Free-to-play has been around for a while now in Asia but has only recently become popular in the West. I remember playing international versions of Asian MMOs in indefinite “beta” status on PC, with cash shops and all, way back in 2001. They were not technically free-to-play, and some of them did release eventually, but the ones that did not were basically free-to-play.
On the other hand, mainstream MMOs in the West still had the normal box fee + subscription model until Lord of the Rings Online switched over in 2010. On PS3, the first free-to-play title was Free Realms in 2011. Xbox 360 players had to wait until 2012 with Happy Wars. (Technically, there were some free promotional games released earlier.)
Free-to-play sounds great at first. We have all kinds of game options available to us now. They all use slightly different business models, so we get to pick and choose which game fits the best for our interests and budget. Later, it becomes a problem. We have only to look at the Apple App Store to see the results.
When it first came out, the App Store was revolutionary. Finally, indie developers could get their game seen by potential buyers just as much as the big publishers could. The earliest games were being priced around $5, $10, or $20. Unfortunately, the system got so popular that a small price drop was enough for a massive spike in sales. A massive price war ensued until the minimum price of $1 became the norm.
Now, everyone is switching to free-to-play. Some of them are still very successful, but it is becoming an extremely low profit margin business. A little bad luck or one small mistake is enough to bankrupt a game company. It has gotten so bad that many developers are abandoning the mobile games market for a PC-only approach such as Steam Greenlight.
This is a warning for free-to-play on the other platforms. On Xbox 360, PS3, and PC, game prices could easily tank because of the amount of competition. Worse, most free-to-play games try to attach their players by giving out rewards through time sinks. Not only is it hard to make a profit with a game given out for free, the players have a really hard time switching to try out a new game. A new game comes out and most players are sticking with the games they already have. That is a sure way to kill the market.
The market thrives on people buying and playing new games continually over time. The companies make money by continually selling new games. They can get by on microtransactions for a while, but ultimately, players will want new games. If too many players stop trying out new games, the free-to-play market will die. I see no way around it. In a few years, there will be so many free-to-play options but not enough players to go around. A bunch of those publishers and developers will go out of business with just a few left standing.
Now, I have predicted before a crash in digital distribution. That to me is more long term, the next 10-20 years maybe. The free-to-play crash is going to happen sooner. My guess is within 5 years. Most companies in this space are just barely getting by, and yet, numerous new companies with new free-to-play games are entering the field.
For MMOs, I expect there to be a small rebound back to subscription-based MMOs. There will be a more even balance between them. For the short, casual games free-to-play does not fit. They will all go back to upfront fees. There are some other genres to look at too, like the Dota-style games. There have been so many of these released recently and many more in the future. Only a few are going to be left standing, namely DOTA 2 and League of Legends.