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Hearthstone - Heroes of Warcraft monetization analysis
by Ethan Levy on 05/08/14 10:36:00 pm   Expert Blogs   Featured Blogs

The following blog post, unless otherwise noted, was written by a member of Gamasutra’s community.
The thoughts and opinions expressed are those of the writer and not Gamasutra or its parent company.

 

As trumpeted by the recent Activision earnings report, Hearthstone – Heroes of Warcraft is off to an incredible start with 10 million registered users. Alongside a stable of Blizzard titles, Hearthstone’s launch has helped drive record digital revenues within Activision; 34% of all Activision revenue for the recently completed quarter comes from digital sources. As both a childhood Magic: The Gathering enthusiast and a monetization design consultant, Hearthstone’s release on the iPad has been one of my most anticipated F2P games this year. In a market dominated by a small number of genres, flooded with me-too clones, the game promised a welcomed blend of fresh air, quality and nostalgia.

I spent 20 hours with Hearthstone as both a free and paying player to research this analysis. The game is clearly driving a significant amount of revenue for Blizzard. In the top 5 countries for mobile app revenue, Hearthstone has performed strongly on the top grossing charts over the past seven days with average positions per country of 12 (US), 109 (Japan), 1 (South Korea), 12 (UK) and 8 (Germany) according to App Annie. These are ranks any company would be ecstatic over. The purpose of this report is to analyze the game and suggest features that will help turn Hearthstone into the next member of Activision’s billion-dollar club.

Before I dive into the analysis, I want to provide my methodology and some stats on the 20 hours of play. For the first 5 hours I was in learning mode, playing as a free player trying out the various features and classes. The second 5 hours I played as free player trying to get serious with a single deck. I assembled a Rogue deck and split my time between casual and ranked play. I then spent 1 hour and $100 transitioning to a high-value payer. This time was spent opening packs and assembling Warlock and Priest decks. I spent 5 hours with my new, big spender decks in casual and ranked play. To cap off the experience, I spent 4 hours playing four admissions to the Arena. Here are some stats on my time:

  • Matches played – 112 (54 wins, 58 losses)
  • Dollars spent - $106
  • Gold earned – 550 (500 spent)
  • Packs opened – 91 (11 earned, 80 purchased)
  • Ending rank – Shieldbearer (rank 20)
  • Best Arena streak – 4 wins (as Hunter)

1. Monetization analysis

Hearthstone is already performing extremely well on the top grossing charts, and thanks to its high quality, fun factor, name brand recognition and proven genre, the game is likely to be an evergreen success for Blizzard that remains on the top 100 grossing chart for years. However, more than any game I have played in the last two years as a monetization design consultant, Hearthstone has the opportunity to knock Supercell and King from the lofty positions on top of the charts. The rest of this article suggests features that can help turn Hearthstone into Activision’s next billion-dollar franchise.

1.1. Social engagement

Issue identified

When I think back to the many hours of my adolescence playing trading card games (TCG), social bonds were critical to my engagement and spend within the genre. Magic: The Gathering was more about hanging out with my friends after school than participating in hobby store tournaments where I would get knocked out easily by older, more strategic players. Embarrassingly enough, in the days before broadband was common place, I used to play Magic over the phone with my friend (and now world traveling pro player) Sam Black. The games my circle of friends played determined where I spent my time and money; my choice to dive into the mid-90s Marvel TCG over Star Wars or any other me-too trying to jump on the Magic bandwagon was purely determined by what my friends were playing.

It was not until the end of my 20 hours of play I even discovered that Hearthstone has a friends list. I understand how in-game chat is likely to create more negative externalities through toxic play than benefits through social interaction. Still, for a PvP game, Hearthstone is too light on the ability to interact with other players.

Proposed solution

Making Hearthstone more social will make it a stickier game, driving long term retention and therefore monetization. I suggest three improvements to multiplayer in order to make Hearthstone better with friends.

