Has the world unsubscribed?

The Old Republic stumbles; Guild Wars 2 soars. Is the age of the subscription completely finished?

As the advent of increasingly powerful and accessible digital distribution platforms continues to wreak havoc on traditional business and revenue models in the games industry, one business model appears to have collapsed faster than others - the monthly subscription. As little as half a decade ago, nearly every publisher on the planet seemed to want a slice of subscription action. Spurred on by the success of Blizzard's World of Warcraft, they poured tens of millions of dollars into creating massively multiplayer worlds which would give them access to the kind of recurring monthly revenue that had made Blizzard into the most bankable company in the business.

We all know what happened. While Blizzard continued to grow - and despite recent decline, it's still operating the most commercially successful game on the planet - almost everyone else failed miserably. Some titles dared to be radically different and found a profitable niche, like CCP's extraordinary EVE Online or Square Enix' stylistically gorgeous (and console-friendly) Final Fantasy XI. Most copied WoW, to greater or lesser degrees of competence, and fell far short of commercial expectations.

Today, the subscription model is dead in the water. Electronic Arts' Star Wars: The Old Republic was a hugely expensive final roll of the dice; in the coming weeks it will complete its transition to a free to play business model, less than a year after launching to immense fanfare with a WoW style "pay up front, pay again next month" revenue model.

"Electronic Arts' Star Wars: The Old Republic was a hugely expensive final roll of the dice"

I'm not sure what company (Blizzard itself excepted, perhaps) will have the cajones to launch a subscription MMO along such traditional lines ever again. In today's market, and most likely in tomorrow's, such a move would feel less like confidence in the model and more like a stubborn refusal to acknowledge reality.

The dream is dead, then - the dream in question being the executive's dream of having a siphon directly into the bank accounts of all of your customers, deftly extracting a monthly toll in return for playing a game which had become a service, delivering solid, predictable monthly revenues of the sort which look excellent in graphs, charts and quarterly financial results. World of Warcraft was not the model for the future after all - which isn't to say that it was a fluke, but is certainly to say that it was a unique product whose ideas could be cloned but whose success was not subject to simple copying. We've woken from that dream to a free-to-play reality. Free to play business models are the new darling child of MMO and persistent world creators and operators. This new reality is similar to the subscription dream, in that it also involves generating a monthly revenue stream - but that revenue is less predictable, since it comes from a certain percentage of your dedicated players choosing to make purchases of in-game items.

Some MMOs are being designed from the ground up as free to play titles (indeed, that's been the default business model for MMOs in East Asia for years, so you could argue convincingly that we're not innovating, we're just catching up). Others - many of them very high profile, like The Old Republic - have F2P systems bolted on to them after the subscription model fails. Sometimes that works, but it's hard; balancing F2P is a tough proposition to begin with, which probably explains why so many people, creators and consumers alike, recoil instinctively from the very concept. It's done badly more often than it's done well.

"Balancing F2P is a tough proposition to begin with, which probably explains why so many people, creators and consumers alike, recoil instinctively from the very concept. It's done badly more often than it's done well."

So free-to-play is the entire future of this type of game, then? I could write that, certainly, and plenty of people would nod along in agreement - but I fear that we'd all be just as blinkered as those who confidently predicted, ten years ago, that subscriptions were the unrivalled future of the industry.

Here's a slightly different prediction, instead - free to play is going to be the dominant form of revenue model for online and MMO games in the (very near) future. Most games will feature some if not all aspects of the free to play model. However, being dominant doesn't mean being the only game in town - and free to play itself is a broad church, encompassing plenty of model variants which can appeal to different consumer groups or suit different game types. (That in itself is an important response to those who issue blanket criticisms of free to play as being exploitative or immoral. Their criticism is normally grounded in a bad experience with a single game or company - and let's be blunt, it's usually Zynga - and doesn't acknowledge the breadth of concepts encompassed within free to play.)

However, even quite a few years down the line, I suspect (and hope) that many developers will still be experimenting with business models - picking and choosing aspects of free to play which suit their product and audience, while also inventing new concepts or new hybrids of existing models.

