Massively multiplayer online games (MMOs) are currently in the throws of a highly disruptive market niche change: one that shifts publishers and developers attention from gathering money from users via subscriptions to one that monetizes free games much like how mobile survives. The standard for subscription seems to be dwindling with towering giants like World of Warcraft looming with billions of revenue a year but newer titles such as Star Wars: the Old Republic, Star Trek Online, and DC Universe Online switching into free-to-play models to compete.

Camelot Unchained developer Mark Jacobs sees the free-to-play niche markets expanding too quickly for their own good and new publishers and developers entering the market as changing the rules—but at a price. Even as games such as DCUO had revenues boosted 700% by switching to free-to-play, new titles are forever entering the market seeking to get a slice of that gamer interest. Now triple-A titles such as ArenaNet’s Guild Wars 2 and Trion Worlds’s Defiance add a box price ($60) alongside the free-to-play no subscription and monetization of virtual item shops.

“The whole free-to-play thing isn’t going away tomorrow,” Jacobs stressed in an interview with VG247, “but let’s just see what happens in three to five years–and I’m betting closer to three–where free-to-play will become just another model. Right now you’ve got everybody chasing it, going ‘Isn’t this great? Free to play, we’re going to make so much money.’”

With the explosion of games reaching into the free-to-play market there certainly must be a market-cap that will be reached: all of the players cannot be playing free-to-play games all of the time and not all of them “buy in.” Worse, MMO games require a much larger amount of infrastructure and maintenance than the casual solo games that appear on sites such as PopCap or arrive for Android and iPhone mobile gaming. The cost can be staggering and as interest shifts so shall go the tide of money.

“I don’t think that model is going to work out all that well for anybody,” he continued, “not in the long term. Short term – absolutely. Just like every model that seems interesting works out in the short term.

“You know, free-to-play is just another model, and just like every other model in the industry, it will hold its special little place for a while but then there will be consequences. Those consequences in a few years will be a bit of an apocalypse.

“You’re going to see a lot of developers shutting down, and you’re going to see a lot of publishers going, ‘Oh yeah maybe spending $20 million on a free-to-play game wasn’t the best idea ever.’ That’s part of the reason, but the other reason is equally as important, that if you go free-to-play, you really have to compete with every other free-to-play game out there.”

The nature of disruptive model changes on industry tends to play out the same

As free-to-play models progress there will be a lot of things to look forward to and potentially some losses. Even SWTOR paired back the number of servers they offered to their users tremendously when EA Games flipped the game to free-to-play. NCSoft eventually shut down City of Heroes after it had been turned to free-to-play for less than a year (although the reasons for this shutdown seemed unrelated to the free-to-play transition entirely.)

Others will follow.

None of these businesses will last forever and especially looking at major distributor-publishers such as Gamigo and AeriaGames outlaying new free-to-play MMO games all the time some of these titles will not make the grade. Popularity for free-to-play MMO games is extremely high right now, hoping to survive in the shadow of unstoppable juggernauts like World of Warfcraft or make a buck off microtransactions and surging (or waning) player bases.

Right now, free-to-play is growing like weeds and it’s leading to a great deal of innovation and new models. As those models rise and fall we’ll have a much better idea as to what direction the industry will follow. There is certainly a place for freemium-with-subscription, for fully free-to-play with microtransactions, and for GW2 and Defiance with buy-to-play box price.

Jacobs sees the culling coming in about five years. In that time, the free-to-play market will have a much better idea of not just what audiences want but what they can afford to play.

[Updated: Since Outspark is recently deadp; probably meant AeriaGames, another massive free-to-play game distributor/publisher constantly pushing the market like Gamigo.]