So is this method of compensating players with free games more cost effective/profitable than having a single player game not require internet access?For sure it is, see quote from Sepharo:
Yeah there is tons overlap in SH5 fans and Shaun White/Prince of Persia fans.With virtually zero overlap, you can probably count the lost sales on one hand and besides, both titles are well into the bargain bin $10-20 range by now anyway. This isn't really costing them anything.