess how much a person is likely to spend, or that some amount must be spent in advance.
All I'm saying is that a game should make an effort to let players know how much they might be expected to spend. Obviously in F2P games that's an extremely murky concept, but there are probably a few general guidelines that one could advocate for. Let me try to think of a few examples...
The scope of payments should be upfront. i.e. a game shouldn't only offer $0.99 purchases at first, only to later reveal that it contains $99.99 purchases.
Similarly, if all these purchases are for virtual currencies, they should let you know what the most expensive single virtual currency purchase is, and perhaps the total number of all the once-off purchases.
If a game is competitive, and you can pay to improve your odds, then is it unreasonable to display how much a player has spent, so you can judge both your odds of winning, and how much you might have to spend to be on even footing?

David Lindsay
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I just don't think it's possible to do that without killing your early retention. Players are incredibly price sensitive at first. People who purchase a game then see it and play it are much less price sensitive. The data collected from any F2P title displays this clearly.

Usually, it would be recommended that you don't show any prices to customers during the duration of their trial period (usually a few game sessions). The number of things they can buy also depends on the game complexity, which undoubtably increases over time, meaning that there are more things to possibly sell once the player knows what they are good for.

Front loading all your purchasable items and content when the player doesn't need or understand them yet just doesn't make sense.

I mean, even if there is a 99 dollar item for players to buy, do they need it to succeed their first play session? If so, maybe this game should be a purchased client download game instead of a F2P?

Robert Green
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Well I have to say it kinda sounds like you're saying that most people wouldn't play these games unless you hide from them the amount they might be asked to spend at some point.
If that's the case, all I can say is that there's a fine line between hiding the truth and intentionally misleading people. Nevertheless, if this legislation did result in all apps following such guidelines, then it'd all balance out, wouldn't it?

Personally, I have a hard time believing that someone would be immediately turned off at the idea of a luxury $99 purchase, yet would have actually bought that item had it been hidden for a while. My suspicion is that the large majority of people who seem so 'price sensitive' are actually just the non-payers, the ones who have already decided they're not going to spend any money before they even try the app.

Ian Griffiths
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@Robert

"All I'm saying is that a game should make an effort to let players know how much they might be expected to spend."

I think this is the problem, it can't really be defined. Many free-to-play games can be 'completed' even if no money is spent. King point out that 70% of people that finished Candy Crush didn't spend anything. How on earth do you go about explaining this because average become meaningless.


For arguments sake, let's try to apply this to a fictional arcade where you pay $0.50 for 3 lives. But how many lives do you need to finish the game? How long does it take? Who knows, it depends how good you are. I mean, should we show a the range, LQ, UQ, median and mean? Should we put up an up to date histogram?


I think David's point about the game being a vendor is very astute. For example, a vendor can tell you how much a can of Coke costs but they can't tell you how much you'll spend in a lifetime - it's entirely up to you. Except it's even more complex than this because you can have all you want for free in most cases.


As if all of that wasn't enough, there are even more dimensions to consider with these games. These are games as a Service, they are always changing and introducing new elements of gameplay and things to purchase that will always change the requirements of what may or may not need to be purchased.

Robert Green
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I agree that it's very difficult to provide any sort of meaningful single number to describe the monetisation of a game. All I'm suggesting is that there are cases where you can describe it as misleading or deceptive.

Also, just as a general rule, everyone reading this might know that most things in the 'free' category are F2P, but this isn't made hugely clear on the store, and in in-game ads, it often isn't mentioned at all. It's not unusual to see ads for games that just say "FREE" with no qualifiers, and that's misleading, isn't it? Just because we've all accepted that 'free' means 'free with optional purchases, that the game is designed to increasingly pressure you into buying', doesn't mean we should pretend those are the same things.

Ian Griffiths
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I do agree that something that is free-to-play shouldn't just call itself free because that is clearly misleading, in any case that's probably a breach of the law.

I think most of the app stores are pretty clear by showing something to the effect of 'Offers In-App Purchases' and showing the top 10 of those. Beyond that I don't know what you could do. I'd suggest you could summarise the monetization mechanics but it would be difficult.

Aaron San Filippo
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The crux of the matter seems to be that consumers feel like they're being misled about the true cost of some of these apps.

I think the solution here is informing consumers better, not regulating. I agree it would set a very bad precedent to do things like cap dollar amounts.

As a developer and a consumer, I'd love to see the app stores list the following:

1. Consumables are clearly marked as such
2. The average dollar amount spent per active user is shown


These would both be honest and useful data points for consumers, and probably satisfy the government.

Kyle Redd
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Those are good suggestions, although since only a small percentage of a game's users actually purchase anything, the average dollar amount spent per user alone may not be very informative.

I would also add another item:

3. All apps must have a list (or link to a list) of *every single item* available for sale within the app, along with the prices for each item.

Of course many developers will complain that such a list will be too long or difficult for consumers to understand, but that should be for the consumers to decide.

Ian Griffiths
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Items would constantly fall in and out of this list as they enter and leave the digital store.

I suppose you could dump the xml for your store somewhere with all of the attributes but I don't see how consumers would find it that particularly useful.

I think the issue is that you don't want to highlight the $100 item as though it's for everybody and necessary for the game. Context or rather perception is everything.

Andrew Haining
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An Average Dollar per Minute stat would be more honest I think, since most users don't pay, but also don't play more than a few minutes, the people who play for a long time tend to spend a lot of money.

Nicholas Lovell
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I think that both your assumptions are wrong. Although F2P games often lose 50% of players in the first day (which is not surprising, when you get the game for free), we typically see somewhere between 10% and 40% still playing at the end of the first month. So yes, I guess that suggest "most" people - being around half - don't play for more than a few minutes, but they are not customers, any more than someone picking up a box in GAME or Gamestop, reading the back of it and then putting it down is a customer.

