F2P vs subs
One of the comments on my recent posts accused me of being naive about marketing. That was a first for me. 
A lot of commenters believe that free to play business models are fundamentally less ethical than other business models, that they are by nature predatory. So I thought I would offer up some simple facts.
The typical F2P player does indeed play for 100% free. It is not a nickel-and-dime model, as some commenters think. The vast majority of players in an F2P model never pay anything at all.
F2P players never end up paying $60 for a game they then find they dislike, as happens in the packaged goods world. In packaged goods, there are a lot of marketing practices designed to make you pick up and pay for something you do not want, often in large lump sums. (In grocery stores, it's making you move more slowly on the expensive aisles, by doing things like having smaller, bumpy tiles on the floor; in games, it is things like touched-up screenshots).
As a consequence, free to play is more democratic — more people can try a game, and this has opened up gaming to a huge audience that had never been in the hobby before.
That said, people playing for free are subsidized by those who pay — often quite a lot. These people only pay because they really want to, by and large, though of course, like any business, there are many tricks used in order to get people to convert to payers. But overall, a single-digit percentage of users are paying enough so that the average across all users including the free ones works out at something that is profitable.
Those who pay tons are termed "whales," which is a term borrowed from Vegas, and this is where people start to grow uncomfortable. But the fact is that whales existed in subscription and retail models too. They were the people who ran 10 to 30 subscription-based accounts — a phenomenon far more common than most players realize. They are also the people who buy the collector's edition of the game, all the novels, the figurines, the hint books, and fly to the convention every year.
It probably freaks all of us out that there are people who pay thousands of dollars a month for a game, until we realize that we probably all have hobbies where we would spend thousands of dollars, if we only could. Those who can afford it are very lucky… and if I could spend thousands of dollars a month on my hobbies (more musical instruments! more travel to exotic places! more books!) I have to admit I probably would.
Whales exist independently of the business model, and what free-to-play does is allow them to spend more on their hobby. Thus the free to play business model ends up monetizing core fans better while actually giving access to more players at the free-to-cheap end. Players whose price sensitivity was on the order of $5 instead of $15 get to play and pay what they want to pay, whereas in a subscription model, they were simply left at the door.
So in that sense, free to play is simply a more efficient means of getting the revenue. But in terms of a per-head revenue figure, it is dramatically worse than subscription model. The net effect of this is to make free-to-play businesses operate like retail stores, using as many tactics as they can to improve margins and maximize revenue. (I have often though that managing inventory for a grocery store would be the best possible training for running a social game in live operation).
Sub-based games and retail-based games also had their own library of tricks and tactics. I've never been contacted by a subscription based game saying "hey, we noticed you haven't actually logged on this month, so we went ahead and skipped billing you," just like I wouldn't expect a local gym to pass up dinging my credit card every month even though I don't go. Where sub games charged people for not playing, and retail games priced lousy games at the same price as good ones, free-to-play games charge you on the basis of upsells.
This works by making the base experience noticeably less attractive than the upsold experience: not very different from the gap between coach and business class on a plane, or between good and bad seat prices at a concert. But since a free-to-play player makes the purchase decision one purchase at a time, the base experience has to be good enough for them to consider paying at all. The moment the operator is perceived as overly grasping, the player can simply walk away or refuse to pay. That means you re-convert customers at every upsell, which is an inherent safety valve against abusive practices. Only happy customers are willing to pull out their wallets.
There are cases where this valve doesn't work — most people cite games such as ZT Online, which basically function like a casino. This drives people to keep playing using tactics that many find troublesome — myself included. But we've had an active debate going on for years whether MMOs by their very nature were headed down that slippery slope, and I believe that the fact that the discussion is ever-present is healthy for the industry. I would be far more worried if people took it for granted as standard operating procedure.
Game fans are also troubled by the injection of money into an equation that they are used to seeing depend largely on skill, particularly in competitive arenas. This is not a new debate — we have seen it in everything from sleeker swimsuit fabrics for competitive swimmers, to horse breeders with dough getting access to the right bloodlines, to salaries for Major League Baseball teams. It is not a new debate, and it happened just as much with the other business models as well, albeit in a more underground fashion.
People get creeped out by the science behind marketing. It's a lot more pervasive than people think, and an educated consume should definitely learn about it all and learn to recognize it. But there's nothing happening here that isn't already happening at your local market. If anything, expect that over time the science will be applied more and more to games regardless of business model. Social-game-style metrics are increasingly in use in console games, for example.
In the end, my message is this:
Free to play is not evil, it's just different. If you're freaked out by seeing business practices nakedly, realize that what's changed is that you can see them. And to my mind, that's actually better for you than blissful ignorance.
