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MMOG Business Models: Cancel That Subscription!
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MMOG Business Models: Cancel That Subscription!

June 5, 2008 Article Start Page 1 of 3 Next
 

[The online game market has a battle raging between subscription-based and alternative microtransaction-related business models - Gamasutra examines the matchup with SOE's John Smedley, Three Rings' Daniel James and EA Mythic's Mark Jacobs.]

While the majority of MMOGs in the U.S. still earn their keep by collecting monthly fees, the classic subscription business model is no longer a knee-jerk reaction for most domestic publishers of new massive-multiplayer online games.

Indeed, publishers say they are thinking long and hard, weighing their options, and not announcing earlier than necessary how their forthcoming games will produce income.

Consider Sony Online Entertainment. Every one of SOE's six current MMOGs -- EverQuest, EverQuest II, Vanguard: Saga Of Heroes, The Matrix Online, Planetside, and EverQuest Online Adventures -- requires gamers to shell out a monthly subscription fee. But come 2009, when Sony launches The Agency, an online action shooter, it still isn't clear what will be its method of generating revenue.

"We'll be launching another MMOG -- Free Realms -- prior to The Agency late this year. And we've already said that we're absolutely going away from standard subscriptions there, using 'freemiums' instead," says John Smedley, SOE's president. "That means you can play for free but you can also sign up for a club within the game if you want extra features.

"As for The Agency, we're taking a wait-and-see attitude," he adds. "Before we make any decisions, we want to see how the combination of free play, microtransactions, and advertising support works for Free Realms. If I had to guess, I suspect we'll be doing the same with The Agency, but we're not quite ready to commit."

"In the meantime, we've designed the game to fit different models. Regardless which we actually choose, I foresee us moving to various business models other than subscriptions over time for newer games."


SOE's The Agency

Smedley wouldn't comment on DC Universe Online, another forthcoming SOE MMOG that has not yet been officially announced.

But he did hint there's even the possibility of re-tooling older MMOGs to accept new revenue models.

"We might be able to get new life out of an older MMO by going away from the subscription model and adding microtransactions," he says. "It is possible to do that, but it's probably unlikely. We'll more likely save the newer revenue models for our newer games."


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Comments


Anonymous
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There's another issue not brought up in this but I see it all the time in games I've played. The whole microtransaction idea can be pretty attractive, but there's only a few ways to do it and if you pick the wrong one you can end up ruining any game balance you might have had. Worse yet you might end up making the game balance force people to buy with microtransactions to do anything after awhile, and with me and my friends nothing gets us out of a game faster than that.



The issue here really is if you balance your buy items correctly. There are several options of course. You could offer items that make you gain exp faster for X amount of time. This sounds attractive as an idea, but really it's just a bad idea. The result is going to be ether one group of players on your server will be constantly spending on this so they make huge characters that make the rest of your players who can't shell out at the time feel left behind or you end up having to balance your game so the items are needed to continue past a certian point which again just pisses off your players who wanted to come casualy play.



The next type of offered item is actual useful ingame items like weapons, armor and consumables. This, by and large, is the worst idea to make micro transactions out of. The first reason is this takes that armor/weapon/item out of the game for earning or gives a secondary way to get it. In the first case this can be very demoralizing to players when they find out the only way to continue is to go buy that one week long armor upgrade for their character so they can just barely survive that next enemy and gain another level. It's not a good feeling. And on the other end of things, if it IS earnable in game, how does that guy who spent 20 hours hunting and slaving to get his shiny new spear feel when the guy right next to him is talking about how he bought his in the in game shop?



The last option is to make creation items and customization items the pay for items. This is the one I can most agree with since it does the least damage to the game balance. Creation items usualy still carry some risk of a failure when making things, or the really good items require some small amounts of rares and a ton of more common ingredents. I can't argue with making the common ingredents easier to get this way since really you'd just be boring the player to make them go earn 50x bars of iron on low level enemies so they can combine it with the hard earned charcoal, gems and monster blood it takes to make the armor they were working on. And the customization items, things like changing the colors on armor and weapons, doesn't even effect game play so I really can't argue at all with that. However then the issue is that some people really wouldn't bother buying these ever.



There's also the option of restricting travel and entry to dungeons and the like, which while not as bad as some of the other ideas might still piss people off.



All in all my point is I guess this, the micro transaction system isn't a 'bad' idea. But it doesn't fit a lot of traditional mmo senarios and if you try and shoehorn it into these you could break your game balance horribly and end up pissing off your fanbase. You have to be really careful about it and not just for money reasons like the article mentioned.

