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MMOs go live with the wrong business model - Vindicia

"Some of these MMOs are launching and, they're really bad," says digital payment vet

Large scale MMOs have launched with the bare minimum of content and asked for too much financial commitment from customers, according to Gene Hoffman, the outspoken CEO of payment firm Vindicia.

The exec, who has worked with creators of core MMOs such as Star Trek Online, Rift and Champions Online, believes a weak launch period has forced companies to adopt a freemium route - a move which has worked out for the better in most cases.

"Look, some of these MMOs are launching and, they're really bad," he said in an exclusive interview published today.

"You don't want to say that too loudly to them, but seriously, these guys need to do a lot more content before they launch. So why not price it that way?

"Why not do a paid beta initially, and tell people, it's pretty damn good and you'll be able to play, but it's not done and we're not going to fill the whole world until three months from now - but sign up today for ten bucks a month and you know what, we'll throw in the actual release and just keep it going when we come out of beta. Or five bucks a month, and move it up - or there's a whole other model, where it's ten bucks a year, and then freemium on top."

2011 has seen many subscription based massively multiplayer online games shift to a freemium business, while some, such as Sony Online Entertainment's John Smedley, believe that BioWare's Star Wars: The Old Republic will be the last large-scale game to try the subscription model.

The accidental discovery for many of a better business model for their product has also highlighted the fact that games should have more than one business model, and a changing model is closer to the way other entertainment media approaches the sale of goods.

"It's an over time business model, right? A lot of people have never really thought about businesses as being one model now and another model later - but of course, this is what movies do.

"You've got your house opening, then your DVD release, your airplane release, your VOD release, then the movie channels, then it's on CBS, ABC, Sky One, etcetera. From that perspective, seeing the game business head that way - sure, the exact steps are different, but it's not that different in reality."

The full interview with Hoffman, in which he also states that Apple's 30 per cent share of revenues is "ridiculous", can be read here.

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Latest comments (22)

Mihai Cozma Indie Games Developer 9 years ago
While freemium is great, I prefer the subscription based model as a gamer. I think that games should continue to provide both models, so gamers should choose whatever fits them best.
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James Prendergast Process Specialist 9 years ago
I have to admit that it always galled me that you had to pay a release price (i.e. 30-40) for the first month of an MMO and then just the usual 10 or whatever after that. What's the extra money for (the cheapness of packaging, tax and shunting it around doesn't account for it all) if not to gouge the customer in one more manner?

Even in the old days there was no option to have your first month at the usual rate. Not sure what it's like now though.
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Ken Addeh9 years ago
I plan to read the full interview in the future.

I cant help but feel that the freemium model is only being taken on board because it's the buzzword of the year/the popular thing and gains more money in return.

Remember when WoW blew up to be this unstoppable force with a lot of financial return?...It works on a sub basis. I heavily doubt many other companies that set up subscriptions methods thought that Freemium was the "best model"...or it would have been a more common occurrence. Feels like a trend, right?
Global Agenda initially was branded as one of those unfortunate games that had so little content and worked on a sub basis, then moved to a Buy2Play(as GW1 was), and is now Free2play/freemium.

Not too sure what the logistics of this "paid beta" he mentions. That's border-lining too close to a sub model for less content anyway, which is the main point of the interview, is it not?
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Show all comments (22)
Ignacio Garcia9 years ago
Distributors are stuck on their old business models that they impose to the studios that depend from them, that's why the industry doesn't change as fast as it should. With the online distribution systems, distributors are not longer needed, now studios can access to millions of costumers through internet, unfortunately distributors still have de capital that studios need to do their games, and that enslave them to their old business models...
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Bryan Robertson Gameplay Programmer, Ubisoft Toronto9 years ago
What's the extra money for (the cheapness of packaging, tax and shunting it around doesn't account for it all) if not to gouge the customer in one more manner?

It's probably to do with the fact that MMOs are the most expensive, and risky type of game to make, and that the beta testing period in particular is particularly expensive and risky (you're pretty much just burning through money at a frighteningly fast rate, with no return), which is why a lot of MMO beta periods are far too short, with very little real change made to the game, even if said change is sorely needed.
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Nicholas Blood9 years ago
One issue which doesn't really get much of a mention here is how a business model can affect core game designs and concepts. Simply put, subscription-based games are designed and built differently to MT-based games, so changing from one to the other can require some fundamental redesigns of core gameplay (a risky proposition for any MMO).

