MMORPG Subscription Economics Discussed

Thanks to GamePro for their article discussing why MMORPGs charge a monthly subscription fee, discussing the "extra developer attention and player community" a monthly payment allegedly brings. It quotes a Blizzard spokesman as saying "running a massively multiplayer game like Blizzard's upcoming World of WarCraft costs about three times as much as running an online server like Battle.net, because MMO games require constant maintenance, 24/7 customer support, and an ongoing dedicated development team", and NCSoft's Robert Garriott, brother of Richard, says: "Think of it as running a small city. Many of these games have hundreds of thousands of 'citizens.' NCsoft operates the 'government' that builds new roads, puts criminals in jail, and digs new caverns for citizens to explore and enjoy. All of that costs real money."

Comments

Pay as you go?

[Peterl]

It would be great if more of the games had a "pay as you go" sort of system rather than a flat rate for unlimited play. I rarely have enough time to play to make it worth the $12-15/mo.

I disagree completely

[neostorm]

This article seems to be trying to stem the flow of complaints concerning online fees with fluffed up examples. For instance, when I was working at Sony (Electonics) in 2000, it was a widely discussed phenomenon concerning the $3.5 million in pure *profit* that Sony raked in per *month* from Everquest. This was after server fees, support fees, and everyone involved had gotten thier paychecks, and if you recall in 2000 EQ cost $9.95 a month.
I knew Sony had a lot of balls several months later when they raised their monthly fee citing extended expenses. And then they did it again, and again...

Furthermore: "...and all people interviewed for this article feel you have nothing to lose by trying it out."
I have to disagree with this, as there is a lot to lose out on when trying out these games. It costs $50 to pick up a game at the store, and everytime I've checked they are non-returnable due to their online-game status.
I think it's an excelent move when developers started to release demos for their new MMOs online, because I am not about to plop down $50 for a game that may be utter crap that I can't return. However, when I can download the full version of this game online to try it out, I then question why I would need to drive to the store and pay an extra $50 for a box and manual in the first place.

I think it needs to be said that the industry has identified a new rush of revenue. MMOs are hot right now, and with the insane amount of profit abailable it's like a new gold rush, or a second .com era. I really wish gamers would step back and take a look at the real facts however, because developers could still make plenty of money by releasing these games online or in retail for (very) minimal prices, and still only charge $10 a month. The last MMO I was tempted to play appeared recently a $16/mo, and that's the last time I even thought about checking one out.

Re:I disagree completely

[Incoherent07]

I've always wondered why more MMOs haven't gone toward a "free subscription" model such as Achaea or Project Entropia, where the source of the company's income is buying various game items with real-life money. Maybe not enough profit involved... but you'd think you'd get more people involved that way.

Re:I disagree completely

[whorfin]

For instance, when I was working at Sony (Electonics) in 2000, it was a widely discussed phenomenon concerning the $3.5 million in pure *profit* that Sony raked in per *month* from Everquest. This was after server fees, support fees, and everyone involved had gotten thier paychecks, and if you recall in 2000 EQ cost $9.95 a month.

IIRC, Everquest has ~400,000 subscribers, which would mean that they brought in about $3.5m in revenue per month, before paying for support people, developers, paying for bandwidth (lots), electricity et al.

The money that EQ brings in a year is significantly smaller than a 'smash hit' like Vice City, Madden Football, or the like, and the profit margins are nowhere near as high.

This article has an interesting read on the online market.

Re:I disagree completely

[Anonymous Coward]

Actually, were Project Entropia more publicized and a bit more stable, they would make a ton of profit. PE is actually a Bank in the disguise of an MMO, and all money invested by the players is traded to make interest, which is where all the developer profit comes from.

Re:I disagree completely

[Anonymous Coward]

it is not revenue, it is PROFIT..trust me, I've worked there as well.
and even internally we joke about the support..its funny how addicted the players are. you could piss on them and tell them it is raining, and they will still keep playing+paying.