Lorenzo Wang
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I think the real pros and cons haven't been clearly laid out here. We need to compare why both exist:





SUBSCRIPTION BASED

------------------------------------------------

+Very predictable cash flow

-Committment to price point is a barrier to entry, as well as re-entry for players that quit.

-Unreactive to actual player playtime, thereby encouraging the creation of time sinks until next content patch.





MICROTRANSACTION BASED

------------------------------------------------

+Clear connection between what players pay and what they get.

+Asset creation and creativity can be managed for optimal effect and sales efficiency.

-Unpredicatable cash flow.

-Less pressure to create either purchasable incentives that affect gameplay balance or gameplay neutral trinkets.

-Incentivizes players who pay more, creating the impression of unbalance that is counterproductive to efforts to get other players to play for free until they are ripe for transactions themselves.





AD-REVENUE BASED

------------------------------------------------

+Developers are justified in focusing on the game itself, which has no artificial barriers of entry.

+Revenue comes from a source independent of developer strategy.

-Revenue comes at the mercy of someone else's strategy.

-People hate ads.

-Games each represent a single niche, and ads are niche-seeking. This is counterproductive to getting advertisers.

Art and Design
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Organized and detailed traffic is extremely valuable. Facebook, myspace, and the others have shown that in the social networking realm. All they are is traffic and UGC that further details that traffic. When the games industry wakes up and learns that, perhaps it will take full advantage of the free to play model that is generating such huge numbers of people through such portals.



I imagine EA's purchase of Shawn Fanning's unproven social networking company is a step in that direction...but whether the games industry learns to monetize, mine, and serve it's traffic, is yet to be seen. There are many ways to monetize traffic and right now the industry is letting it's customer base come in the door and go right back out without taking advantage of such an ideal mass market for such opportunity.



There are few companies truly taking advantage of the traffic they generate. Valve has leveraged it's traffic well...as has Bioware with it's successful online communities, outside the free to play markets...but even their numbers are low compared to FtP models that are successful. Building a massive amount of highly detailed and organized traffic creates greater independence in the market as as customer bases can be reached, marketed to, and developed further for even greater independent leverage. Once the traffic base is built, further product can be delivered, regardless of what it is.



The games industry has, for the most part, squandered it's traffic over the past ten years. Even Nexon seemed perplexed when I asked them if their traffic was organized. The free to play folks who become established will control their traffic streams in huge numbers. The industry cannot deny the value of reaching a 100 million person customer base at the push of a button, or with a tasteful or creative marketing push. It pays huge money to reach such numbers in the form of PR and advertising.



The FTP model is not, to me, an end in itself. It is simply another tool to build and control huge internet traffic, which if properly developed yields greater reach in all areas of sales, PR, and marketing..ie independence.



These thoughts are outside of gameplay or game monetization movements...just related to the reality of huge traffic control. My company Massive Black is successful, partially, due to the reach it has in our 10 million page views a month online community which we built from scratch.





Jason Manley

President

www.massiveblack.com

Founding Director

www.conceptart.org/forums

www.conceptart.org/workshops

www.conceptart.org/school

Anonymous
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I think Jacobs sums up one of the biggest troubles with micro-transactions at the end of the article: "I don't have to worry about nickel-and-diming people to death." Even Daniel James said, "I'm talking about a meaningful number of high-end users who spend multiple thousands of dollars a month." Too often in the market the microtransactions become a necessity to gameplay. When players who can't pay much begin to see people paying thousands of dollars and becoming far more powerful, you start finding disgruntled players. Players who will leave a free game because of the price.



Honestly, I find the subscription model to be the most conducive to a strong player community and player retention. And, if companies wish to hook more casual players, I have often wonder why they don't choose an hourly model that caps out at the monthly fee. Such a model may or may not be successful at attracting more casual players, but it would certainly be less divisive than microtransactions.

Anonymous
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Anon 12:08 has an interesting point, an hourly model that caps out at the monthly expense I'd be perfectly happy to pay.

Christopher Plummer
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I've got to agree with Jason. MMO games are going to have to change the way they are played/created in order to fit the free to play model not the other way around. People are drawn to these games because of the community and FTP is the best business model to guarantee that a large community exists and is sustainable.



Certain publishers are going to be the unscrupulous hacks they've always been and nickel-and-dime players to death. But the most successful ones in this arena are going to be the creative ones that can sell someone something that they really want to buy. That is the business they chose to be in!!!



