MMOs and Monetization

Disclaimer: If you do not like walls of text, this is not the place for you.

In my debut piece, I want to talk about something close to my heart, the increasing monetization of MMOs and the ‘Free 2 Play’ or indeed the ‘Freemium’ model.

A bit of background information first:
The MMO market is growing in terms of number of gamers, share of people paying fees and money spent, most analysts agree on this but the number of high-quality MMOs has, and still is, outpacing this growth.
Now what does this mean for the developers and publishers?
Logic will dictate that as the number of options for the player increases, so too does the competition for that ever important revenue stream, and a number of high profile scalps has been claimed in the process. (Tabula Rasa, Hellgate London, WAR)

Now from a player’s point of view, we are spoiled for choice, but the developers are being forced to think outside the box in order to obtain the favour of the market.

Up until a few years ago, the subscription model was the preferred way of monetizing your MMO, a monthly subscription fee ensured a steady revenue stream month in and month out, and provided continuous resources for future game development.
November 24th, 2004 World of Warcraft released, and the impact on the MMO genre was nothing short of earth shattering.
With its accessibility, low barrier of entry and proven successful IP behind it, subscriptions soared, and like it or not, it became a benchmark for the genre.
More importantly however, the success of Blizzards game proved that there was a sizeable market there willing to embrace a genre which historically had been a niche, with a limited albeit fiercely loyal fan base.

Watching the millions rolling in, a host of companies set out to carve a slice of the pie for themselves, investing millions in the production of ‘Triple A MMOs’ all based around the same revenue model, after all there was a huge market there with enough money to go around for everyone right?

Fast forward 8 years to 2012.
Since the release of WoW in 2004, high profile MMOs such as Age of Conan (2008), Warhammer Online (2008), Dungeons & Dragons Online (2006), Lord of the Rings Online (2007) & Aion (2009) have all released to rave reviews, and great initial box sales, however player retention, and thus revenue plummeted within the first 12 months.
There are multiple reasons for that, but that is not the subject of this feature, what is however relevant is that they all started out mimicking the monthly subscription fee business model.

They see me rollin' they subbin'

Every single one of the above games have since made the transition into Free to Play (F2P) with the exception of Warhammer Online, and every single one of those games, experienced an almost complete turn-around in fortunes. Where before they had ailing subscriber numbers, forcing server merges and a general negative vibe amongst the remains of their communities, they now gained literally hundreds of thousands of new users, simply because the biggest barrier of entry has been removed. The subscription fee.

Now the way these companies have gone about making money is firstly to limit the services that free players receive, typically this means reduced amount of character slots available, reduced number of inventory and bank space, limited access to in-game mounts, chat channels and dungeons etc.
All of these services are fully available of course for paying customers, and can be procured by buying a monthly subscription or ‘pack’.
Now in the case of Dungeons & Dragons Online, the higher level you get, the less content is available for free, that is not to say that there is none, but you are increasingly encouraged to ‘pay to play’, items such a XP boosts are also available from the in-game store for ‘Turbine points’ which of course you pay real money for.

Interesting key facts:

• Free-to-play MMO games gross more revenues than Pay-to-play MMOs in Asian (51%), European (53%) and Emerging markets (59%).

• Free-to-play MMO games take 47% of all money spent on MMO games in the US, up from 39% in 2010.

There are a few conclusions we can draw from all of this this.

The market that the games companies felt so certain about a few years ago was nowhere near as big as we estimated it would be.

World of Warcraft’s enormous success is not is not reproducible on the scale that was previously assumed, in part due to the shift in the market place brought about by the industry itself and the plethora of options available to consumers, but also due to the global economic changes since 2004.

Many analysts agree that ‘Free to Play’ is the way forward for the MMO genre, as it allows for people to get involved with more than one game, whereas previously your typical MMO gamer would only play one game due to the subscription fee barrier and limited funds.
With the free to play model, the player has ‘nothing to lose’ by trying the game out right?

Well in essence, yes, that is indeed true. However, the reality is a little bit more on the grey side.
Some companies such as Funcom take a less than altruistic approach to monetizing their ‘free to play’ game.