I imagine that in some situations adapting and tweaking the business model on the fly can work and isn't too much effort, but I would say that for some games this would be tremendously difficult.

Anyhow, my take away from the article is that subscriptions are justified so long as there's the content to back it up. It's sort of an implied point in the piece, and I agree with it. I think sometimes there's some confusion on this point, and people see the failure of a subscription game as a failure of the subscription model, when really there can be other factors involved as well.
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Andrzej Wroblewski Localization Generalist, Albion Localisations9 years ago
Marketing/Business-driven deadlines and schedules are the reason why games are being launched prematurely (literally in pre-beta state). It's also causing companies to lose their credibility in eyes of their customers. I'm surprised that managers are blind to this, especially that in case of MMO games players tend to socialize and exchange information. For example, I'll never buy anything from BIGPOINT again... and I know a whole bunch of people who feel exactly the same (in fact, if a survey would be done among Battlestar Galactica Online players, the results would've probably hit below even the most pesimistic estimates.)

Fortunately, there's good news as well. The amount of talk about the subject is clear evidence that the "QA crowdsourcing" era (= selling beta versions to consumers) is coming to an end.
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Jeffrey Kesselman CTO, Nphos9 years ago
This article seems muddled and self-contradictory. he says, " Sony Online Entertainment's John Smedley, believe that BioWare's Star Wars: The Old Republic will be the last large-scale game to try the subscription model."

But he also says, " sign up today for ten bucks a month and you know what, we'll throw in the actual release and just keep it going when we come out of beta. Or five bucks a month, and move it up -" which are both subscription models.

The fact of the matter is that "freemium" really is subscription... itrs just a different way of presenting a free-trial. I'm all for that. IMO the mdoel of the future is...

(1) Free client downlaod directly from maker
(2) So called "freemium" that presents a limited trial experience and then converts to subscription.

While the masses will be happy to consume junk if they think its 'free", there will always be an upscale market that is willing to pay an honest fee for honest entertainment that isn't all slanted towards selling them something.

Im one of the latter. And I'm not alone.

Witness the success of Cable TV in the face of "free" networks.
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Patrick McCarthy Lead Automation Engineer, Humana9 years ago
If I find that I am playing a game that has a "Pay to Win" feature ($$=Nice Sword, $$$=1-shot kill opponents sword, $$$$ = kill everyone on the server sword)
I wil no longer play that game... it is that simple.
I will play a game if it is based on my skill, not if it is based on the depth of my wallet.
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Wincy Cheung Project Management, Anakan GmbH9 years ago
Here here! Finally somebody goes public about the amount of crappy f2p business models out there.
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Roberto Bruno Curious Person 9 years ago
Freemium model could probably be even more successful if not for the very bad reputation that follows it.

Going "freemium" most of the times means going "pay to win", as it's usually called by gamers. It means introducing in a online game all the gaps of the real society, where just the wealthiest players have chances to experience the game in an advanced or even competitive way.

Of course, one publisher could say "Who cares? We are making money so it's fine, who gives a damn about poor players complaining", but that's a very short sighted way to handle it.
We have these grotesque situations where anyone can play for free but the customers willing to pay actual money (a FAIR amount of money) are discouraged to do so.
In fact they are usually facing exorbitant prices for trivial gains ("look at this cosmetic hat, it's FIVE DOLLARS"). That's discouraging for many players and in the long run can kill an entire community, with potential customers always ready to leave, to experience the next free game leaving behind just those few richest and/or most addicted. And they too are going to leave, sooner or later.

We all know that in the end the whole point of free2play is to convince people to try the game for free and then to pay for staying. A most balance way to handle this then should be something like:
"Look, you can try the game for free, but if you actually enjoy it, I'm going to offer you a few subscription models [with several options turned on or off]. You can have *everything on* for roughly the same price you used to pay as monthly subscription".

That's a much more fair way to deal with freemium. You have the same appeal on those who want just try the game for free and instead of relying on few addicted willing to pay 1000 dollars in a month, you have thousands of players paying small fees.
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Stephen Moore System and Concept Designer 9 years ago
I like your way of thinking, cheaper and free starting out. The biggest problem I see with free-to-play is the opinion of players. Although it is slowly changing, the word 'free' may add unneeded stipulations and undermine the community.