Re:I disagree completely

[Anonymous Coward]

EXACTLY! Players can be so stupid to when their being taken advantage of. And it doesn't help when the developers play the "poor innocent us, and our incificient funds" act. When they say they're raising monthly charges to cover extended expenses what they really mean is "we're not making enough money off of you yet".

Re:I disagree completely

[murdocj]

For instance, when I was working at Sony (Electonics) in 2000, it was a widely discussed phenomenon concerning the $3.5 million in pure *profit* that Sony raked in per *month* from Everquest. This was after server fees, support fees, and everyone involved had gotten thier paychecks

I believe right now there are about 400,000 EQ subscribers. Even if there were that many in 2000, which I very much doubt, that would be $4mil a month. I don't think $3.5mil of that was pure profit, although I'm sure that EQ is extremely profitable.

It costs $50 to pick up a game at the store

Maybe when the game is new, but you can buy EQ plus 1st 2 expansions for $20. That's plenty to let you know whether you want to play or not.

As the article pointed out, $10-$15 a month is cheap compared to other forms of entertainment. How much do you pay for your cable tv? How much to go to the movies or a ballgame?

Re:I disagree completely

[gtshafted]

"because I am not about to plop down $50 for a game that may be utter crap that I can't return. " Just wondering, where in the world can you still return games if you don't like them? I know EB stopped doing it and I think Gamestop did too. no major retailer I know of, allows it....

Re:I disagree completely

[ameoba]

..but within a year, GTA:VC or Madden is going to sitting on the shelves for $10/copy while everquest is going to keep pulling in that revenue.

It's the same as how MSFT wants subscriptions; constant revenue streams are better than selling somebody software that you -hope- they upgrade.

Re:I disagree completely

[whorfin]

Okay, so last year's Madden is now $10, after it has raked in $300 million in revenues. And next year, this year's Madden will do the same.

The thing is, typical shrink-wrap games require *no* after-sales support, other than the current PC misbehavior of releasing beta quality products and patching later (not an option on consoles). Zero, Nada...Even crappy EQ support costs money, and keeping the servers up costs money, too. And even if you don't like the incremental content, it comes from somewhere.

I'm not saying that EQ isn't profitable, or that the purveyors of MMO games should be recognized as saints or anything, but making a product that people want and charging what people will pay doesn't make them some sort of omnipresent evil conspiracy. Hell, Tivo costs about the same, and it's just a fancy VCR! Is EQ worth more to you than the monthly charge for your Tivo?

That said, most people won't pay the $15/month *required* to make online games viable (no profit, no product), even though we'll pay $100 a month for Digital TV and High-Speed Internet access. That money buys you a lot of variety for the whole family, but EQ buys you exactly one thing...EQ.

And yes, most software companies would like to sell software by subscription, especially when they have a captive customer base, or the customer wants to buy the 'future', rather than the 'present' product. I subscribe to virus protection software, and I know that I'll always be up-to-date, and the company is motivated to stay that way. And it's cheaper for me that way, so everybody wins!

Re:I disagree completely

[will_die]

For your average game the devs,actually thier company, are going to see around $15 for each box sold, then they have to pay all thier costs. MMORPGs have higher costs and development and also setup fees, all the servers etc. However they do not sell as many copies; EQ has sold over 1 million copies but something like madden footfalls will sell close if not over 20 million, and you average will game will sell a million.
Now why everyone is producing a MMORPG is because because all thoses hardcore players will subscribe for $12-$15 a month and will do it for a long time. Over the life of the product the decent standalone game will average a decent 12-15% return on the money which is good. However for a MMORPG you are talking an average of 19%+ with some people saying that the bigger games like EQ/UO/DaOC are doing close or over 30%.
As for the costs, some of the smaller companies making MMORPG have said they need to average around 50K-60K subscribers a month to break even and pay back all loanes

SOE-tech support or lack there of.

