Tobold's Blog
Wednesday, February 06, 2008
 
Innovation smothered by piles of money

Once upon a time there was a game company that stumbled upon a surprise hit, a MMORPG earning them unprecedented piles of money. The game company was Electronic Arts, and they would never have thought that over 200,000 players would be willing to pay a monthly fee to play Ultima Online. It was a great cash cow. But after a while the managers from EA started to worry: Other companies were developing similar games, and they would have to either add content to UO to keep people playing, or make a new MMORPG to stay the market leader. So in 1999 they announced UO2. But then they started to have doubts. Could the devs guarantee that the new game would be as profitable as the original? No, they couldn't. Would the new game canibalize the old game and draw players away from it? Yes, most certainly to some extent. So in 2001 UO2 was cancelled, before it was released. Then somehow EA managed to repeat the same story with Ultima X: Odyssey, another planned MMORPG, cancelled in 2004. Instead of new games, EA decided to add content to the old game, releasing 8 expansions up to now. But again they didn't want to rock the boat too much, preferring to add more of the same to UO. Graphical updates, new classes, new races, new continents, new dungeons. Except for the Renaissance expansion, which created a PvP-free mirror image of the world, the UO expansions didn't change the UO gameplay in a major way. But all the added expansions couldn't stop Ultima Online from decline. Nowadays its market share can only be described as insignificant, although there are still about 100,000 players, and UO is still a cash cow after 10 years.

Once upon a time there was a game company that stumbled upon a surprise hit, a MMORPG earning them unprecedented piles of money. The game company was Blizzard, and they would never have thought that over 10,000,000 players would be willing to pay a monthly fee to play World of Warcraft. It was a great cash cow. But after a while the managers from Blizzard started to worry: Other companies were developing similar games, and they would have to either add content to WoW to keep people playing, or make a new MMORPG to stay the market leader. ... Well, you can imagine how that story could possibly end.

It is totally possible that Blizzard continues going down the path they mapped out with the Burning Crusade and the Wrath of the Lich King announcement: One expansion every 1 to 2 years raising the level cap by 10, adding a new class or race, having a new continent with new zones and dungeons, especially new raid dungeons, and changing not much in the way that World of Warcraft is played. Blizzard is working on a new MMO, but who knows whether that will go through or be cancelled to not canibalize WoW. On its 10th birthday World of Warcraft could find itself where Ultima Online is now: Subscription numbers having declined to half of the peak, but that would be 5 million players, and the game would still be extremely profitable. A cash cow.

Of course as a player I wish that Blizzard brings out a second MMO which is at least as good as WoW. And hundreds of blog posts on the subject are proof that I would like WoW expansions to change how the game is played: Primarily by making the raid dungeons accessible to the majority of players, in some sort of "easy mode", while preserving the old hardcore raid focus only in the form of "heroic mode" visits to exactly the same dungeons. No more exclusive content for a small elite. I also would like World of Warcraft to much expand their social interface, making it much easier to find groups, giving guilds more purpose in life than just raid progress, improve crafting and add player housing with a possibility to set up player-controlled shops, add guild housing as a place to hang out and hang up guild trophies, etc., etc.

But changing World of Warcraft has its risks. Nobody knows what the secret ingredient is that makes 10 million players play WoW, not even the devs. What if changing WoW destroys just this secret ingredient? Making a new MMO is also a huge risk. What if you invest $100 million and the game flops? What if it doesn't flop, but all the players in the new game are just players who left WoW to play the new one, so you suddenly have twice the cost and still the same total number of players? A billion dollars is a pretty scary number, especially if that is 85% of your revenues. It takes balls to dare to tinker with something that is so successful, or to try to replace it. Sometimes just repeating to do what worked before, and hoping that the inevitable decline won't be too steep, seems like the safest option.

But I am an optimist. There are 6.6 billion people out there who do *not* play a MMORPG yet. EA probably thought that 200,000 subscribers for UO was impossible to beat. Blizzard probably thinks that 10 million subscribers for WoW is impossible to beat. But the number of PCs worldwide is growing every year, the number of gamers is growing every year, and there is no reason to assume that 10 million is the upper limit. If Blizzard goes the safe way, doesn't bring out another MMO and continues their expansions as they are now, they might still have a cash cow on their hands in 2014. But their market share might be as insignificant as that of UO is now. Blizzard has over $500 million of pure profit per year, investing just 10% of that every year could not only keep WoW alive and growing, but also get them an even bigger smash hit in a couple of years. They could be growing the MMORPG market instead of canibalizing their existing game by making the new game less hardcore endgame focused. They could keep the WoW subscription numbers up or even growing by adding new gameplay modes to the game, instead of just 10 new levels and the next layer of raid content. There are risks, but there are also immense opportunities. Blizzard should go and grab them instead of playing it safe.
Comments:
Interesting that you mention the growth of computers, most of them using Windows...

Maybe Microsoft should tie a MMORPG directly into its next version of Windows and have it packaged, ready to go.
 