Wish there was a way to mix the different subscription models in a fun and inventive way. I've always seen f2p and subscribers as two different factions; one as a massive horde of hungry digital tyrants and the other as heroes who support their game through thick and thin. When you mix them together, you get all sorts of unexpected reactions - so just pit them against each other in friendly combat.
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David Pierre Env. Artist 9 years ago
Honestly, I believe that those 'trivial' matters are what best holds freemium together. Take for instance, League of Legends. It's a game where you can play entirely for free. Unlocking things as you go with points you get in-game. While you can easily purchase runes/characters with real money (converted into RP), there is literally nothing in that game that can enhance your ability (runes, extra characters) that you can not obtain with the in-game currency (IP). You can buy additional skins of your favorite characters. These do nothing for your skill, it just changes the look of your character. You can only purchase them by converting real money into Riot Points and use that as currency.

So, getting ahead with money is possible, but definitely not necessary. and there's nothing a paying user can achieve that improves their ability, that a free user can't by just playing the game more. This is one of the best approaches to this model that I have seen work. It's free to play, but pay to enhance your 'personal' experience.
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William Usher Assistant Editor, Cinema Blend9 years ago
Roberto, many games are already like that...Champions and DC Universe both use that method as well as APB: Reloaded (i.e., free client download, mostly free content, all the good stuff if you decide to pay from the cash shop or take it a step further and subscribe monthly).

I completely agree with Hoffman's assessment of the subscription-based MMO model....there are many pay-to-play games that just aren't worth it. If you're paying $10-$15 a month for a game it better have some replayable content worth coming back for every month-on-end. Most aren't designed that way from the outset and it's easy to see why the dropoff rate is so high for many pay-to-play MMOs.

I thought a game that started off well and could have been pay-to-play was Vindictus...the early goings of the game were highly addictive and the combat -- it's bread and butter -- was spot on. It's one of those games that's hard to stop playing. The problem is that most F2P games aren't like Vindictus and most are Korean-style WoW-clones, which is where the bad reputation for "Freemium" came from.

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Rick Lopez Illustrator, Graphic Designer 9 years ago
I would just go with a small monthly fee. 5$ a month seems ok. And you can play the game in its entirety. I really dislike the "freemium"/ free2play model. Its NOT free... you get the base gameplay for free, but all the cool stuff you have to pay for. So naturally, the wealthiest gamers benefit. But a smaller fee might generate more subscribtions and all gamers have fair gameplay opportunities. There should be no initial boxed art charge or anything. Just a Demo, a website describing game features and videos showing off the games features and advanced gameplay features available if you subscribe. You can cancel subscribtions, your profile remains intact, for whenever you wanna subscribe again and continue. The 5$ subscribtion fee is small enough to join multiple online games and you can cancel and resubscribe to continue were you left off when new features are released. this will allow gamers to juggle differant games around incase the play more than one. It often happens that games are not updated freequently enough and gamers usually get the most out of whats availableand the game becomes 'stagnent". So if a gamer has reached a point in a game were he has unlocked everything or reached the hight of the games potential, the player can unsubscribe and come back when new features are introduced. The problem with MMO games is that they require an enormouse amount of resources to continue operating, maintaining and updating. And I feel a lower subscription fee along with gameplay mecanics that can be updated and refreshed consistantly can encourage more people to subscribe and remain subscribed.
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The costs involved with the upkeep and maintenance of game servers, backend databases, paying for internet bandwidth monthly and the rackspace rental, plus the added salaries of IT personnel alone is a massive undertaking. Throw in the cost of programmers writing updates, patches, and new content, plus the art dept work on updates, and new content. The initial cost of the game upfront will not pay for the continued existence of the game. The subscription is suppose to help pay for the continuation of the game beyond the initial release. From the gamers point of view they don't care, they want their game. From the business side they need the profit to continue or they will turn the lights off. The world of MMO's is very interesting, and there are many pros and cons for each biz model. I personally think it will depend on the customers the MMO is trying to attract.
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Bryan Robertson Gameplay Programmer, Ubisoft Toronto9 years ago
To be honest, I think this guy is right. While it certainly has its faults, I think freemium is the way to go for the vast majority (if not all) MMOs in future. No matter how good the game, a monthly subscription is a pretty big barrier to entry for a lot of people, it's intimidating, it puts a lot of people off. Whereas, I think, if you can get something compelling enough to get a sustainable core of people playing, you can build on that, and provided you can find a decent way to monetise it, it seems like it's a great way to iteratively build on what you have.