[skinnedmink]

Well, all I know is that SOE tech support is not worth it. On the 24/7 tech support, try 9-6 weekdays.... on a non-800 number. Depressing.

Tier-based Subscription

[Allaran]

I too have often wondered why they don't implement a system which allows you to choose a payment plan that is most economic for your playing style or even just lets you graduate to a different level depending on your play.

For casual ( 10 hours/month) players, $1/hr.

For midrange ( 10-40 hours/month ), $10/month.

For hardcore (40+ hours/month), $20/month.

Naturally, they'd do research to determine ideal numbers, but this would encourage more casual people to play, and give them higher revenue from hard-core players.

Re:Tier-based Subscription

[Anonvmous Coward]

Usually these games give you a free month to try them. Besides, isn't the point of a lot of these games that you keep at it regularly? Granted, I haven't played one, but the real-time nature of it makes me think that if you go a few days without playing it, you're missing something important.

Re:Tier-based Subscription

[Mizery De Aria]

Uh, 10hrs/month for $1/hr = $10/month. Also, why charge more per month for hardcore players? If anything, charge per hour for everyone, but monthly is just fine as is. With the free month to try, you can determine if you like the game or not. Also, based on monthly fees, you don't have to worry about hourly fees racking up if you decide to play for too long.

Re:Too many damn fantasy mmo's

[BarnDoorBubble]

I want my city to have indoor plumbing.

What about Roma Victor?

It's a non-subscription and non-fantasy MMORPG currently accepting testers.

There is ONE problem with the MMORPG model

[ymgve]

...you pay for the goods TWICE!

It's OK that you have to pay a monthly fee, due to the amount of content and such. I've got no problem with that.

But I've got a problem with all the MMORPG developers that ALSO CHARGE FOR THE GAME DISK! And it's not just some small fee to cover the cost of the disk/manuals, the cost is right up there with any other game!

And don't even talk about the expansions. HELLO, I AM ALREADY PAYING $10 A MONTH SO YOU CAN CREATE CONTENT, I WILL NOT PAY YOU FOR ANOTHER CARDBOARD BOX!

It's sad that most MMORPG developers seem to be bent on profit and refuse to let go of this obsolete payment model. Either go for monthly supscriptions or go for a one time fee. NOT both.

Re:There is ONE problem with the MMORPG model

[Tisephone]

Whoa there, don't forget the expansion packs. >.

Couldn't one or two of these guys give you a free trial, too?

Re:There is ONE problem with the MMORPG model

[Allen Varney]

It's sad that most MMORPG developers seem to be bent on profit and refuse to let go of this obsolete payment model. Either go for monthly supscriptions or go for a one time fee. NOT both.

At the Austin Game Conference last weekend, John Taylor of Electronic Arts and (previously) Kesmai, among many others, explained that almost the entire profit of the boxed game goes to the publisher, which is often a different entity entirely from the company that runs the actual online service. The profit on the retail box is an incentive for the publisher to distribute the game widely, a necessity for the online service to build its audience.

Yes, the MMORPG developers are bent on profit -- being, you know, businesses -- but they're not holding onto an "obsolete payment model" out of greed for the box profits. The boxes are only the means to an end.

Re:There is ONE problem with the MMORPG model

[DarkZero]

At the Austin Game Conference [gameconference.com] last weekend, John Taylor of Electronic Arts and (previously) Kesmai, among many others, explained that almost the entire profit of the boxed game goes to the publisher, which is often a different entity entirely from the company that runs the actual online service. The profit on the retail box is an incentive for the publisher to distribute the game widely, a necessity for the online service to build its audience./i.

This does not, however, explain why the expansions cost $50 instead of being a part of the subscription model that's downloadable from inside the game. It's not as if Everquest is going to disappear off the shelf without expansions, because Half-Life and StarCraft still haven't and they don't have more than one retail expansion each.