Why I no have epic mount!?

The ‘free’ players are severely handicapped in Age of Conan, the lack ‘Epic’ mount skill, the lack of class availability and limit to two raids essentially bars them from being anything other than a second class citizen compared to their paying compatriots.
Now there is a good argument here in the favour of the developers, they need to generate revenue, and if they gave away the whole game for free, it will be bad for business, that much is obvious to anyone, but isn’t this kind of behaviour a slippery slope?

Where is the line between ‘Free to Play’ and ‘Pay to Win’?

You could argue that if a player cares enough about the limitations on the free plan, he will happily fork out money to become ‘premium’ member; however is it ok to make players who pay become much more powerful in a game that has a strong player vs player emphasis?

For clarification, I am not opposed to selling ‘short cut items’ in an in-game store, provided that the same benefits can be obtained by the free player through in-game means such as grinding, or the completion of difficult quest lines.

I am not saying that free players are entitled to anything, by all accounts, the company gains nothing from them unless they spend cash eventually, however from a marketing, and word of mouth standpoint (word of mouth is essential in the MMO world) garnering the good-will of your player base is key in an effort to up retention and thus potential revenue through the in-game store.
A company that is feeling the effects of consumer backlash these days are Zynga.

While they are not a Triple-A MMO developer, there are parallels to be drawn between their somewhat aggressive monetization of Facebook hits such as CityVille, FarmVille etc.
Recent studies show that while they garner explosive initial player numbers, their retention rate is surprisingly low, and many people do not play their games beyond the first 2 months.
Those who do stay however, invest huge amounts of money in their game.
At a recent event I attended, a key note speaker revealed that some players of Zynga’s more successful games spend up to $1000 quarterly.
That is a staggering number, but also a direct result of Zynga’s aggressive monetization, and while we have yet to come across this level of sales tactics being employed by the western MMO world, there are indications that we might not be that far off, and as a player I personally find that a worrying trend.

The problem is not only prevalent in PC MMOs though, making the players pay extra in order to stay competitive and let’s face it, most gamers are competitive by nature, in console games its not a new thing.
This generation in particular is a case in point, with huge amounts of DLC being sold, especially map packs for First Person Shooters.
Sure you don’t need the new maps to play the game online with your friends, but in order to stay ahead and in some cases in order to actually play with your friends, you need that new $10 map pack right?

In conclusion, perhaps I strayed a little off my initial path, so I will sum up my thoughts on F2P models.

F2P is the future of online gaming, I do not see any way around this, and if done correctly, can be a huge benefit to us as gamers, we can chose our involvement in the product to a degree that we are comfortable with, and in all likely hood the amount of choice we have in terms of products will grow as more and more games get released.
While this is a hugely beneficial to us, we as consumers have to be careful that we do not allow ourselves to become complacent, and simply accept every F2P business model out there, because that will eventually become detrimental to our gaming habit, paying to win, is not what F2P should be about according to yours truly.

Developers and publishers like to say ‘we are adding value to the product’ every time they feel they need to justify launch day DLC or indeed offer more things for sale in an in-game shop, I sometimes want to ask them ‘Value for who?’

Lastly, I want to mention one F2P model that I actually think works, to the benefit of both consumer and developer.

The Guild Wars model.

Shockingly clever

In 2005 ArenaNet released Guild Wars, an MMO without a subscription fee. You bought the box, and bang, you were playing with thousands of other players.
As a supplement to the box sales, ArenaNet launched a store, selling largely cosmetic and convenience items, such as alternate outfits for characters, increased bank space and skill sets.
Neither of these gave the player the feeling that they needed to buy these things to be competitive, but they were a great supplement for those who want to get more involved in the game.
As a result people tend to think along the lines of; ‘I don’t pay a sub fee, so this month, I might buy those bank slots’ and it garnered in the long term, a largely positive reaction for the player base. And made ArenaNet a very tidy sum of cash.

So what are your thoughts on all things F2P, Freemium and monetization of games?



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