In 2012, the general consensus among game publishers was that premium gaming was on the way out. The major bellwether was the launch of the PlayStation Vita. In a mobile market crammed with repetitive match-3 games and city builders, Vita stood out as the high quality alternative. It offered a true console experience, complete with dual analog sticks and HD visuals. It launched with a raft of killer titles: Uncharted: The Golden Abyss, WipeOut 2048, Ultimate Marvel vs Capcom 3, etc.

But the Vita tanked. Hard. It seemed that consumers didn’t want to purchase a $299 device to play Uncharted (which debuted at $39.99) when they could start playing Clash of Clans on a device they already owned for free. The 3DS, which launched a few months earlier, was struggling in the market, too. Nintendo was forced to provide a dramatic price cut (from $250 to $170) after less than six months in stores to gain traction.

The next generation of set-top consoles hadn’t launched yet, but if you talked to any game agencies, they’d tell you that the big hardware manufacturers were planning for a potential future where the dominant business model would be free-to-play.

Here’s a quote from Eurogamer: 

According to three separate sources familiar with Lionhead’s relationship with Microsoft in 2012, Xbox executives insisted the studio make a new Fable in the games as a service mould. A single-player focused role-playing game would not be allowed, Lionhead was told. “There’s no way anybody’s going to be making single-player boxed products any more,” sources say Microsoft executives told Lionhead. “I want something that’s games as a service.”

“You make a service game or you get closed down,” was how another source with knowledge of the conversations remembers them. “It was the new big push from Microsoft and I heard that all first party studios got a similar message, however some had more of a push back against it.”

http://www.eurogamer.net/articles/2016-05-12-lionhead-the-inside-story

Companies started pulling their investment dollars out of premium gaming, and started bulking up their games-as-a-service groups. Industry analysts spoke to the inevitability of F2P killing premium, as the cost of distribution dropped to zero.

To the trained eye, it looked a whole lot like the time when everyone thought subscription games like World of Warcraft represented the one, true future of games. That tail-chasing hadn’t ended well for anybody but Blizzard.

It was a difficult time to work in the industry, if your reason for being in the field was tied explicitly to a love of traditional gameplay experiences. When it came to judging the quality of a product, you were encouraged to value data over your own experience. Critics’ reviews were written off as meaningless; subjective navel-gazing when compared to the magic of real-time earnings reports. “Good” and “high-revenue” became one-and-the-same. You’d be looked at cross-eyed by peers if you said Game of War: Fire Age wasn’t fun, or insisted that Lara Croft Go (a smartphone game with a $5 spend cap) was better than Candy Crush Saga (a smartphone game that allows an uncapped level of spending). In years past, you could have qualitative debates about similar games, like Resident Evil 5 vs Dead Space. In the new F2P era, the question of which game in a genre was best was answered by checking which was highest in the top-grossing charts. The rich language of game critique was abandoned, replaced by alphabet soup: CPI, LTV, ARPU, ARPDAU, etc. Games were seen not as an art, but as a math problem to be solved.

F2P games looked like they’d be much lower cost bets upfront, with the potential for massively greater returns. Vastly more customers could be reached, and you would no longer have to worry about the second-hand market. Sure, this would mean the death of single-player games, but gamers would adapt, right? Finally, games would be for everybody, not just entitled twenty-somethings that wanted to blow stuff up.

PS4 and Xbox One are very healthy now, but in 2014, publishers were gun-shy about supporting the machines. Sony and Microsoft went out of their way to make their new platforms appear F2P-friendly, but third-party companies were not convinced. For executives who believed in an all-F2P future, the console space represented a much bigger risk than the smartphone and PC markets. F2P would be tough to do on these platforms, given the high cost of production, low initial install base, and inability to carry the experience with you to Starbucks. The common wisdom of 2012 was that without offering a fertile ground for F2P, console would be too niche to be sustainable. The industry was bracing for the death of premium gaming in general, and console gaming in specific.

That didn’t happen.

It turns out, lots of customers still want single-player games (see Legend of Zelda: Breath of the Wild or Fallout 4). Enthusiasts know that premium titles are likely to be less expensive for them in the long-run, and prefer not having their experiences interrupted by ads or IAP prompts. Even in the highly contested mobile market, The Switch has quickly become a highly desirable product by offering spend-capped, console-quality games of skill as an alternative to the uncapped games of chance available on your phone.

We’ve learned that there is an addressable gulf between the players who will spend nothing upfront, and those who will buy multiple retail games a month. These “middle of the road” players may be best supported by subscription services like Xbox Game Pass or PlayStation Now – premium solutions.

Yes, the single-player game market is smaller now than it was. It is a shame to see titles like Dishonored 2 underperform. And there’s also a whole generation of consumers that are growing up with Clash Royale instead of Super Mario Bros. F2P is a big market, and it will continue to get bigger. The market overall will continue to shift in the direction of games-as-a-service. The tastes of the Chinese market, comprised of customers who didn’t grow up with pay-upfront options, will become more important to cater to.

But with the success of the PlayStation 4, the Xbox One, and the Switch in the west – and the continued support of premium titles on Steam – it looks like the death of premium gaming will not come to pass. The future is bright for that side of the hobby of video games.

I can stop stockpiling VITA games, anticipating the time when premium handheld games are a thing of the past.