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Thursday, June 22, 2006
Raise or fold
There is a gigantic poker game going on behind the scenes between the giants of the computer game industry. When talking about World of Warcraft I often mention Blizzard, but Blizzard is just a game studio wholly owned by Vivendi Games. And in the five-card stud poker game between the big PC game publishers, Vivendi has three face-up aces in the form of World of Warcraft, undeniably the strongest hand visible. So it is to the other players to raise or fold.
THQ just announced that they are folding in this particular game. CEO Brian Farrell said "To come out with something competitive now I think would be misguided for anyone, including THQ."
But EA refuses to fold, and has raised the stakes by buying Mythic Entertainment. Thus Warhammer Online: Age of Reckoning will now be published and developed by Electronic Arts. That is certainly not a bad business decision. Of all the contenders for WoW's throne in a few years, WAR is one of the more promising ones.
Blizzard still has some time to reveal a 4th ace, by showing how they will develop World of Warcraft further. WoW is currently stagnating at around 6.5 million subscribers, the time where Blizzard announced rising subscription numbers every month are gone. Of course the stagnation is at a very high level, but for every new customer they are winning, some existing player cancels his account. And that is mainly because WoW shipped with a huge, but not infinite, amount of content, and people have consumed this content in the last 20 months, until they had nothing new left to see. Now Blizzard must show that in the expansion they can add enough content which is accessible to the average gamer, and will keep him playing until the next expansion after that. If the second expansion takes another 2 years to get out, and content patches only add raid dungeons for a small minority of uber guilds, the subscription numbers of WoW might well start declining from the inevitable spike at the release of Burning Crusade. Blizzard needs to add content faster, and the content has to be more accessible to the millions, to keep them p(l)aying.
EA has a dismal record in the development of MMOs. They failed to grasp the full potential of Ultima Online, and then started and shot down the development of a sequel not once, but twice. Their other MMOs, "Earth and Beyond" and "The Sims Online" flopped. Nevertheless they obviously have the cash and the will to succeed with their next attempt. Mythic's Dark Age of Camelot was a solid competitor to Everquest, with a quarter of a million subscribers, although it is in decline now. DAoC is by many people considered to be the top title for PvP, their realm vs. realm combat beats WoW PvP hands down. So WAR is hoped to be WoW with good PvP, which could certainly be a winner. In any case, competition between companies is always good for the customers. We, the players, can only win if the game publishers don't all fold and leave the MMO market to Vivendi.
- posted by Tobold @ 2:09 PM Permanent Link
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I also think EA buying Mythic had a lot to do with their Warhammer Online project. The question I see is if Electronic Art's involvement will make Warhammer worse or better? Will they nitpick the development of the game or just give Mythic more money for content creation?
I did a similar write up on my blog but not as detailed as yours.
I did a similar write up on my blog but not as detailed as yours.
So what's NCSoft doing, cleaning up at blackjack at a different table?
--GF
--GF
# posted by 
: 22/6/06 16:38
: 22/6/06 16:38
EA with Mythic makes sense *if* EA leaves Mythic alone to run their business. It's revenue and experience for EA, and it's debt coverage for Mythic. Everyone wins (for the present)
But otherwise on everything else you're right, of course. But the point I think a lot of people aren't bothering with (or are unfamiliar with) is that you don't need to beat Blizzard to be profitable. If we believe Jacobs, Mythic is doing fine. And I think CCP with Eve is also doing great. You can run a "profitable" business without trying to be Walmart. The Mom&Pop corner store is there for years because Mom&Pop watch costs, have good margins and are "profitable". They are running a successful business. They may not have big, sexy revenues, but they are getting by. If they were't profitable they wouldn't be in business for years.
My point is that people who are thinking about the business of Online Services (like MMO's) are looking at scoring "big" to take on Blizzard or MySpace or whatever. And it is the exact equivalent of starting a new retail store and saying "I want to be Walmart." Well, the problem is that if you are planning from the start to be massive you are going to incur costs so large that will require revenues several times your probable current disposable asset value that you have to have large debts to cover working costs. Example, you want to be be Blizzard and have millions of subs, so you need to have a worldwide presence with a support infrastructure for your service to cover millions of subs. So you need to lease all that gear, pipe, people and materials ahead of launch. You're going to have very little time to cover those up front costs to build your service, along with the present costs you have at launch and going forward. Blizzard could do it because they already have a successful business and experience with BattleNet. Of course THQ is going to run away screaming, since they have nothing to rely on.