Micro-transactions don't have to be what we all fear they will turn out to be. For instance, WOW could've made the arena system and the battlegrounds work like an arcade machine. Your team could pay a $.25 or $.25 a person to purchase arena/battleground credits. Win and your credits carry over. Lose and you need to get more credits.



Why does this work? Because some people don't want to PVP and feel like their subscription money was being wasted for this stuff. While others loved PVPing and spent most of their time doing this. In either case, if people were unhappy with something they would just stop paying for that particular thing instead of leaving the game/community.

Lorenzo Wang
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Jason I don't see any evidence that anyone is just "letting" their users go without taking advantage, they just *can't* take advantage. There are many ways to monetize traffic and few of them work.



The thing is that games are inherently organizing traffic around the thing that the traffic wants to play. That bears little to no relevance to your monetization schemes, at least not without making users feel their privacy has been violated.



You overestimate the 100 million customers that are available at a push of a button; they are there indulging in content you create that naturally competes with your advertisement (for example). Those people are there to play WOW or Maple Story or Club Penguin. They are not TV audiences. Every monetizing action, if not part of the game, impinges on their enjoyment of the game.



I'm saying I don't think it's been a squandered opporunity, it's just too new to say. Even the most popular game on Facebook makes virtually nothing. I doubt an even more product-focused audience is going to be more cooperative.

Terry Matthes
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"-Games each represent a single niche, and ads are niche-seeking. This is counterproductive to getting advertisers."



The above statement confuses me.

Lo Phat
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Can someone please provide some concrete examples of free to play MMOs where players are complaining about other players buying their way to greatness? Most of the Asian MMOs I've seen take care to balance things such that this doesn't happen.

Christopher Plummer
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Lorenzo,



I think that you are oversimplifying the nature of MMO games. The games are inherently organizing traffic to play a game online with friends but because of the sheer amount of stuff in the game there will be tons of things that players don't want to do or are waiting to have finished. So the subscription begins to feel like a tax over time.



This also has the side-effect of most players feeling like they have to give a bigger commitment to MMOs than to other games. Which is much more counter productive than one might think at first.

- Most players will only be able to play one MMO at a time.

- Most players will play the MMO that most of their RL friends play whether it is their preferred one or not.

- Players and Publishers will be scared to move away from well known brands in this genre as well

Anonymous
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Lo Phat there's a couple, one there was an article on recently but it's name escapes me, discribed how you literialy could not progress in the game, could not even leave the starting area without spending a bunch in micro transactions and how someone who was spending tons had a huge edge on someone who didn't.



Other examples include GunBound and well, honestly almost all mmos that offer timed equipment for buys. Yes there is a time limit on the item but nothing stops someone with money to burn from going back and buying it again, and again, and again.

Anonymous
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Gunbound is not a good example because there are plenty features and pricing structures that 'shield' non-paying users from paying users. Gunbound may actually be one of the games where the power of cash is negligible.

Stephen Chin
profile image
I believe the article in question is this one (Gamble your life away in ZT Online)



http://www.danwei.org/electronic_games/gambling_your_life_away_in
_zt.php



While it is perhaps a more extreme example of what can happen and while it may not be directly Power for Cash/Cash for Power, I think one of the key points the Anon's are trying to make is the idea of a System. Much like the Matrix, the System isn't there to be fun - it's there to keep you churning in the same place. You don't so much advance so much as work to stay where you are; the game play becoming secondary to that of keeping a mass of people seeing a rare few Gods Among Men and keeping them striving to achieve that (while at the same time, taking down those Gods to ensure they're never secure in the least).



In essence, what the Anon's are trying to caution against is casino like monetization - casinos don't make money from you having fun. They make money from dangling a cheap prizes in front of you and the lure of a quick promise.

Lorenzo Wang
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Christopher I completely agree with you, not sure what I oversimplified. Even worse than players not wanting to engage in content is when games run out of accessible content, the way WOW did for non-guilded players at the end-game level.

Christopher Plummer
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Lorenzo,



I was referring to you saying,



"I don't see any evidence that anyone is just "letting" their users go without taking advantage, they just *can't* take advantage. There are many ways to monetize traffic and few of them work.



The thing is that games are inherently organizing traffic around the thing that the traffic wants to play. That bears little to no relevance to your monetization schemes, at least not without making users feel their privacy has been violated."



I felt that you were glossing over an important part of the MMO community - the traffic wants to play and connect with each other, they don't necessarily want to play the game.