My first suggestion is to enhance Hearthstone for players in the same physical location. A curiously absent feature for a TCG is the ability to gift, trade or auction my cards to other players or friends. Given the hoopla surrounding the Diablo III auction house, I anticipate Blizzard is unlikely to institute a similar system for Hearthstone. However, the ability to trade cards freely with another player on my wifi network would be a powerful feature to encourage friends to play together. Similarly, gold rewarding quests tailored at encouraging players to play in the same physical location would create the strong social bonds that build long term retention.

My second suggestion is to implement some form of viral feature to encourage installs. For instance, a friend code system could be used to reward a player with an expert pack for every friend who joins Hearthstone and achieves a certain play milestone (eg. level X with at least one hero). Alternatively, a player could earn free Arena passes at the end of every week for each invited friend who has been an active player that week.

My third suggestion is to implement guilds within Hearthstone. For core games in the F2P space, social events are the feature driving the incredible revenue of games like Clash of Clans and Modern War. It is the implementation of guilds that will empower Hearthstone to topple Clash from its lofty perch.

1.2. Socially competitive events

Issue identified

The key to unlocking Hearthstone’s potential to be a billion-dollar franchise (over the next 5 years) is guilds and guild-based events. Competition between teams of players is an incredibly important feature in F2P. For instance, the chart dominating Modern War has publicized a 600% increase in average daily revenue when running events. Given the setting within World of Warcraft, the narrative wrapping already exists for guilds and guild-based competitive events in the form of Raids. All that is needed is a clever implementation that will drive player engagement and revenue.

Proposed solution

At its simplest, an event is a time-limited leaderboard for individuals and guilds to perform the most of a particular action, with tiered and exclusive rewards depending upon performance. Highly monetizing events are ones that include some form of consumable use that leads to spending for those players who care about their individual or team rank. This structure pairs naturally with the concept of WoW’s Raids to create the perfect event for Hearthstone.

A possible implementation of Raids is a weekly challenge against a sequence of enemies with powerful decks, custom hero powers and astronomical health, perhaps with some puzzle elements. A Raid would have a time limited entry currency – a player may get one free, non-stacking Raid ticket every 4 hours or they can buy one with gold or real dollars. If the player is part of a guild, their progress occurs at the guild level. The player faces whoever the current enemy in the Raid sequence is, and the enemy’s health is a global pool that all players in the guild whittle down collectively.

The weekly Raid (perhaps only open for 3 days during a week) would have a guild and individual leaderboard. In addition to being rewarded each time a player’s guild conquers an enemy in the Raid (with a large reward for defeating the Raid boss), their performance gives the guild a global score that ranks them against other guilds. At the end of the event, rewards are distributed to players based on the placement of their guild as well as individual performance in the event. The higher their ranking, the bigger the reward.

The key to this system is the consumable element. Just like the Arena, players can participate for free and enjoy Raids. But if topping the global leaderboard and reaping the reward is important to a player or guild, then they will spend real dollars for the opportunity to be number one.

1.3. Competitive events

Issue identified

Although I never made the trek from suburban Chicago to Milwaukee for GenCon, another staple of my Magic days was participation in weekend, hobby-shop tournaments (where I usually washed out quickly). Tournaments are exciting, heightened events that enhance the experience of playing a game you already love. They are a staple of the TCG genre and another opportunity to introduce a highly monetizing feature into Hearthstone. A tournament can be a complementary style of event to Raids by appealing to competitive individuals instead of team oriented players.

Proposed solution

Some flavor of daily event is a common feature in F2P games. For instance, X-Men: Battle of the Atom features multiple, scheduled, daily battle events that a player can only join within a specific timeframe. Similarly, Hearthstone would benefit from daily, scheduled tournaments. Perhaps every 4 hours a massive, double elimination tournament begins (possibly with a quickening mechanic, like 20 health per hero instead of 30 to cut down game length).

