While online games' profitability is still a question, Blizzard Entertainment's Battle.net has thousands of loyal users and a growing community. Paul W. Sams, the "biz guy" at Blizzard Entertainment and spokesman for Blizzard's Battle.net online games network, isn't about to tell other publishers how he did it. But he did take time recently to talk with Gamasutra about the challenges and opportunities facing Battle.net, now and in the future.
What are your responsibilities at Blizzard Entertainment?
Sams: I manage Blizzard's business operations and licensing efforts for our various properties so that our president, Allen Adham, can focus on development. I also handle all business efforts for Battle.net including online advertising, Internet service provider partnerships, and business strategies as well as assisting in our marketing and PR positioning of Battle.net.
How long have you been with Blizzard?
Sams: I started with Davidson & Associates, Inc. in January 1994 and was part of the due diligence team in acquiring Blizzard. In August 1996, I joined Blizzard as its director of business development.
What are the major challenges of running an online service like Battle.net, and how do you deal with them?
Sams: Making sure that your business model is intelligently crafted and that your technology works well. As you can imagine, there are many places that you can overspend and a lot of technical pitfalls associated with setting up your own network. From a technical standpoint, making sure we could deliver a fun, high quality experience was our primary goal. Given that our games are peer-to-peer, latency is one of the primary issues that helps to kill a fun experience, so we had to do some creative problem solving. We addressed these issues by connecting users to the fastest server available to them given their ISP and their geography. The system determines which country you're from and puts you into a country-specific chat channel, which helps deal with latency too. For instance, if you're from Germany we put you in a German chat room. By being in a German chat room you see other German speaking players, but most important, you are being put in contact with other players who are geographically close to you and who, presumably, share the same ISP or have ISPs that peer with each other. It's a comfort and a latency improvement effort. We also empower our players to choose the friends (or opponents) based upon the latency they have between each other by showing them latency bars next to everybody's name. We created the latency bars in a easily discernable color scheme -- green, yellow and red -- just like a stoplight. Green means "good," yellow means "should be fine, but use caution," and red means, "you probably shouldn't do this." We think these solutions help keep it simple and fun for our customers. At the end of the day, we felt if we could create a fun and easy way for people to play our games, they would keep coming back for more -- fortunately they have.
A Nov. 18 MMWire report says publishers such as Activision and THQ are considering operating their own online gaming service, "spurred by the success of Blizzard Entertainment's Battle.net." Define Battle.net's success.
Sams: One of the reasons I think Battle.net has been as successful as it is, is because we've kept it simple. First, you have to have high quality content. Blizzard's main goal in life is to create the top games in the world. We've been fortunate. Our games have been very successful. Second, we kept it easy. When we develop our games there is a group that deals with Battle.net and a group that deals with the game. They communicate throughout the development process and make sure that the game and the online gaming network are completely and totally integrated. The other thing is, when you buy the Starcraft or Diablo CD-ROM game and select the Install icon on the CD-ROM, it automatically installs the game, the software for the game network, and properly configures it. You're ready to go.
Why did Blizzard decide to forego licensing revenue and develop its own online games service?
Sams: We don't want to rely on anyone else for technology, nor do we want to wait for anybody else to create new things. For instance, if we want to do things that are different, wacky, wild or cutting edge we are in a position to do so. Other technology companies may not be as willing to invest time and energy in creating the things that we desire if they can't use it elsewhere. As a point of reference, we did go down the road of licensing our properties to the online networks. For Warcraft we licensed to TEN and Mpath non-exclusively. For Warcraft II we licensed exclusively to Engage Games Online. With Diablo, our first game for Battle.net, we non-exclusively put it on TEN, Mpath and Engage. Our reason for this was twofold. First, we wanted to hedge our bets in case Battle.net didn't work as we had planned. Second, we wanted to put Battle.net to the test against the more established networks to see what worked best for our customers. What we found was that Battle.net, with just Diablo, is at 1.25 million unique users to date after launching in January 1997. We have had over 22 million games played over Battle.net and we average over 3,500 new unique users every day. None of the other services have been able to deliver to us the number of eyeballs that Battle.net has thus far. Basically, it was a combination of us wanting control of our own online game experience, and the fact that Battle.net was the winner in our mind in the battle of the game networks that helped us decide to focus our efforts on Battle.net only. That's why we have announced that, beginning with Starcraft and moving forward, all Blizzard titles will be available exclusively on Battle.net. Starcraft will be shipped post-Thanksgiving, pre-Christmas and will be exclusively available on Battle.net when it ships.