This week's launch of Guild Wars 2 is a pretty solid example of that happening already. The game is a fully featured MMO, but instead of asking for a subscription fee, it's sold as a full-price PC game (and with a million copies sold before it even launched, it's very successful in that right already). Further down the line, developer ArenaNet has the opportunity to earn extra revenues through microstransactions (for services like moving or renaming characters, or for cosmetic items, for example) and through selling regular, albeit optional, content packs for the game.

World of Warcraft itself is another solid example. After leading the entire games industry for a merry dance for a decade, as publishers struggled to emulate its subscription model, Blizzard has begun dabbling in in-game item purchases - building its revenue from the hugely popular game by selling cosmetic items as well as its hugely successful content packs.

"We can and should accept that F2P, in its various guises, is going to be a dominant form of business model for games over the coming years."

These are developers who know how free to play works. They've clearly studied it and liked some of what they saw (Blizzard also applies the viral user acquisition idea as deftly, if not more so, as many dedicated F2P game companies do), but decided that their specific customer base was better served by a hybrid model which enjoys advantages from other sides of the industry as well. Of course, it's worth noting that making a decision like that requires really knowing your customer very well. Companies like Blizzard and ArenaNet don't make decisions based on emotional responses like "I hate F2P!"; they make them based on an extraordinarily in-depth knowledge of their product and their customer, and of what will work best for both.

Even so, they illustrate an important point. We can and should accept that F2P, in its various guises, is going to be a dominant form of business model for games over the coming years. However, those various guises are indeed varied, and the dominance of F2P won't squeeze out other models entirely either. Toyota cars are the dominant way of moving people around on the roads; they're arguably also the most cost-efficient and effective way of doing so, from a dispassionate, analytical point of view. That doesn't stop you from seeing the occasional Ferrari or Porsche, neither of which company seems to be about to disappear due to Toyota's dominance; nor does it stop some people from cycling, some from choosing motorcycles, or Sir Richard Branson from getting from A to B by hot air balloon. Just because a business model isn't the dominant form doesn't mean that it can't work profitably and effectively for certain products and audiences.

Perhaps we're even ringing the funeral bell a little early for the subscription model. Who's to say that this won't transpire to be the perfect model for some consumers; for some developers; for some types of game? The story of the games industry in the 21st century is often mislabelled as "transition", but that's not what's happening. What's happening is diversification. Our church grows ever broader - and different business models are simply becoming a powerful set of tools which developers and entrepreneurs can use as appropriate. That's a future to welcome, not one to fear.

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Latest comments (19)

Peter Dwyer Games Designer/Developer 9 years ago
In this time of continued recession I think a lot of us have "Unsubscribed" as it were.

It makes little sense for all but the hardcore to spend 10 to 20 dollars/pounds a month on a game when there is so much uncertainty surrounding life in general. Top that off with the fact that a lot of us have neither the time nor the inclination to play these games, for the amount of time required to actually progress, and I see the subscription model dying a very slow and painful death.
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Bruce Everiss Marketing Consultant 9 years ago
Those folk over at Jagex know what they are doing with Runescape and for over 10 years they have offered the game for free with a subscription for a premier version of the game.
But now they are gradually going over to an IAP approach to monetisation. In April this year they introduced payment for the Squeal of Fortune and in July Rune Coins were introduced to spend in game.
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Jose M. Martin Head of Marketing, Micronet9 years ago
I think those subscribers (myself included) have less and less time to play and MMORPG's require tons of time. I stopped raiding ages ago and even lost the train of the latest content patches in WoW and the game is completely alien to me. MMO's are not only what their creators actually design but what players make of them and right now it's probably those players who are driving away WoW subscribers. Regarding SW and the other games I don't think anyone actually thought they had the slightest chance seeing the record of failures over the last years.

By the way, it is "cojones" not "cajones" :)
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Nick McCrea Gentleman, Pocket Starship9 years ago
For me, the killer is not so much the subscription, but the stale design that a subscription model theme-park MMO necessitates. Most subscription MMOs are designed to require too much of a time investment, for too little in-game reward, because the cost of producing content means they have to slow you down to keep you from reaching the 'end' too quickly. Coupled with the forced-reliance on other players to see much of the content you're paying for, I'm just done with this model, as I'm sure many others are too.