But otherwise on everything else you're right, of course. But the point I think a lot of people aren't bothering with (or are unfamiliar with) is that you don't need to beat Blizzard to be profitable. If we believe Jacobs, Mythic is doing fine. And I think CCP with Eve is also doing great. You can run a "profitable" business without trying to be Walmart. The Mom&Pop corner store is there for years because Mom&Pop watch costs, have good margins and are "profitable". They are running a successful business. They may not have big, sexy revenues, but they are getting by. If they were't profitable they wouldn't be in business for years.
My point is that people who are thinking about the business of Online Services (like MMO's) are looking at scoring "big" to take on Blizzard or MySpace or whatever. And it is the exact equivalent of starting a new retail store and saying "I want to be Walmart." Well, the problem is that if you are planning from the start to be massive you are going to incur costs so large that will require revenues several times your probable current disposable asset value that you have to have large debts to cover working costs. Example, you want to be be Blizzard and have millions of subs, so you need to have a worldwide presence with a support infrastructure for your service to cover millions of subs. So you need to lease all that gear, pipe, people and materials ahead of launch. You're going to have very little time to cover those up front costs to build your service, along with the present costs you have at launch and going forward. Blizzard could do it because they already have a successful business and experience with BattleNet. Of course THQ is going to run away screaming, since they have nothing to rely on.
I didn't finish my stupid point.
My stupid point is that I sorely wish people would stop aching for someone to "beat" Blizzard. You don't need to be Walmart to be successful. If I were starting a games company (and I'm not) I would much rather be the BedBath&Beyond of the MMO world instead of trying to be something I can't. You can't be massive from the start unless you are massive already have some kind of economies of scale happening for some of your products. "Niche" is it, since everyone other than a handful of existing competitors are niche compared to Blizzard. Any new entrant is naturally in the niche space. And that should be a positive thing for some providers.
My stupid point is that I sorely wish people would stop aching for someone to "beat" Blizzard. You don't need to be Walmart to be successful. If I were starting a games company (and I'm not) I would much rather be the BedBath&Beyond of the MMO world instead of trying to be something I can't. You can't be massive from the start unless you are massive already have some kind of economies of scale happening for some of your products. "Niche" is it, since everyone other than a handful of existing competitors are niche compared to Blizzard. Any new entrant is naturally in the niche space. And that should be a positive thing for some providers.
"EA with Mythic makes sense *if* EA leaves Mythic alone to run their business."
No offense but EA doesn't have a great track record in that dept. but we can hope.
Oh and I rather liked Earth and Beyond. I always wished they'd release the code so folks could start up their on fan-made servers.
No offense but EA doesn't have a great track record in that dept. but we can hope.
Oh and I rather liked Earth and Beyond. I always wished they'd release the code so folks could start up their on fan-made servers.
"My stupid point is that I sorely wish people would stop aching for someone to "beat" Blizzard. You don't need to be Walmart to be successful. If I were starting a games company (and I'm not) I would much rather be the BedBath&Beyond of the MMO world instead of trying to be something I can't. You can't be massive from the start unless you are massive already have some kind of economies of scale happening for some of your products. "Niche" is it, since everyone other than a handful of existing competitors are niche compared to Blizzard. Any new entrant is naturally in the niche space. And that should be a positive thing for some providers."
Didn't people say exactly that when they first heard that Blizzard was planning to do their first MMORPG? Blizzard went against the established industry giants like SOE/Verant or NCSoft, and became massive from the start, with nothing but battlenet as previous experience.
People are aching not for somebody to beat Blizzard, but for another game with multi-million player base. Playing the same game as many other players has obvious advantages: the game is financially stable, the developer can afford to pay programmers to create more content, there are lots of third-party fansites and databases.
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Didn't people say exactly that when they first heard that Blizzard was planning to do their first MMORPG? Blizzard went against the established industry giants like SOE/Verant or NCSoft, and became massive from the start, with nothing but battlenet as previous experience.
People are aching not for somebody to beat Blizzard, but for another game with multi-million player base. Playing the same game as many other players has obvious advantages: the game is financially stable, the developer can afford to pay programmers to create more content, there are lots of third-party fansites and databases.
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