Why not take a mixed course? I think their current method (adding more of the same) gives them about 5-6 years of peaktime until they meet the fate of UO. Probably even 7 years if they (as I suspect) carry on copying features of their competitors (quests easy to see on your minimap etc). This time could be spent studying the factors that made WoW such a success, maximising the chances of a successor and developing it. Even if it takes them a year longer, it would be a year with half the profits as they actual have, which is still more than most other companies could dream of. And if the successor canibalizes WoW, who cares? They would have probably even higher profits than before and could start changing the old WoW without the bugging fear to slaughter their cash cow. They could turn it radically into a game that attracts all those people that don't like the successor. If the latter is more tailored to the hardcore audience, they could simply improve WoWs graphics a bit and pump brutal amounts of fluff into it to start attracting the opposite of hardcore, for instance.
 
blizzard only knows the word safe.
 
Well, Blizzard isn't EA, they don't develop like EA does, and I am pretty sure they aren't scared of the so called competition out there. The games that are all pending over the next year aren't going to be the real competition. The "WoW Killer" that everyone seems to want to have happen is going to be a game that nobody has heard of yet, possibly a game that is barely a twinkle in the eye of the developer that makes it.
 
If a 'WoW killer' does appear, then they will make a move; until then , I don't see them bringing out their own 'WoW killer'.
 
The benefit of getting a new game out of the door is that they have the potential to attract back the vast multitude (millions?) of disaffected former-WoW players who used to love the game but have been turned off for one reason or another.

I imagine that the majority of former WoW players loved the game at some point, and would be more than willing to give Blizzard a second chance if a shiny new product came along.

On the other hand, attracting new and former players to WoW will become more and more difficult as the perception of distance between level 1 and the top end grows.
 
Honestly I'd like to see something like the station account for sony. I'd pay about $20 a month to play all of blizzard's MMO's.
 
Tobold, you bring up an interesting point. Why are developers so afraid of cannibalizing their own players? Who cares if you bring some of your Game1 players and bring them into your Game2 as long as you can attract new players as well?

Here's a little real world example for you. Within a single block on a main street near my home there were four gas stations. One was owned by Shell, another by Esso, and two by Beaver. On one intersection, three of the four corners were occupied by these stations (Shell, Esso, and Beaver) and the business was split about 33% to each.

One day Shell decided to buy up both Beaver stations (one across the street and the second on the opposite end of the block). There are now three Shells and one Esso.

Why would Shell want to own three of the four gas stations in a 750m stretch of road? Customers, obviously... Even though they are paying out a lot more in operating costs, it is offset by the amount of extra income they're bringing in.

This isn't corporate either. Each of the Shell stations are operated as a franchise and the owner said it was the best decision he ever made. Given the chance to purchase the Esso across the street, he said he would. That way, you can ONLY buy gas from a Shell station on this street and all the money flows to him.
 
Blizzard can easily afford to spend $100 million developing a game and have it flop, so really I don't see it as much of a risk for them.

And honestly, unless the game was truly horrible it would still sell millions of copies just for having the Blizzard label on it.

Worst case would be it cannibalizes existing wow players and splits their subscriber base between two games. But that would actually make both games easier to grow, leading to a larger subscriber base in the long term.
 
no company manager can justify losing 100million buckazoid and expect the board to just swallow it.

he'll be on the streets the next day imho. blizzard dont get big by being stupid. money dont get spent for fun, its for result. anyone here remember the Daikatana / John Romero debacle ? where lot of money is spent on fluff stuff (expensive office , things unrelated to games) and yet there is lackluster games from their effort ?

just because its blizzard doesnt mean they can sell crap and expect ppl to buy it. its arrogance, blizz is maybe slow and lazy and copying other people's idea, but they certainly arent stupid. they wont dare release crap to smear their name.. if you read blizzard history you will see 'nearly finished' games that got chopped and dont get released because they dont get 'blizzard final seal of approval'.. Warcraft Adventure games, Starcraft Ghost, Lost Viking MMO, all those dont pass their quality approval (ok the last game is a put on lol)

One thing you can trust blizzard is they will control the quality of their release.
 
Vivendi knows that they have to invest in various development gambles to survive. The only real risk is that the whole genre of the MMORPG dies and gets sucked up by some totally different line of products.

MTV maybe...
 
This is a familiar pattern. It is the same dilemma faced by the "gorilla" of every market. Innovate or eventually become insignificant. But innovation means destruction, and therefore it often doesn't get done out of fear. And companies wither away...

Here is an example of why it is not so simple to just spend another $100 million on an experimental MMO and see what you get: resources. Where do you want your most talented developers and artists? On your next WoW expansion? Or on the experimental MMO? Blizz will put them on WoW, and the experiment will get the 2nd string. Even if they hire more people, it is practically impossible to always hire top talent especially the larger you get. (this is why the US can't grow their Special Forces, they've been trying to get more men for decades, but simply can't increase their size without lowering standards, so they stay small)
 
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