I can understand the need to get the game onto shelves to build an audience and prove that the game isn't some sort of fraud, especially for brand new companies, but that doesn't excuse the use of retail expansions to screw another $50 payment or two out of people that are already paying the $50 retail price plus $120-$180 per year for their subscription.

Re:There is ONE problem with the MMORPG model

[metamatic]

The division of profits between the software producers and the distributors is their problem. The point is that as a potential customer, there's no way I'm going to pay $50 for the pleasure of committing to a monthly subscription for a game I might not even like.

You can either charge me up front for the game, or charge me monthly for the game. I'm not gonna let you do both.

A big price on the box just says to me "Hey, we don't think you'll want to stay subscribed after the first month or two, so we're going to hedge our bets and try to get some profit up front".

If that wasn't the case, they'd be cutting a deal with the distributor, paid for out of the subscription profits, and making the up-front cost lower.

Re:There is ONE problem with the MMORPG model

[murdocj]

Where does the $50 come from? $20 gets you EQ plus the first two expansions.

Re:There is ONE problem with the MMORPG model

[metamatic]

Not when it was released it didn't.

EverQuest for Mac (released recently) is $50.

Re:There is ONE problem with the MMORPG model

[Psychochild]

...you pay for the goods TWICE!

Not quite.

There are costs to get that box on the shelves. Duplication, printing, distribution, storage, etc., all these things cost money to get a game on the shelves. In reality, most single-player games rarely make more than $10 or so per box after all expenses are figured, so that means the "free" month in most games is paid for by the "profit" from the box sale.

That said, however, box sales are still very necessary. People still go to their local game story and buy games they see there. Take as an example, my own game Meridian 59. The only time a box for the game was available was during the launch of the game in 1996. After that, the game went to an entirely downloadable client (with the option to purchase a CD that would be mailed to you for $10 or so). Needless to say that most people haven't heard of M59, but have heard of the larger games like Ultima Online, EverQuest, etc. Beyond that, having a box in the store and charging more gives the game a sense of legitimacy that you might otherwise lack. Some people hare hesitant to play M59 because you dont' get a physical box, therefore the game seems less "professional" and "legitimate". In all, you still need boxes on the shelves to attract large numbers of people.

This is also why expansions are sold in the stores, too. You need a "fresh" product on the shelves in order to draw new people to your game. Again, Meridian 59 has had a hard time attracting new people to the game in the 6 years it's been out. This is mostly due to lack of effective advertising and a lack of presence on the store shelves.

Even with some of the cool things we're doing, including a new rendering engine, it's still hard to get attention to the game, because we don't have a presence in the traditional channels for games, notably boxes on the shelves of game stores.

As for the subscriptions, it's hardly the cash cow it seems to be. Meridian 59 has a $10.95 monthly fee with no box to buy, making it far cheaper than most of the other games out there. The business is marginally profitable, but only because all the people working on the game are making approximately 20% of what they could be in other jobs. We're not bathing in large pools of cash because of the subscription income.

Some perspective on the matter from someone running one of these games, admittedly on the smaller scale.

Re:There is ONE problem with the MMORPG model

[ymgve]

Not to sound arrogant, but with graphics like that, it's no wonder you don't have more players.

What annoys me

[Lord_Dweomer]

What annoys me is that when a new MMORPG comes out, it inevitably has a higher monthly fee than its predecessors. What then happens is that all the other MMORPGs feel they need to raise their price. Yes I could understand a price raise to match inflation. However, some of them are ridiculous. The maintenance costs for those existing games did not increase. They are just able to charge more to match the other prices in the field. It is absolutely disgusting. And people keep paying. Thats why I'm done with MMORPGs for a long time until something worth the extra cost comes out.

We do it for free, but...

