MMO business models must become more sophisticated - ICO

Core, subscription MMORPG will remain, but must be tuned to audience, says consultancy

Thomas Bidaux and Julien Wera of ICO Partners believe that, even in the face of strong opposition from freemium and microtransaction models, the subscription-based core MMO still has a future, but must adapt and become more sophisticated in order to flourish.

The comments came as part of the second half of an interview with the pair at Nordic Game last month, published today. With Star Wars: The Old Republic looming large on the horizon, asked, is there still room for multiple old-model MMOs in the market?

"Personally I don't think that AAA, subscription, high-end MMOs are going to go away," offered Wera. "There aren't going to be many, that's the thing. You have the top, then then you have the browser-based stuff at the other end of the spectrum. Some years ago you could have some games in the middle - subscription-based but not that high end. They could survive, but I don't think they will survive in the future, unless they really cater to the niche.

You're not going to be able to say, my game is very different to yours, but with the same business model. That's going to be like shooting yourself in the foot

Thomas Bidaux, ICO Partners

"There was a lot of talk [at Nordic Game] about Eve Online, it's very high end, very deep, very complicated. It's perfect for a certain type of player. They don't need ten million players. They've got a high revenue, they've got high quality, they've got a retention rate that's crazy. I think they were saying that 50 per cent of people who bought the game at launch are still playing now. It's been eight years.

"That's probably the highest retention rate of all of the online games. That's the kind of game that can actually make it. You see different games that are high end and hardcore - free to play games like World of Tanks. Very niche, but very well executed so very successful in its niche. League of Legends is the same. It's extremely hardcore, but it's extremely well executed so it does very well."

Bidaux agreed that core games will always have their market, and additionally argued that subtle and appropriately pitched business models will be key to the survival of all types of online title.

"I think that it's going to change, but I think that big, subscription-based MMOs will not die either," he agreed. "I think there's always going to be an audience for those games in the same way that there's always going to be an audience for big AAA single player console games. I just think that their market share is going to change, back and forth in some ways. There'll always be a place for that.

"I think that the business models are going to become more sophisticated. We came from a really dumbed-down business model which is 'give me money, I'll give you the game' to something with a lot more options.

"There'll still be pay to play stuff, but it'll be that you get the game free but pay a subscription or microtransaction - it's going to be more complex, possibly, but a lot more integrated into what is each game's experience. Each experience is going to become more unique. You're not going to be able to say, my game is very different to yours, but with the same business model. That's going to be like shooting yourself in the foot.

"That's what we've been doing with online games for the last five years, and I think that's why a lot of games fail: because they try to apply business models which are fundamentally flawed for that game's experience."

More stories

In 2019, video game projects on Kickstarter held steady

Ico Partners: Though tabletop drove segment's rise, video games saw only minute growth in funded projects, money raised

By Rebekah Valentine

Ratio of successful Kickstarter projects at highest since Double Fine Adventure

ICO Partners breaks down ongoing maturation of crowdfunding projects with H1 2019 update

By James Batchelor

Latest comments (14)

Klaus Preisinger Freelance Writing 9 years ago
Not just MMOs are guilty of employing strategies to quench more money out of the customer than the initial purchase. Every game these days is using DLC, special editions, or plain palette swap microtransactions. MMOs were simply lucky they were able to brainwash their customers into believing a multiplayer feature is worth paying for. Ironically more often than not, "MMO" is not a feature allowing for reasonable co-op play, but only fueling competitive grinding and eepeen. Is there any game where the "massively" part plays enough of a role, or even is meaningful gameplay? The best you can hope for, is having a good co-op RPG experience.

To that end, games such as Guild Wars 2 without monthly fees will exert more price pressure. As MMO features become increasingly normal, there will simply be no legitimization for paying a premium.
0Sign inorRegisterto rate and reply
The question is, what kind of sophistication is required for the core games MMO market which ultimately revolves around a set price point.
0Sign inorRegisterto rate and reply
Klaus Preisinger Freelance Writing 9 years ago
For the core gamers, who buy a game and then forget about it three months later, because they simply buy the next hot game, MMOs are way too big, way too complicated and way too time intensive. 16 player dual stick shooter, with some stats sprinkled on top and a large lobbywhere people just smacktalk, /dance and /jump is already too complicated.

For those player who are in it for the fame, there is the WoW barrier. Since long term motivation is mostly related to grinding out virtual tokens proving you are +1 compared to the guy next to you, people tend to gravitate towards the game with the most players. Little sense in being "the best" at a game nobody plays.
0Sign inorRegisterto rate and reply
Show all comments (14)
There is always the appeal of a semi unexplored world, with a moderate sized player base. Not too big or small. Afterall, not everyone fancies super congested areas, which invariably translate in possible lag in certain hunting grounds.