I think APB Reloaded is a good example. The business model was not the only reason the original APB failed, but I think Reloaded Productions and Gamers First have done a great job turning the game around, and building something that seems to be thriving. It's the kind of game that lends itself well to drawing people in to mess around when there's a low barrier to entry.
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Klaus Preisinger Freelance Writing 9 years ago
@John Nelson

NCsoft, a company which operates five MMOs does so with monthly server costs of about one million Dollar. That includes server rent and bandwidth, all websites included. They are a stock company, they have to publish quarterly results and those figures are very stable.

The costs of running support and a full team of programmers, that is obviously another story, but that is still not $15 per month territory of publisher costs. From Activision's quarterly reports, one can calculate monthly costs of $2 per user and those are the costs of the largest, most costly developer out there. Even if every user only paid $2, Blizzard could still pay for all servers, all programmers and all support people. If it was any other way, free2play would not work, a downscaling of costs to below 25cent per user/month impossible.

If Riccitiello says Star Wars can survive on 500.000 subscriptions, what he really says is Star Wars can operate on $84 million per year. Which is a ludicrous amount for a developer to spend in one year, MMO or not. Naturally, Blizzard spends $250+ million on Wow every year, so you get an idea of how many subscriptions Star Wars really needs to be able to put up a fight. Even then Blizzard could still upscale the amount of money they spend on content updates and continued development.

If you prevent piracy the way MMOs do and make the average customer spend $90 during the three months he realistically plays the game instead of the regular $40, then it is hard to argue with your business model. You fundamentally did something right. If you gamble the continued existence of your company on people playing your game for more than a year, then you are a sad fool to behold. You either cycle through customers as if they are underwear (Facebook), or you bombard people with new releases to keep the balance sheet in check. We have seen enough MMOs sell good and then drop to the bottom to know that WoW is the exception to the rule, not the new baseline for how a game performs.
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Harrison Smith Studying Games and Graphics Programming, Royal Melbourne Institute of Technology9 years ago
runescape does a good model it has its free areas, then its premium sub areas, there is enough content in the free sub area to keep players interested for hours until they decide umm paying a sub would be huge amount of content, I should give that a try.
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Greg Wilcox Creator, Destroy All Fanboys! 9 years ago
Really interesting article, but I still say no way to play any MMO offline is also a bad business decision as well:
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Emily Rose Artist 9 years ago
Greg, if mmos could be played offline, they'd have to compete with far superior single player games (for gameplay) Without the social aspect mmos are a joke.

The article you linked is full of holes -_- Being able to play a sp character and bring it online leaves it more vulnerable to stat and item-hacked characters away from the authentication of the main server ruining the game for legit players.

Unfairness is a great way to get players to leave in droves...

Lego online failed because it was terrible, not because you couldn't play it singleplayer. imo being able to scan in your real life lego sets to get bricks ingame would have been a master stroke. (like the wow tcg loot cards)

That article seems to be written by someone that doesn't like mmos and is trying to get them to be something they aren't...
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Greg Wilcox Creator, Destroy All Fanboys! 9 years ago
Tim, so... you're saying every single MMO has shitty stories and don't hold up to scrutiny someone with basic reading skills can't enjoy? Well, no. You didn't say that, but you may as well have. That and the fact that if there were no Knights of the Old Republic (a single player game, last I checked), we probably wouldn't be seeing a SWTOR at all. At least from BioWare.

I've played MMO's that I like because of the story, but the simple FACT is, developers aren't reaching out enough to capture the attention of anyone outside the online space who may be interested in an offshoot to a popular game. Who wouldn't want users playing their game as much as possible on as many devices as possible, connected or not? I'm also a bit of a mercenary here, I'll admit. WHEN the cloud crashes (not if), I'd bet some MMO's would wish they'd included some sort of SP/co-op mode or had a spin-off that could keep customers busy while they waited for things to be fixed.

MMO's WOULD indeed be better with the addition of content that CAN be accessed at ANY time. Maybe being something they "aren't" would not only help the genre, but again, KEEP PEOPLE WORKING.

Shit, man - what's better. A game with a team still generating content (and money) or yet another studio closing because they refuse to adapt a bit and as the article above says, ship with the wrong business model. Me, I'd choose to make a story matter whether it was an online or offline game. Also, try telling MMO fans of certain games that it's only about "social" and you'd probably get digi-slapped.

No holes in the article at all. The genre expands its horizons, cheaters get banned (as they should) and at the end of the day, someone's making a profit and someone else is happy they've played a game they can take anywhere and not need to worry about always being online.
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