Not that F2P is any solution to this particular malaise; it brings a whole suite of design perversions of its own, and generally produces games I'm not interested in playing either, but clearly it works for many.
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Jed Ashforth Senior Game Designer, Immersive Technology Group, Sony Computer Entertainment Europe9 years ago
Great piece Rob, as usual pointing out obvious facts that it's easy to forget amidst all the buzz.

COD ELITE and Battlefield PREMIUM subscription services are high profile examples of selling a boxed product at premium RRP as well as charging the same again for the subs service on top of this - and seem to be successful doing it, more so than many 'successful' F2P games. The idea that the subscription service is dead in the water may seem true for traditional MMOs as you say... but these soldier sims are arguably MMOs in camouflage, so it may just be a case of drawing conclusions based on traditional labels, when the reality is that genres and gametypes are blurring and cross-polinating everywhere.

It seems too early to say anything conclusive other than that we've got a bunch of disparate business models emerging here and companies are finding success and failure in them all, I agree. It's certainly fascinating to see the market continually changing around us like this.

Edited 1 times. Last edit by Jed Ashforth on 31st August 2012 11:22am

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I actually like the Guild Wars biz model.

Cash up front, everything else - optional
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Once again, Rob, you are mistakenly assuming that F2P and subscriptions are mutually exclusive. There are over 160 F2P MMOGs and virtual worlds (mainly kids' VWs) that incorporate subscriptions either as their primary model (RuneScape, Moshi, Club Penguin etc.) or as a secondary model (LOTRO, DCUO, STO etc.). In fact, F2P subscription MMOGs now comfortably outnumber mandatory subscription MMOGs by over 3 to 1.
Case in point: SWTOR may be going F2P but it is certainly not giving up on its subscription model - players can continue to subscribe if they want to gaining unlimited content access as well as a bunch of other benefits such as free virtual currency allowances. I would suggest that the adoption of this hybrid F2P subscription and microtransactions model has been just as important a trend in MMOG commercial models as the move away from mandatory subscriptions.
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James Prendergast Process Specialist 9 years ago
I think a combination of factors are all in play here but I think subscription can still be a valid economic model:

1) Whether your customer can afford the outlay each month and whether they can justify that monthly price. For me >10 per month is too much. 5-7 is probably "ideal" in my head and reflects that I don't think I want to spend 100+ per year on a game that is usually, a) buggy, b) unfinished and c) grindy just to slow down player progression. It's just not worth it and subscription fees are generally too high.

2) How saturated the genre of the game is and, linked in to that, how tired the consumer is of that genre. If I'm playing WoW then I've got that experience of mechanics and interaction. I don't need to switch over to something very similar like, say, Warhammer Online as I'm already paying for that experience. Sure, there will be a proportion of the playerbase who will but most won't. Not to mention the whole friends and clan aspects of a game which means that your customer is much less likely to jump ship to another game. Back to saturation: You lose your edge and competitiveness by cloning or jumping into the same genre if it's already successful and saturated. You're nothing special and you won't stand out from the crowd.

3) I guess I mentioned it in the first point but; Price, price, PRICE! If the F2P model has shown anything its that consumers are price-sensitive (who knew?!) and paying out $15 or 12 per month is more than the majority of Free-to-players will probably spend on your game in that same time period. Lower the price a bit and you will get higher subs and the "guaranteed" monthly revenue and a higher average per player unit revenue. Yes, there are other subscripton-based services out there that charge more than that a month but don't be fooled into making the comparison between mobile and TV subscription services... MMOs are not those two things and they sure as hell don't offer the same level of convenience or service as those services do.

4) As Bruce posted: You need to offer different levels of being able to pay to experience the game. Some people would like to pay a one-off price for unlimited access for the lifetime of the game without getting "nickel and dimed". Others would like to pay a constant amount monthly but at a lower cost and yet others still would like to be able to sample the game "a la carte" in a free-to-play style model. I have no idea if this tiered approach is realistic or possible (certainly not with the design of certain games as they currently are) but having only one way to get a service results in losing potential customers who have different requirements and expectations as much as a mobile service only offering "pay as you go" or 500 "ultimate" contracts would not achieve its full potential.