Perhaps we will see hybrid FPS mmos in the near future to cater to the hard core demographic
0Sign inorRegisterto rate and reply
Chris Tux Consultant 9 years ago
Subscriptions are not the problem - people WILL pay subscriptions + box fees to games that are worth it (WoW is the perfect example). Bad games are simply bad games though and no hybrid F2P/P2P pricing scheme will fool players into thinking a bad game is worth a little bit of $.

The whole "more complex" argument reads as "we need a new way to mask how we sell stuff". Greed will be the death of some of these companies.

Selling more 'complex' virtual goods in stores, lotteries, trading cards isn't the answer - producing better games IS! It's that simple.
0Sign inorRegisterto rate and reply
Klaus Preisinger Freelance Writing 9 years ago
would you really pay a subscription for WoW, if it was a single player RPG? Would you even pay a subscription for the best single player game you know?

There is a certain threshold of hours a game must be able to cross, before you can consider an ongoing payment scheme. The novelty of MMOs might have provided that threshold, but it is fading quick. They usually quit after a short period of time, so at best the publisher gets 60 per user instead of 40. Quite some money, but not enough to have an entire studio kick back and enjoy the rain of money for the rest of their lives.

On the console, no manufacturer is interested in creating players who stop buying other games, because the manufacturers already get their subscription fee, so to speak, in the form of licensing fees on every boxed copy. Therefore, whatever Activision conjures up for money, Microsoft and Sony will provide for free, in an effort to keep new retail sales going.

On the PC it is hard to imagine how Activision is ever going to corner a market so completely that their product is suddenly exempt from having to compete financially and charge a premium. WoW had the advantage of building an audience for a small genre at that time, during a critical time when broadband Internet hit the mainstream. CoD has none of those factors going for it.

I say, at best this subscription raises what the average consumer spends by about 5%. Nothing fancy, but still something they will take. Unless it backfires, then they just revert to before. But it is an illusion to think somebody will release a shooter for which people are prepared to pay 400 (on average!) instead of 40. That is something only WoW was able to pull off and none of its successors.
0Sign inorRegisterto rate and reply
Jeffrey Kesselman CTO, Nphos9 years ago
What players don't always comprehend or appreciate is that an MMORPG is a fundamentally different business modle then a package game, with different business costs.

Package games are like books or DVDs.. You pay once for N hours of entertainment and its over. By the same token, the developer pays once for development, and its over.

MMORPGs are like magazines or your cable TV subscription. You pay an ongoing fee for ongoing new entertainment. And like magazines or cable TV, there is an ongoing cost to the developer to develop that entertainment.

Whether its new things to buy, and thus new micro-transactions, or a monthly fee, the players have to keep paying for that ongoing development, or it stops.

The other thing to understand is that MMORPGs to provide the MMO play in a secure way require large server resources that, again, the developer has to pay for in an on going fashion.

Multiplayer isn't really the issue. I can build a multiplayer game today that works over the internet even for massive numbers of players that requires very little serve resources, it would just be totally insecure.

If you want ongoing content, and you want any sort of game security, you will have to pay for it because We have to pay for it, Its really that simple. Myself, I prefer the subscription model because its honest and upfront. The F2P model still requires you (in the aggregate) pay, its just that I, as the developer, hide it in micro-transactions.
0Sign inorRegisterto rate and reply
Klaus Preisinger Freelance Writing 9 years ago
I really enjoy deep reading financial reports of publishers, which is why I can say with much certainty, that server and bandwidth costs are not a reason to charge players.

Jeffrey is right in pointing out that most of the costs an MMO entails comes from keeping all the people working on it employed. Two diametrically opposed, yet very healthy business models are known.

The first one is WoW, where we have a large team working on expansion being sold regularly. The generated sales from those expansion are already enough to pay for the development team. WoW on quarterly reports appears to be wickedly old-fashioned. Make a game, make the development costs back, make another game, keep paying the bills for the team. The subscription is merely the creme topping. That is pure money gained. Worst case scenario for Blizzard is people stop playing WoW after a month and the team simply makes its money with the next expansion. All the massive players created for Blizzard was a massive overhead on support costs. But those can very easily be paid by the subscription fees and very easily scaled up and down according to user numbers.

The second approach is that of ArenaNet, a bunch of former Blizzard guys. They made Guild Wars without any monthly fees. They just made four Guild Wars games, three standalone products which are interconnected if you wish and one expansion. Just like any fps series, they found a publisher to front the money, made it all back on sales. Server costs, security, support no better or worse than elsewhere. They also release content between expansion to add to the perceived value of their product. Even six years in there is new content. They might not have made billions off subscriptions, but north of 300 million Dollars nonetheless. Enough to keep them from being hungry and developing Guild Wars 2 for four years now with a full crew. How many PC only developers have that luxury?

Make a good game and you will make your money, regardless of how much you want to charge. But between Blizzard charging a premium for its name and Ex-Blizzard guys putting the thumbscrews on the pricing, there is little room for error for everybody else, because both those team will deliver a gaming experience as good as it gets.