THQ's CEO Brian Farrell recently was quoted as saying, "none of (the services) have established a proven business model." Define Battle.net's business model, and tell why it is "free."
Sams: The reason why Battle.net is free is because as game players, we asked ourselves, What is the thing we would want most as gamers? Do we want to buy our games, pay $50, and then pay $2/hr? No. We wanted to be able to play our games over the Internet for free. Then we said, How can we justify it from a financial standpoint? We felt we would be able to generate more revenue, increase our sales of boxed units at retail, by offering Battle.net free. And we have, about a 10% increase. In addition, we anticipate generating online advertising revenue by sponsorships and banners. We are taking money for banners and have a handful of sponsors in the works.
Describe Battle.net's fee structure for sponsors and advertisers.
Sams: I can't share a lot about sponsorships at this point as we are currently crafting that program. From a banner standpoint, our rate is approximately $20-30 CPM (Cost Per Thousand impressions). We have established our pricing model based upon what the market will bear (i.e. what people are willing to pay).
How much monthly revenue does sponsorships and ads bring?
Sams: We are not disclosing that at this time.
What kinds of questions/concerns do potential Battle.net sponsors and advertisers raise?
Sams: The advertisers ask the same basic things, What is your click through rate and what are your audience demographics? Our standard answer is that our click-through rates are consistent with current internet averages (i.e. greater than 1%). As for our audience demographics, they are 92% male, average household income of $55K, median age of 28 with an approximate age range of 18-35.
How much money has Blizzard invested in developing Battle.net and maintaining it?
Sams: We are not disclosing that at this time.
Is Battle.net profitable?
Sams: We don't look at Battle.net as a profit center. We look at it as a value add to our customers that is justified by increased retail sales. I would guess that we will turn Battle.net into a profit center in a very near future as we are beginning to generate real dollars as we speak.
How long will Blizzard wait for profitability before changing its business model and charging players?
Sams: We are not going to charge. Even if we do not generate a dime from online advertising or sponsorships, the business model that we have created is fully sustainable. The cost for us, because of the way we structured our business model and our relationships, is nominal and does not affect our bottom line. Therefore, we can continue to provide Battle.net for free and we intend to do so.
Are any of the online gaming services (TEN, Engage, Mplayer, etc) making money?
Sams: I don't know for sure. I do know that they are generating some revenue. I have received checks from each of our online gaming networks partners. We still have Warcraft, Warcraft II and Diablo on all the networks we originally signed with and look forward to additional checks. But starting with Starcraft, our new content is not going to be available anywhere but Battle.net.
How do Battle.net's figures for total users and simultaneous users compare against other, for-pay services such as TEN, Engage and Mplayer?
Sams: Based upon the most recent figures that I have seen in print, the next closest network behind Battle.net is Microsoft's Internet Gaming Zone (IGZ) at 500,000 unique users. Presently, Battle.net has in excess of 1.2 million unique users.
Approximately how many developers worked on Diablo and Starcraft?
Diablo is a tough one. The core development team versus how many people touched it are two different things. The core development team at Blizzard North (formerly Condor) was less than 20. Starcraft was developed by Blizzard Entertainment (HQ), and its core development team is just over 20.
How many QA people and how many testers were involved in each title's beta test?
Sams: On Diablo we had over 1,000 external beta testers. Internally our entire company tested it, from our president to the receptionist. For myself, the last 2 months we had Diablo in test I was on average coming in at 10 a.m. and leaving at 2 a.m. and testing a good part of the day. I probably spent 6-8 hours on business stuff and then helped test for the rest of the day. This extra effort in play balancing and "fun factor" by our employees is what I personally believe sets our products apart from many others currently available in the marketplace.
How long was the beta test?
Sams: The Diablo beta test lasted about 2-3 weeks. The purpose of our beta test is primarily to stress-test Battle.net. As for play-testing and play-balancing, we do that internally, although many of the coolest comments come from our customers.
What were the major items that needed resolution from Diablo beta test?
Sams: The usual. Continuing to optimize code for both Battle.net and Diablo, fixing sync bugs, etc.
How many copies of Diablo have been sold?
Sams: Diablo sell-through (i.e., actually getting boxes into customers' hands) is in excess of 1 million units worldwide since its launch in January 1997.
What other Battle.net titles are coming?
Sams: Diablo II. It's expected release date is holiday season 1998.
Describe Battle.net's infrastructure (the number and type of servers, support personnel, etc).
Sams: : We are not disclosing that at this time.