The game they are playing is generally not as important as the amount of stuff they are able to do on the periphery of the game. Don't get me wrong, the gameplay has to be entertaining because at the core of the community are the people that want to "complete" the game, but then you have their friends who enjoy the MMO atmosphere, their wives, husbands, girlfriends, and boyfriends who enjoy spending time with their significant others, their online friends that enjoy the clan/group they created on another game, their technically-inclined and creative friends that want to create mods, sites, artwork, and blogs that people they really know will get to see and use, etc... All of these groups want something different out of the game than the next and unfortunately the subscriber model lends itself towards shafting them (i.e. as a developer you can't support everyone so you support your core). Blizzard did an amazing job making everyone feel welcome but for the community the welcome was short lived causing a lot of players to leave as the game became to focused on the hardcore guilds and ended up alienating most of the other players in the game.



I felt they, and most MMOS, do let their traffic go and the reason they can't take advantage is because of the subscription model. In WOW's case, they have no real competition, because they destroyed it or made it cower in fear and delays. So, they could afford to let people go. But as this genre matures, companies aren't going to have that luxury. Trying to keep a game running on at least a 3 year life cycle is going to become much tougher as more and more publishers get involved. And that's when people will see that FTP/micro transactions become a much more stable source of income. Subscriptions gives you a sense of security as long as the player base stays the same size or grows but it doesn't scale well when faced with the inevitability that gamers are going to play other games. It may seem like a silly analogy but comparing this with the vacation industry could prove to be insightful. All-inclusive resorts are a great idea when you are in an area where your clients most likely won't or don't want to leave the hotel grounds. However, when you are at a vacation hot-spot such as Vegas and trying to compete with all of the other big casinos then you open your doors to everyone and make your goods as attractive as you can.

Lorenzo Wang
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Sure, although that's beside the point I was addressing. My definition of play of course includes interaction within the social clique, but you prove my point. People that get together to play with friends and family, and in that private space they are not open to *ad revenue systems*, which is what Jason was talking about.



Subscription are not relevant in the "squandering traffic" discussion because they are already monetizing traffic, just to varying degrees of effectiveness. What you are talking about is squandering "goodwill" or retention rates, in which case I completely agree that MMOs alienate users over time with a tax-like model.

Christopher Plummer
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I guess that is where the disconnect is then. I understood Jason's comment to be highlighting that game companies are lagging behind their revenue generating potential because they are squandering their traffic via the subscription model. True they are monetizing SOME of their traffic but because it is a fixed tax they are unable to distinguish even those players' wants and needs from one another. The rest of their traffic just finds a non-subscription based way to play with their friends.



I do think that people are open to "ad revenue systems" they are just not open to heavy-handed ones. Creative solutions exist and can be found to make ads agreeable - an example of this could be the teaming up of Coca Cola and World of Warcraft in China. That was cool and it mutually benefited both partners.

Anonymous
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Thanks Stephen Chin, yes that was exactly the sort of point I was trying to make. There may be 'guards' against the players being abused in some cases, but for the most part if you want to play the game like it's 'meant' to be played you need to spend a ton of money in the micro transactions. And maybe this wouldn't annoy me so much in the games where it happens if they didn't usualy mean you needed to spend MORE in a week than you'd normaly pay for most subscriber mmos in a month. So far the only real example I've seen of a microtransaction system I like is in this one game I think called malbognia or something to that effect. Their two micro transaction type things, are A), cards for rebirthing or making new characters, and while the rebirthing thing I could see "might" be a little unbalancing the rest of the game and it's pace seems like it might make up for that, and B) a sort "item club" that sends you random items and occasional gifts on your character's birth date in the week, none of which from what I can see are game breaking amounts of anything, just useful and fun and often it's things like dyes which just modify your clothing color or healing potions for use in dungons and such.

Stephen Chin
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You're welcome; I do my best.



On the flip side of things, I would like to give a different example of micro-transactions that, strangely, rarely ever gets picked up on the debate. Magic: The Gathering Online. Unlike the majority of micro-transaction based games (barring two off the top of my head - SAGA and Battleforge which lack one difference from MTGO), micro-transactions are a core part of the game; you buy booster packs which equal cards you can use to make decks as the game is a CCG. No cards, no play (though like in the real version, you get a starter pack and such with a fully playable deck to use - and likewise, you can win new cards from other players and from tournaments). The principle difference though is that, at any time, you can 'cash in' any of your cards to get a real version of it (which, being a CCG in real life as well, means it's also usable). The cost of play is countered by the fact that the purchase actually has real value and real world use. MTGO is less a specific online game and more an extension of an existing franchise.

Anonymous
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A very good article. I'm looking for a subject to write on for my thesis and I think I may of found it. Cheers.

