Tobold's Blog
Tuesday, September 25, 2007
 
Defining success

The reader of this blog who signs with the symbol = # # = is busy doomcasting any smaller game I mention based on the number of reader comments my post gets. While that is a rather inaccurate measure of hype, and thus not a good predictor of success, we might need to have a look at how we want to define success or doom for a new MMORPG. And with us living in a capitalist system, success is probably best defined as financial success. A financial success keeps a company afloat, and allows them to develop more games. A financial flop gets everybody fired and the remains of the game acquired by SOE. ;)

We often correlate financial success with subscriber numbers. Even in a very rough approximation that is only valid for games with a monthly subscription fee model. Of the famous "9 million" WoW players, at least 6 million don't pay monthly fees, because WoW is on a pay-per-hour business model in Asia. If the average Asian WoW player gets bored and plays only half the amount of time he used to play, Blizzard would only make half the money from him, although it wouldn't change the number of customers Blizzard reports. Games that have micro-transactions or optional fees for premium access can have millions of "residents" without making any money at all, with Second Life being the case in point.

We got so used to these numbers in the millions that we forget that 100,000 subscribers used to be the level which separated the successful from the not-so-successful. Everquest 1 was a bestseller at just over 400,000 subscribers. If you sell your game for around $50 and take a monthly fee of $13 to $15, you make just over $200 per subscriber per year. Thus 100k subscribers result in $20 million revenue per year, which isn't half bad.

But revenue isn't profit, so you need to substract the development cost, cost of capital, distribution cost, and running costs for servers and customer service from that. And there we as players don't get enough information to judge the financial success of a game. I've read that Pirates of the Burning Sea has been in development since 2002, which sounds expensive, but I haven't got a clue what size of a team they had, and whether that came ended up costing as much as World of Warcraft in development, or significantly less. The subscriber numbers for A Tale in the Desert are tiny, a few thousand, but the game is running since 2003, the development team is small, the graphics engine was developed in-house, and apparently they can at least live from what they are making. Earth & Beyond was shut down when its subscriber numbers went down to below 20,000, I don't know what the numbers were for Auto Assault. Asheron's Call 2 was cancelled because it had less than 35,000 subscribers, which was said to be the break-even point.

I think most MMORPGs would be a success with 100,000 subscribers, as long as these subscribers stay in the game. Vanguard sold 142,000 copies, but retained less than 30,000 subscribers after the free month. So lets define success as still having 100k subscribers after one year. Unless the development was excessively expensive, that would probably be a financial success for most games. Too bad many games don't disclose their subscription numbers any more, especially not when they are going down.
Comments:
Surely it all comes down to profit margin, and also expected profit and actual profit.

If you expect to make 10% profit on a game, and you make 10%, then the game is a success. If you expect to make 10% and make only 5% or even make a loss, then the game is a failure. The actual amounts of money involved are not relevant.

I could get even more nerdy and start talking about contribution to fixed costs (no I'm not an accountant), but I will just say WoW is not the only winner, and everyone else losers.
The picture is much more complicated than x subscribers therefore winner/loser.
 
Excellent Post Tobold. In these days of console sales and hyped up wow numbers we sometimes forget that less than 5 years ago (Pre-WOW), any PC gaming that sold 100k was considered a success.
 
Lately, I think I've been rather reserved in my criticisms.

/sniff

In fact, I'm simply not going to talk about metaplace, for this very reason. No need to rain on anyone's parade if the see some potential in Koster's new "project".
 
To be fair, just as with all things market related, the implication things are going south can make the implied real (Northern Rock, anyone?) Now, I'm certainly not saying that a game in financial hardship will be saved if no one knows they have problems, but at the same time if all the rats run away from the (perceived to be) sinking ship, then that ship has to sink.
 
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