According to the Battle.net website, Internet service providers GlobalCenter (formerly Primenet), MindSpring and Exodus Communications in the USA and Multiplay in Australia host Battle.net servers. Are there others coming?
Sams: Yes. We are in serious negotiations with providers in Germany, France, Canada, UK, Northern Europe (Scandinavia area) and the Pacific Rim for additional ISPs. We intend to expand Battle.net to better serve our customers in those markets. The international market is very important to us. Almost 50% percent of our sales are generated overseas. As a point of reference, we plan on launching Starcraft simultaneously in English, German and French. About a month or so later, we hope to launch the game in Japanese, Korean, Mandarin, Portuguese, Italian and Spanish. As for Battle.net, we also will be localizing the Battle.net user interface into German and French.
How many total users and simultaneous users can Battle.net's servers handle before crashing?
Sams: Battle.net has never crashed. Even at our peak time, at 14,000 users and with half the number of servers than we have currently, we were not even at 50% capacity (from a hardware standpoint). From a bandwidth standpoint we have more than enough bandwidth to handle just about any usage increase or spikes. Basically, we can handle a lot more (users). The reason I believe Battle.net has not crashed is one of the decisions we made early on--not to put all of our eggs into one basket by going with just one ISP. It's kind of like making investments. You diversify your portfolio. For instance, let's say that one of our ISP partners nosedives for three hours -- our network routes people to other servers. The only way Battle.net is going down is if the Internet goes down. We did have a hard drive on one of our servers fail once, but the customers never had any idea because the network just re-routed traffic.
How does Blizzard handle cheaters, hackers and players who don't act responsibly?
Sams: We have had a handful of problems with cheating. Number one, we patch the game as appropriate when there are cheats that adversely affect other players. However, if customers decide they want to use a trainer where they can make their character more buff (strong), our feeling is that it's not affecting other people, so we leave that alone. As for hackers and people that act irresponsibly, we have a term of service agreement for Battle.net usage and we expressly reserve the right to kick anybody's butt off who doesn't follow the rules. The bottom line is, we are not going to tolerate people who are cussing excessively, making inappropriate racial comments, attacking our servers or basically causing havoc in the chat areas.
What Blizzard PC titles are available now?
Sams: Diablo, Warcraft Battlechest, Warcraft II: Tides of Darkness, Warcraft II: Beyond the Dark Portal and Warcraft: Orcs & Humans. That's it, currently. We do have Starcraft coming out very soon and we have Warcraft Adventures: Lord of the Clans coming out in 1998.
What's the next step in Blizzard's online games? How are they being made more challenging and enjoyable for players?
Sams: Features in Battle.net that will launch with Starcraft will expand the experience. We will have tournaments and ladders built into Starcraft, and a worldwide ranking system, so someone will be able to say they are the best Starcraft player in the world. It will be similar to a chess tournament ranking in that you'll have to play a certain number of games to be included in the rankings. The way that you will move up and down will be based on who you play and what their rank is. We'll also have team and ally play in Starcraft over Battle.net so you'll be able to join forces with other people.
What lessons have you learned from starting/running Battle.net?
Sams: That it's not an easy endeavor! It is by no means a trivial effort. I think there is a misconception out there that this is easy and that every publisher should jump in with both feet. It's taken a lot of my personal time crafting our business model and working with thousands of ISPs, doing a tremendous amount of research on the ISP partners. There's so much legwork involved in making sure you're making good decisions and deciding what the parameters are for your partners. There's the contractual process. Getting all the network and server code handled, making sure it interfaces with the game properly, making sure we're not dropping packets. There are a million things. We're fortunate because we have some top quality people that helped bring this together. We tried to keep it simple, fun and free. Those are some of the cornerstones of our Battle.net business model.
What advice can you give a games publisher who is considering setting up his own online games service?
Sams: Don't do it (laughs)! Actually, I think that other publishers should think long and hard before jumping into this area. There are many hurdles, pitfalls and the like that can make you want to pull your hair out. The aggregators (Mpath, TEN & Engage, etc.) offer some really good solutions. For some companies this is a real positive thing. For instance, LucasArts, which we believe is a great company, decided to go with IGZ. For them, it seems, this was a good decision. I guess it really depends on the resources, time and energy that you want to put on online gaming. For us, Battle.net was the way to go.
When she's not interviewing games industry gurus, Barbara Walter recruits fulltime staff members for games companies as owner of San Diego-based search firm, Walter & Company. She can be reached at email: firstname.lastname@example.org or on the web: (http://www.sandiego-online.com/forums/careers/).