But you also suggest that people who play for a long time tend to spend a lot of money. That is only partially true. Some people who play for a long time choose to invest money into their hobby. Some choose to invest time. Both are valuable to the developer.

I'm not against the stat. I'm just not sure what you think it will achieve.

Ian Griffiths
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Let's say a normal paid game game restricts my progress by skill? I've paid the same as some other player but I can't see all of the content because I'm not good enough. Should that game be forced to show on average how long people play it? Should they have to show a $ per hour price? And if you fall back on the argument that you can keep replaying the bits you can complete then it's no different from many free-to-play games.

I'm afraid that these averages just don't work because they are meaningless, having worked with lots of big data in gaming I know full well not to rely on one simple metric to explain what's going on.


"1. Consumables are clearly marked as such"
They almost always are.

"2. The average dollar amount spent per active user is shown"
Active user over what period? And why dollars? If this was the law then why shouldn't it apply to everything else that is bought and sold? Why single out apps over other games or media?

Nathan Mates
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I would add a #3 to Aaron's list:

3. Maximum spent by any single consumer for this app.

This stat doesn't need any time period, active vs inactive user, etc. Could be updated daily (for the first month) then weekly thereafter, and currency localized (at current exchange rates) to viewer's currency.

What calling out the max would help with is this: show users upfront what they could be in for, and help differentiate games that keep upselling vs a limited set of expansion packs.

Ian Griffiths
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This would clearly be designed to misrepresent the experience for most players, it's just not proportionate.

I would accept this if it became the law for all purchases though, when you go to buy a pair of jeans they should state the maximum spent by any consumer, the same with chocolate, milk, cars etc. Perhaps something similar for drugs; a running death count updated every month. It would certainly have the same kind of negative effect of keeping people away from a product that they generally shouldn't worry about.

Ultimately we shouldn't be creating specific consumer laws for situations that don't uniquely affect games, it will only harm the industry at large.

Mark Velthuis
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While I apreciate the effort, I am worried that this will turn into a "People making decisions on things they don't realy know much about" situation.

While at least having to give info is a start, but what if the developer wanted to change prices or add products to the store? Will there be rules in place to prevent a "bait and switch" and if so, won't those rules hurt some developers ? What about the costs of having to know about this stuff for indies ?

Andrew Haining
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It's not Hypocrisy to condemn government intervention when an industry has proven responsible in self regulation and support it when an industry has proven completely incapable of restraint and ethical practice.

Andrew Haining
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I'd love for someone to be able to point to an actual example of when Regulation of a Monopoly was bad or stifled creativity.

Nicholas Lovell
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To which monopoly are you referring? F2P games seem like an extremely competitive market to me. That is why the price upfront is free?

Andrew Haining
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The app stores are distribution monopolies and are directly responsible for many of the bad practices in the mobile games industry. Gaming reviews, downloads and star ratings and the 15 minute window that allows for unauthorised transactions to name a few.

Nicholas Lovell
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Ah, OK. So the issue is with the appstore, not with free-to-play? Because the model is similarly popular and successful on the open market of the PC.

Paolo Gambardella
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I think that before of any legislation a serious study must be conducted. How about that 0.15% population? In companies we use to call them "whales". Are they sick people? are they destroying their lives and families? Are big companies helping them in this?
Governments should study them with research and science, maybe taking datas from companies to contact those persons privately. I know that is not the optimized solution, I am just brainstorming on it.
Once a serious study is properly conducted, we can discuss what is actually good or bad for the gaming business and for the human race. It is too easy to believe that big devs are evil fortresses ruining the world defended by indie gaming paladins. And it is too easy to believe that there is nothing bad on not implement any friction on IAP.
We should start a serious investigation, maybe with the help of universities and/or startups with the clear intention to help the world with this. It is better to take decisions based on datas, not on thoughts.

Adam Bishop
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"I read the Financial Times for free. Only I don’t. Because I only get 8 articles a month before I have to subscribe to read more. Is that misleading? Should it be banned?"

The FT web site does not advertise itself as free. The word "free" does not appear anywhere on the site. The link you provided to the EU statement applies specifically to *advertising*. Further, if you click on an article on FT.com and you aren't signed in, you're immediately presented with a pop-up explaining precisely how many free articles you get and how much a subscription costs. Nothing is hidden or misleading.

"Free is good for consumers."

Most of what's called "free" is actually just hidden in the costs of other things. You pay for "free" content every time you buy a pair of shoes or go to the movies or eat fast food. There's nothing "free" about it. It's more like "hidden". It's bad for consumers because they can't make accurate assessments of how much money things are actually costing them. What's good for consumers is transparency and availability of information.

Ian Griffiths
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I agree that transparency is good but so is proportionality. Just because some people spend lots of money to make their avatar look cool doesn't mean it's required or the norm. These games allow people to spend what they want when they choose to. The customer is always informed of what they are purchasing and makes a conscious decision to go ahead with the purchase. They can always vote with their wallet.


I think the square peg we're trying to fit into the round hole here is in identifying very subjective measure of value and investment in terms of effort, time and money. By coming at this through peculiar interpretations of the law or worse, new badly written laws will possibly hurt innovation. Moreover, any laws that apply here could have unintended consequences on existing markets. Let's take a not-too ridiculous suggestion - what if we need a 60 second cool-down period before hitting the 'accept' button. If we applied this to shops in the real world there would be outrage from both merchants and consumers.

I've actually seen very little damage coming from all of this and a disproportionate response could cause all kinds of problems, even have long term unforeseen economic consequences.


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