Which brings me to the failed MMOs, those are typically the ones which are either low quality, or do not release expansions aggressively enough. People drop out over time, so if you keep just shoveling new content on top of the old one, your circle of potential customers will shrink and shrink. PC players are no paupers, they can handle buying a new 40 game. What they can't handle is subscribing to something which is only releasing content they never reach anyway. The carrot still has to be in front of the donkey. Do that right and you can charge for anything.

All that talk about "creating a service" and "doing the right business model" is not backed up by the financial reports. You can't save a bad game with a brilliant business model, period. All that talk about what is important often amounts to little more than misinformation. The industry version of the users' legend MMO cost 15 per month because servers and bandwidth cost trillions of Dollars. You can't trust any of those statements, what you can trust is the quality of the game. If it is there, feel free to charge whatever you want.
0Sign inorRegisterto rate and reply
Zidaya Zenovka Blogger, Writer, freelance artist. 9 years ago
*Applauds@Klaus*So much this^
0Sign inorRegisterto rate and reply
Chris Tux Consultant 9 years ago

I never said I'd pay for WoW if it were a single player RPG game. I used WoW as an example of a massive audience still willing to pay SUB + BOX fee's for an MMO, not single player.

To answer your question, no. No current single player game is worth a sub fee, nor a cash shop (DLC).
0Sign inorRegisterto rate and reply
Jeffrey Kesselman CTO, Nphos9 years ago

Granted it was over-built, but at its height Zoo Kingdom was racking up nearly $30,000 a month in AWS charges. Even slimmed down it was $10K plus.

The rumor is that Farmville runs on 4200 servers currently.

And those are games built for tens of thousands of users per server.

I dont think you can dismiss operating costs in the real world. Do you have any counter examples? Can you share these reports with us you are referring to?

I'm not denying that there is a healthy profit margin in the operation of a game like WOW, but remember that every successful game has to pay the costs of multiple failed ones. Next time out of the gate, Blizzard could burn $100M and make a flop.

There is also opportunity cost to consider. You have to not just make the money back on those employees and resources you are using, but you have to make a profit *at least* equivalent to what you could make using them on some other project. Otherwise you are a fool not to drop that game and put the resources somewhere else.

As for Battlenet/ArenaNet and guild wars...

As I said to start with, cheap scale is easy if you don't care about game security. And if game security doesn't matter to your target audience this is a 100% viable model to pursue, I agree.

Edited 7 times. Last edit by Jeffrey Kesselman on 7th June 2011 2:19am

0Sign inorRegisterto rate and reply
Jeffrey Kesselman CTO, Nphos9 years ago
I'd like to share an old story because its highly relevant to this kind of thinking...

There once was a farmer who had a plow horse. The farmer hit tough times and so he cut the horses's feed back. The horse got a little thinner but kept working.

Then times got harder so he cut the feed back even further. The horse acted sluggish and would stumble but it loyally kept on working.

This pattern went on for most of the summer when, one day, the farmer came out and found his horse had died.

"Damnit!", he cursed, "just when I had that fool horse used to eating nothing!"

Be careful what you wish for. In a capitalist market you never get more then you pay for. And any horse that you demand that of will just die.

Edited 4 times. Last edit by Jeffrey Kesselman on 7th June 2011 2:25am

0Sign inorRegisterto rate and reply
Jeffrey Kesselman CTO, Nphos9 years ago
Btw, I should add that in any true server based game (as opposed to ArenaNet which is basically just a match maker) the real economics are in the subscription fees v. the ongoing costs. The package fee is insignificant and pretty much unimportant. Many game developers would love to give you the client download for free.

The problem with that is that too much of the market is still brick and mortar. To get to those customers, you need a box to sell and to get it into the brick and mortar stores it has to be at a price that is attractive for the B&M to sell.

Offering it for free download would be taken as unfair competition by the retailers and would prevent them from touching it.

This is why you see the common pattern now where an MMORPG is released as a boxed game first, and then at some point later in its life when over the counter sales have been saturated, it becomes a free download.

Edited 1 times. Last edit by Jeffrey Kesselman on 7th June 2011 2:37am

0Sign inorRegisterto rate and reply
Jeremy Choo Indie Developer 9 years ago
"You're not going to be able to say, my game is very different to yours, but with the same business model. That's going to be like shooting yourself in the foot."

What is fundamentally wrong with different product, same business model? Why can't you do that??? People have been buying pepsi and coke the same way for more than a century. Since when does the buying process becomes more important than the actual product? Not to undermine the marketing people, but I think at the most, creative selling is only as important as the creativity of the product. These typical mindset seems to imply, product doesn't matter, ONLY the marketing does. It's okay to have the same product, most importantly the packaging isn't. Thus summarizes the sad state of the industry today.


Edited 1 times. Last edit by Jeremy Choo on 8th June 2011 7:26am

0Sign inorRegisterto rate and reply

Sign in to contribute

Need an account? Register now.