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MMOG Business Models: Cancel That Subscription!


June 5, 2008 Article Start Previous Page 2 of 3 Next
 

Smedley observes that while SOE's current MMOGs have been very successful, he's starting to see some growth limits due to the subscriptions they impose on gamers.

"As time goes on, it's going to be easier to reach new, non-typical gaming audiences with new business models, especially if they've never subscribed to games in the past and are reluctant to do so," he says. "That is the main reason we're instituting a new strategy for Free Realms and considering one for The Agency."

One developer that's had experience reworking an MMOG from subscriptions-only to micro-transactions to grow its audience is San Francisco-based Three Rings Design.

The company currently offers two MMOGs -- Puzzle Pirates and Bang! Howdy -- as well as Whirled, which is in beta. Three Rings launched Puzzle Pirates in 2003 as a subscription-only game which ran in that format for a little over a year.

"But, in 2005, we rolled out a microtransaction version of the game which we called 'Doubloons,' and we did that for a couple of reasons," explains CEO Daniel James. "People were playing for the seven-day free period and then leaving us."

"We theorized -- and it turned out to be correct -- that if you could keep gamers around for a longer period playing for free, you have a better chance of turning them into revenue-generating customers via microtransactions down the road."

"Also, not everyone wanted to commit to a $10-a-month subscription," he adds. "But they were willing to pay $3 in micro-transactions to get their feet wet. And, interestingly enough, if these people found that the game provided attractive enough things to spend their money on, a small portion of our user base suddenly became extremely enthusiastic about spending a lot of money on it. And I'm talking about a meaningful number of high-end users who spend multiple thousands of dollars a month."

James firmly believes that the nature of a particular MMOG has a lot to do with whether it lends itself more to subscriptions or to micro-transactions. For instance, the people who play the larger-scale, "hardcore" MMOGs -- like Blizzard's World Of Warcraft or SOE's current offerings -- tend to consider themselves "gamers" and are more amenable to paying recurring monthly subscriptions.

"They are used to acquiring their MMOGs through the retail channel and then spending $10 or $15 monthly on what they consider their hobby, which is playing games," he says. "In contrast to that, the market we are more interested in... and one that is growing much, much more rapidly in terms of number of users... is the casual gamer whose numbers are in the hundreds of millions worldwide."

James explains that these "casual gamers" are not the ones generally considered to be the older female audience who enjoy playing Sudoku and card games online.

"By 'casual,' I'm referring to the armies of teenagers -- perhaps 100 million of them -- who are actively playing games on the Internet," he says. "By and large, they aren't buying games in stores because they are so expensive; they're playing simple flash and Java games online that don't have to be downloaded or installed.

"There is a huge audience out there that is voraciously consuming games like Puzzle Pirates -- a very casual MMOG -- which is why our demographics are literally from seven to 70 and 50-50 male-female."

"It is so broad that if we, as an industry, can work out how to monetize that audience, how to get them to become more immersed in games and then give us money, then clearly there is a much greater potential than in the hardcore PC game industry, in the MMORPG business, or in the console business. And that is where our focus is as a company."


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