Chris Crowell
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The two basic commodities that players have to invest in a MMO are time and money. The current games such as WoW heavily favor those with a lot of time. The micro transactions have been shown to give some help to those with money and no time. Of course, any play skills cannot be bought, so execution performance will always go to the 'time' player.

And for those players without excess of time or money...you are still left behind. No real solutions on that one, you reap what you invest.

Easy Writer
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Bit of a breezy piece really, though it is always nice to have quotes from industry leaders to refer to. Nevertheless, where are the interviews with Asian MMO producers who have been experimenting with all kinds of monetization models for years?



The article is also entirely too dichotomous as well. Hybridized microtrans and subscription models can support one another. A basic subscription can provide everyone equal access to the competitive game, while simultaneously a microtrans engine can allow player who so desire to buy additional cosmetic upgrades or status items that have no relevance to actual gameplay. This way the true fanatics subsidize the more casual subscriptions players; lower the cost of entry to the game; keep everyone on an even playing field; provide a steady and predictable revenue stream; and release developer resources from the headache of balancing purchased vs. unpurchased gear.



In some ways of course even WoW is already doing this: everyone pays the same subscription, but those who go out and buy the WoW trading cards can redeem them for unique in-game status items. It is effectively an in/out-game microtrans model.

Anonymous
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Interesting point there Easy Writer. That would be a form of microtransaction I could easily get into as well. I wouldn't mind seeing one in relation to guilds as well. Not like an upkeep cost or something, more like the item to make a guild can be bought or can only be bought. It'd help cut down on any friviouls guild making, and as long as it's not too pricy any group with enough people could easily chip in a dollar or two towards it so the guild could start.

Stephen Chin
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Easy Writer: I am reminded of an old Gamasutra article (or perhaps, elsewhere, I don't remember exactly) where the author suggested various possibilities on alternative methods of paying for online games. One thought they had was similar to the existing model of cell phone and internet service in the manner of tiered services. The idea was that people would pay for what they want (like with micro transactions) but with constant subscription and with smaller itemized bonuses. For instance, a beginning tier might only allow access to the base game while higher commitment tiers would open up raids and such or more complex difficult zones; or that each section would have it's own 'cost' the sum of which would equal a normal subscription (PvE only stuff, X amount. PvP stuff, X amount). Itemized stuff would be things equivalent to text messenging on the phone - depending on the plan, you may be limited or unlimited but you're still only paying for what you want and use (or plan on using).

Lo Phat
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Here's a bit of a counter point to the article referenced above on ZT Online:



http://www.escapistmagazine.com/articles/view/issues/issue_153/49
59-Slave-To-The-Beat

Richard Cody
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There's one way to create an engaging play experience for players who don't pay up the money when using the micro-transaction method: You have servers that players are forced into once they spend a certain amount of money on their character.



So, if you've spent $0-$50 on your characters current attire and items when you login you're placed in one server. But once you cross that threshold you're put into the next set of servers for people who have spent $50-$100. It brings up a problem for the player in that they may not want to spend more money because they'll be separated from their friends. Yet that's not such a bad dynamic or decision to face.



I'd rather have a higher subscription price than a micro-transaction model because I GUARANTEE many people would not spend nearly the cost of the subscription fee. Unless the game was free and you were able to download it free online. In other words no commitments to get the game on your system. I mean advertisements could make that up, but you're talking tricky business there. Games like WoW would not work with ads a bartender wouldn't offer you a medieval Sprite on the rocks.

Only castle builders and farmers could advertise there.

Neil Sorens
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You can't build a game first and then think about what subscription model fits it best. You don't build a product without a business plan for that product. Smed is either being cagey or clueless when he says that he's not sure what model The Agency will use. He's always struck me as pretty sensible on the business side of things, so I will have to go with cagey. He might not want to spill the beans just yet on a planned RMT scheme because of the predictably negative reaction it would get from the community.



Lorenzo Wang is absolutely correct when he implies that the subscription model encourages poor design. This is the biggest reason to dump the subscription model, not the potential to make more money through RMT or whatever. As a designer, it seems unethical to keep players through addiction instead of enjoyment.



There is this almost universal assumption that to be viable, RMT has to benefit your character or other persistent entity's advancement in some way. This is a tacit acknowledgement that MMOs are all about advancement, not social interaction and whatever else. It may be true of current MMOs, but it does not have to be. It is possible to make MMOs where advancement is not the main goal of the game and isn't really a big deal. In those games, RMT can be applied to all sorts of things (events, customization, etc.) without disturbing game balance, which is the primary objection against them.


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