This tournament would be a turbocharged version of Arena mode. A player would purchase entry for 375 gold or $5, draft a deck, and play for increasing rewards the further into the bracket they progress. At the end of each week, there could be a free, Twitch streamed and announced tournament for the top X placed players from each daily tournament. Additionally, the year would be punctuated with massive monthly or quarterly finals, as well as an annual, big money cash tournament. Skilled players who rake in gold from Arena wins and event participation would be able to enter these tournaments with earned currency, but other players would end up increasing their overall spend to participate in these exciting events.

1.4. Performance improvements

Issue identified

Given the Blizzard pedigree, I experienced two unexpectedly negative elements of Hearthstone during my time with the game: technical performance and UI implementation. Playing on a 3rd Generation iPad, I was surprised at how poorly the game performs from a technical perspective. Transitioning from screen to screen was slow with hangs and pauses at key moments (like the end of the battle). For a game built on the proven Unity engine with a largely 2D experience, I was surprised that the game did not run smoother.

This is a minor issue, but the negative effect is compounded by issues with UI flow and functionality. The game uses a hub and spoke model that makes transitioning from element to element an annoyance, since the player constantly has to return to the main menu before moving to other areas. Another small, but unfortunate detail is that a button to access the deck builder is not present on every screen outside an actual round of play.

Deck building itself is a chore. As I got deeper into the experience, I was surprised to discover that there is no easy way to delete a deck, nor can I give a deck a custom name [edit: thanks to a commenter I found that there is a way to rename and delete decks, but that it was a relatively hidden interaction for a touch based interface with no mouse hover]. Several times I had to reset a deck by literally dragging each card off of the deck UI element so I could begin with a blank slate.

These are all minor issues, unlikely to have a major impact on revenue. Bundled together, they may have a modest, negative effect on retention (and therefore revenue). However, these peccadillos collectively communicate to the player a game that was built primarily with a desktop frame of mind.

Proposed solution

Technical fixes may not have a large, direct effect on monetization. However, fixing these issues will enable Hearthstone to reach a larger, more global audience of older iOS and varied Android powered devices. Also, performance and UI flow improvements will make the game more joyful to play, even if only in a subtle way. The experience of Hearthstone would be improved by speeding up technical performance, modifying the UI so that the deck builder is always a single tap away and making deck building a significantly smoother process.

1.5. Let's get small

Issue identified

Currently, Hearthstone is exclusive to iPad for touch based devices. However, the in-game UI is primarily decoration that is wasted space from a functional point of view. If anything my thousands of matches of Ascension on the iPhone have proven, it is that there is a way to pack a dense, card based experience onto a tiny screen.

Proposed solution

Hearthstone needs to be available on iPhone and Android powered phones and tablets. Not only will this increase revenue by increasing reach, it will also close the current opportunity for me-too products to start building an audience on those platforms where Hearthstone is currently unplayable.

2. Is Hearthstone pay-to-win?

Additionally, I want to analyze the effect becoming a high value player had on my Hearthstone performance. The most frequent accusation leveled at F2P games by core gamers and journalists is that they are pay-to-win, and therefore inferior to packaged goods. Due to its incredible quality and fun factor, the discussions I have read and listened to for Hearthstone have largely forgiven the monetization aspect of the game.

Without a doubt, Hearthstone is pay-to-win. Just like poker, there is plenty of luck involved and the outcome of a match can swiftly change with every card dealt. In any match, a completely free player can beat an equally skilled paying player. However, over the long run a paying player has a distinct advantage in deck building that increases the likelihood they will win.

Putting aside my first 5 training hours, my record as a free player was 7 wins and 20 losses for a 26% win ratio. As a paying player, I went 15 and 15 for a win ratio of 50%. In ranked play, as a free player I had a 33% win ratio and stalled out at rank 23 after a 6 game losing streak. As a paying player, I easily ascended to rank 20 with a 53% win ratio before hitting the 5 hour mark. Had I been willing to disenchant cards outside of my core class to craft an even stronger deck, or spend even more money on expert packs, I would have undoubtedly continued to rise in the ranks on the strength of my Priest deck.