Personally, I'm looking forward to Planetside 2 and though I'll try it I'm not sure how the F2P model will shake out. I think I'd rather pay a cheap monthly sub for that than be shaken down for elements of the game I may need to remain competitive. But we'll see.
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Richard Westmoreland Senior Game Designer, Codemasters Birmingham9 years ago
My issue with subscriptions are the commitment that they need. Paying X amount each month to play a game means that I will have to get use out of it, something I just can't commit to with my busy lifestyle. I'm not prepared to pay X a month for something I wont use, so I choose not to play these games. I'm sure there are many out there who feel the same.

A less intimidating and binding monetization method would actually get me playing, and more importantly spending money.
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Sam Brown Lead Audio Programmer, TT Games9 years ago
My issue with subscriptions are the commitment that they need. Paying X amount each month to play a game means that I will have to get use out of it, something I just can't commit to with my busy lifestyle.
Agreed. I think one solution would be some way to be billed per minute of time played. It worked for modem use, it works for phone calls, so once microtransactions can be performed economically I can't see a problem with it. Play for a period of time, get charged once you're done.

Edited 2 times. Last edit by Sam Brown on 31st August 2012 2:21pm

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Graeme Quantrill Mobile App Developer 9 years ago
No one seems to have mentioned that it was a dull experience. From the feedback I've seen on the forums, and my experience with it, the game became repetitive quickly. Who wants a paid monthly subscription for a game that actually not that good?
Many other MMO's have fallen as they are clones of WoW, or a similar style anyhow, and are less bug free which players don't tolerate nowadays (looks at free to play Dust 514 struggling in beta).
Eve Online, as far as I'm aware, is the only MMO to have a constant slow burn increase in the number of users over it's 9 year life span. They have both a the subscription model and the 'pay with ingame currency' model which is unique.

I'm not debating that the free to play model isn't perhaps the way forward, but we'll see a tonne of games fail even if they try that. Like Old Republic, some games aren't good enough to capture a long term audience.
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Tom Mejias Programmer, Blitz Games Studios Ltd9 years ago
On the other hand, having a "pay now and pay next month" approach initially, followed by a planned, but not disclosed transition to free-to-play to boost waning interest should still be massively profitable as it capitalizes on the hype machine that MMOs always generate.

These games come with a massive amount of hype. The hype that they will be something different from WoW, something extraordinary. They never are, however the initial numbers always soar and then wane. Why not capitalise on those 3 months at the start where everyone is blinded by hype before the smoke clears and all that is left is a WoW clone without the community. Then switch to free to play (as planned) and enjoy the second wind that that incurs.

Or is that already what's been happening... /tinfoilhat :)
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This statement is inherently false:

"Here's a slightly different prediction, instead - free to play is going to be the dominant form of revenue model for online and MMO games in the (very near) future. "

Free to play is NOT a revenue model. Giving something away by definition can never be a revenue model. free to play, rather, is an advertising slogan.

The real models are either (a) free trial (also known as freemium) or (b) micro-transactions for in game objects.

The idea that Micro-transactions are the big future of games is being shown to be false right now with the rapid decline of the biggest player in that space-- Zynga,

Free-trials however have been with us going all the way back to share-ware days and have always been a good way to sell software. Particularly in online, where distribution costs are being driven to 0, it makes sense. But you still have to convert or get rid of users however as each unpaying user is an expense. And that conversion must either be through subscription or continual upgrade charges.

Thats the real economics.

Edited 1 times. Last edit by Jeffrey Kesselman on 31st August 2012 5:20pm

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Ashley Gutierrez Animator 9 years ago
The main reason I don't play subscription games; they're too expensive for what is offered.
I don't think any game should cost a person that much money to keep on playing it.
I don't mind the option of DLC and other perks like fancy controllers. (Rock band upgraded controllers)
Those, I will gladly buy when I see something I like, or even just so support the developers for giving us a decent game.