[Doctor Cat]

Our game Furcadia has been running for almost seven years now, and currently supports a community of around 40,000 players. We don't charge any fee to play the game, and I'm proud of what we've accomplished. We do have some optional addons players can get, but most of our players never buy anything. So we have a LOT less than the $120+ per player per year that the big online games have to work with, and our first three years we didn't charge for anything at all.

Our bandwidth was provided free at first, by Mplayer and then by Playnet. (Thanks, guys!) Now we pay something like $650 a month for a game server, mail server, and web server plus enough bandwidth to service all our current players, with really good private peering to keep netlag minimal. It's great how much bandwidth prices have come down since we started in 1996! If we had to, we could take day jobs again as we did our first few years, just pay that monthly hosting bill, and keep the game open. And the game's been a lot of fun for a lot of people, led to marriages, all the usual things online games have (and a few unusual things, since we let players upload their own art, maps, code their own scripts to make quests, games, etc.)

But... While you might think someone with a background like that would be on the "they charge too much, burn the witches!" side of the debate... I've worked in the game industry since 1982, and I know a lot of the people that work on the big expensive hit MMORPGs. And those costs aren't made up. Yes, my partners and I, and the game we made, serve as living proof that you can do SOMETHING on a pretty fair sized scale for almost no money. But you do get a lot of things on a game that charges $10-$13 or more a month. Millions of dollars worth of professional quality art and animation, for one thing. And paid customer service and tech support staff, something we mostly use unpaid volunteers for.

Ultimately, the biggest operational cost on most of the commercial online games today is customer service, eclipsing even the number two cost, bandwidth. And I think most people would agree that the average level of customer service quality today is not satisfactory to players, and would not be considered acceptable in most other industries that maintain customer service phonelines and such. (Which is almost all of them). Rather than argue that they exaggerate their costs, one COULD make an argument that they need to be spending even more, until they are providing satisfactory service!

Current games spend half or more of their revenues on customer service staff and bandwidth (and a few other operational expenses). Whether they'll eat into the profits more, raise prices, get consumers used to the idea of never expecting higher quality support, or keep outsourcing more and more of the support work to India, that remains to be seen.

I kind of like our all-volunteer model for the enthusiasm it brings, but the big companies would never take a legal risk like that, after seeing the lawsuits against AOL and Ultima Online. A lawsuit like that could crush a company as small as ours just from the legal fees, even if we won - but it's in the nature of tiny companies to take the big risks, right?

Free Trial Please?

[MMaestro]

I think MMO games need to package a free trial subscription in the boxes. Now before you people point out, 'some/most games already do' I'd like to point out that a 30 day free trial is never equal to the $50 you paid for basicly a CD in a box. The average subscription rate for MMO games is something like $15 a month now, right? Well if I could get 2-3 months of free subscription time and some real goodies in the box, I'd be much more willing to try the game out.

Thats just my opinion, but considering signing up for a MMO is a fairly considerable financial decision, I want some serious payback. And no, when I say goodies in the box, a manual with more than 50 pages doesn't count, nor does a cheap napkin sized cloth.

A really, really neat goodie would be to give a special items out to players, based on random drawings using their CD key. Say you got a CD key between B and D, so you'd get a unique prize that only people in that catagory would get. It could also be ever changing with the game like it could grow, transform, or some other really cool thing. Like for those who played the game for 1 year without ever cancelling their subscription and being a regular player (1 hour a week on average) would have their unique item become some kind secret treasure map or a key that would only work with a treasure chest that another unique CD key user would get. That would be a lot cooler and a lot more appliable to the idea of the MMO world constantly changing.

One thing I don't understand...

[feidaykin]

Is why, when we are paying a monthly fee, do we still have to go buy the damn CD for $50?

I think that new MMORPGs should either be a free download, or start at something more reasonable, like $20-$30. The price of a full game doesn't make sense, because after I buy it, I still cannot play the game until I fork over a credit card number.

Other than that, I think the monthly fees are, for the most part, understandable.

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[Anonymous Coward]

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