Obviously from my record, I am neither the most skilled Hearthstone player nor is the game completely pay-to-win. Spending $100 did not guarantee easy victory. But it did give me a significant advantage relative to my performance as a free player. As with many F2P games, by paying for packs I was artificially boosting myself up the skill curve relative to more experienced and strategic players.

Most interesting for other F2P games with a multiplayer component is Hearthstone’s Arena mode. In the Arena, a player spends $1.99 or 150 gold to enter, draft a random deck and play until they lose 3 times. At the end of the mode, the player is rewarded based on the number of accumulated wins. A player is essentially paying to skip the pay-to-win portion of the game and face other players in contests that are equal parts luck and skill. This mode is fun and compelling and the $1.99 Arena admission purchase is currently the second most popular option behind the $9.99 purchase of 7 card packs. It is disappointing to spend $1.99 to draft a deck and quickly lose 3 battles, but even when this happened to me I was rewarded with at least 1 expert pack, a $1.50 value relative to the cheapest pack option.

[This follow section is an update written on 5/13 based on play since originally posting this article].

Since originally posting this article, I have continued to play Hearthstone, mostly in ranked play using my high value Priest deck. I have accumulated a lot of wins and currently sit at rank 14 with 3 stars. I have not spent any additional money on my deck, crafted new cards specifically for my deck or even opened any packs since completing my 20 hour evaluation.

Many commenters (here and on Reddit) have argued that Hearthstone is not pay-to-win, citing both outlier players like Trump (who achieved Legendary status with only free cards) and by arguing that high value spenders may have an advantage in the beginning but it will erode over time if you play enough to unlock all the cards and delve deep into the meta.

My definition of pay-to-win for the purposes of this article is that spending money does not give you an instant win button (as it does in some free-to-play games), but instead gives you a significant advantage over free players who have invested similar amounts of time and energy into the game as you have. 

Let us assume it takes something like 100 hours of play over several weeks to earn a collection on par with mine as a player who spent $100 (several weeks because a new quest - the clearest way to earn gold if you are having trouble winning in Play or Arena modes - is only served once per day). For that first 100 hours, a spending player has a massive advantage over a free player. Although there is undoubtedly a large part of the community who invests this time and energy into Hearthstone, I believe the median player of Hearthstone does not. Therefore, for the average player of the game and not the deeply commited, the game has a strong pay-to-win component.

In no way does this detract from the quality or fun factor of Hearthstone. As a designer who embraces in-game monetization, I view the level of criticism of my statement as a validation of how expertly Blizzard has built a working free-to-play game. Hearthstone is an incredible game and as I noted above, I believe it will be an evergreen success for Blizzard, staying on the top grossing chart for years to come.

For those interested in my high-value deck composition, my deck contains 11 basic, 3 common, 10 rare, 2 epic and 4 legendary cards. The total crafting cost of my deck is 8320 arcane dust. The cards in my deck are:

  • Divine Spirit x2 - basic
  • Holy Nova x1 - basic
  • Northshire Cleric x2 - basic
  • Power Word: Shield x2 - basic
  • Sen'jin Shieldmaster x2 - basic
  • Shadow Word: Death x2 - basic
  • Inner Fire x2 - common
  • Lightspawn x1 - common
  • Holy Fire x2 - rare
  • Injured Blademaster x2 - rare
  • Lightwell x2 - rare
  • Pint-Sized Summoner x2 - rare
  • Sunfury Protector x2 - rare
  • Cabal Shadow Priest x2 - epic
  • Illidan Stormrave x1 - legendary
  • Prophet Velen x1 - legendary
  • Ragnaros the Firelord x1 - legendary
  • Ysera x1 - legendary 

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