But requiring me to pay over a couple hundred dollars for a years' worth of playing?
I don't have that kind of money to fork out for a game, nor do I have the kind of time to make it worth it.
And if you do make time for it, you start becoming addicted in trying to get your monies worth.

Not to mention the terrible stigma you have to carry around if you haven't been playing WoW since it came out. Newbs in those kind of games barely get the chance to become part of the community and are often left out, unless they find others that are at the same skill level.

And of course, feeling like you're being taken for a sap for paying a monthly subscription AND paying full price for the game itself. I know how expensive it is to make games, but at the same time, you can't treat your customers like they're made of cash and nothing else.

Edited 2 times. Last edit by Ashley Gutierrez on 31st August 2012 7:27pm

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Emily Rose Artist 9 years ago
To be honest I don't regret any of the money I spent in subscription mmos over the years, I got my money's worth, though now I work a lot more the time/cost/fun ratio just isn't worth it with such high quality free/cheap options like indies and games such as league of legends.

And the best thing about GW2's cash shop is that they take the eve method of allowing the cash shop currency to be traded in the game economy, allowing paying and non-paying interaction that has a nice sideffect of pressuring goldsellers :)
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So we've heard someone rant about why he hates the monthly fee, we aught to have the other side of the coin represented. As a game developer I hate the words "free-to-play" and the business model of micro-transactions. Here is why:

First of all, I hate the term "free to play" because its inherently dishonest. Any game that is truly free to play will fail due to lack of income. The fact of the matter is that entertainment must be paid for, the only question is how.

When a game's primary revenue source is micro-transactions then the pressure on the developer is totally on driving micro-transaction sales. Development becomes a matter of trying to create hooks for people to want virtual goods and goods for them to want. It makes the developer into a salesman, when what I want to be is an entertainer.

In contrast, if the relationship is based on an honest fee for an honest peice of entertainment, then the focus is clearly and solely on entertaining the user.

I actually favor the exact opposite of the GW approach. The game client should be a free download. What you should be charged for is the monthly service. Subscription fees put the onus on me, as the developer, to make sure you are continuing to have fun every month.

When we started putting out MMORPGs we had to charge for the client in order to get it distributed-- gamestop wanted their cut. But the rise of digital distribution has pushed distribution costs down to near zero. There is no reason we cannot give you the client if you get it via electronic download.

Edited 2 times. Last edit by Jeffrey Kesselman on 2nd September 2012 12:25am

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It is also worth noting that the entire thesis of this piece is provably wrong.

SWOOR is an interesting but in many ways failed experiment in its gameplay. That is why it is struggling, not because of its monthly fee.

This is provable in that a huge number of people showed they were willing to pay a monthly fee by signing on. Its problem has been that they have been dissatisfied with the gameplay and are leaving in droves.

Edited 1 times. Last edit by Jeffrey Kesselman on 2nd September 2012 12:30am

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Andrew Goodchild Studying development, Train2Game9 years ago
"But the rise of digital distribution has pushed distribution costs down to near zero. There is no reason we cannot give you the client if you get it via electronic download"
Not only do I agree with this totally, but I also find it crazy when you can download the client for free for a trial, but then have to buy it before you can subscribe.
I think anyone trying to charge a sub for a WoW clone will come up against the fact that anyone willing to pay a monthly sub for WoW's gameplay will go where all the other players.
To me Secret World was not ruled out because of the sub, but was ruled out because of how high that sub was. If you are a new sub trying to compete with a behemoth like WoW, assuming most users won't pay multiple subs, you should not go in more expensive. I don't know if a sub only model can work or not, but I haven't seen anyone try a sub only model at 5 a month. Maybe that would have been an experiment worth trying.
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Dean Hulton Founder & Creative Director, BlueBlaze Studio9 years ago
At the end of the day we are all happy to pay if we are having fun. Loads of us played the old republic and were having a great time until the level cap. Then we got board and un-subscribed. A similar thing is happening with Tera although they have now released the battle grounds (US) which is pretty fun especially with their awesome combat system. The trick is to have loads of competitive endgame content. If we are still having a good time we will see value in subscribing and keep playing. simple
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