Tobold's Blog
Thursday, April 03, 2008
Monthly inflation

Although Relmstein threatened to fly over here "for a nice long chat about responsible use of April Fool's Predictions", I'd like to talk a bit more about the possible increase of monthly fees for MMORPGs. Although my fake announcement was designed to shock, it was only funny because we all know deep in our hearts that such an increase is far from impossible. In 2003 EA raised the monthly fee of Ultima Online from $9.95 to $12.95. Everquest originally cost $9.89 per month, with the price tag funnily chosen after the name of 989 Studios who designed the game, but was later raised to $14.95. Just last year SOE increased the price of their Station Pass, giving access to all SOE games, to $29.99. So believing that MMORPGs will always cost $15 per month is just wishful thinking.

Keen recently posted news about the Warhammer Online monthly subscription fee, which is going to be "around 14 Euro". Frankly I have no clue how Keen jumps from that information to the expectaction that in the US WAR will cost $14.99 per month. Not only is 14 Euros already 1 Euro more than the maximum monthly fee for World of Warcraft in Europe, so why should WAR be more expensive than WoW in Europe, but not in the US? But also 14 Euros at today's exchange rate is $21.87, which is far more than $14.99. Mark Jacobs already stated that the WAR monthly fee will "quite possibly" be higher than $14.99. So something higher than $15 per month for WAR wouldn't surprise me at all.

The unknown factor here is how price sensitive MMORPG players are. How many less players would play WoW if it cost $20 per month instead of $15? How many less players will pick up WAR if they announce a $18 per month price tag instead of $15? As I already mentioned in my April's Fool post, the total amount of monthly revenue is number of players times monthly fee, so if you increase the monthly fee by a third, and lose less than a quarter of your players, you make more money. And use less resources at the same time.

Demographics are a big factor here. Video games aren't just for kids any more. While $5 more might make a big difference for a teenager, a lot of adult players would consider the increase as minor. Playing World of Warcraft for a year is considerably cheaper than buying a new single-player video game every month. It is also cheaper than many other forms of entertainment, on a dollar per hour of entertainment basis. As the $9.89 example from EQ shows, the price chosen is completely arbitrary, and is in no way related to cost; Blizzard has a profit margin of over 40% on their monthly fee. And UO being $2 cheaper obviously doesn't make a large number of players switch from WoW, so monthly fee doesn't appear to be a big deciding factor. Yes, far more people play free-to-play games, but that is a completely different demographic and business model.

Now I'm not really predicting a monthly fee increase for WoW anytime soon. As the game ages and newer games come out, World of Warcraft will get less attractive over time. Keeping the monthly fee constant might be good business tactics to keep your players loyal. What I do predict is that future MMORPGs will cost more than $15 per month, probably already starting with Warhammer Online. And people will pay up, maybe under protest, but pay they will.
I would expect some sort of increase in WoW subscription price, probably when WotLK comes out.
I don't think it will go up that much, maybe a couple of Euros.

I think once a company has set a price, it is not important whether that price is high or low; what is important is how it compares to similar products, and any increase over the original price must not be seen as 'profiteering'.

For example, in my works canteen they put the price of a Mars bar up to 50p. Can I afford that? Of course I can, but when I compare it to the 40p I pay in my local shop, I feel that the canteen is ripping me off, and I so don't buy Mars bars from them any more. The 10p difference is trivial, but the feeling that they are overcharging is the principal.
Although there may well be a large profit margin, it’s not entirely accurate to say the price is arbitrary and unrelated to cost. Different MMOs have very different operating costs that are fairly dependent on the back end architecture design, which in turn is strongly influenced by game design.

Factors affecting running costs include: number of players you can get on a given bit of hardware, how database heavy the game might be, how much network bandwidth you need within, and to/from, your data centre, the country you operate your data centres in (which in turn depends on where you think your players may be) which will determine salary levels for your support staff etc.

The final profit margin is somewhat arbitrary, but that’s no different to a lot of business models really. Although I’m sure you knew all this!
I totally agree.
I would never miss a few extra Euros a month but knowing that Blizzard have just made a gigantic amount of pure profit in the last year would make me feel like I was being ripped off if they did increase the price.

Enough to make me quit, though? I guess I won't really know unless they do it...
the only thing I hate about a price increase in MMOs, is I always felt when playing WoW that if I didn't play alot I was not getting my money worth so I cancelled. If the cost is to high and I don't play enough, i'll just quit and not play at all. I wouldn't mine $20/month or $60 for 6 months.
Turbine/CM put a whole different spin on this with their lifetime membership for LotRO. I've been playing for a year now, so it's already paid for itself, or thereabouts, and I'll be immune to any future price hikes.

I suspect this is why they recently committed to releasing yearly paid expansions, so they can guarantee at least some extra income from their lifetime members on a regular basis (yearly in this case means every 12 months, and not Blizzard's idea of how many months constitute a year).
I probably won't play WAR if it's more than WoW. Or any other mmorpg, for that matter. $15 US is about as high as I want to go.

Well, make that $30, because I'm usually subscribed to two mmorpg's at once. Right now, it's WoW (god, I have to cancel, I haven't played in a couple months) and LOTRO.

Hmm, I'll pay $30 for two, but I don't want to pay $20 for one. Ok, my internal logic is flawed, but my instinctual monetary trigger finger doesn't want to fire on $20/month for one game. Guild Wars would suddenly look a lot more attractive, or free multiplayer games (FPS games, RTS games, etc.).
It would be a risky strategy. If they charge more then they'll have to release a product that is percieved as worth more. If it's just percieved as being equal to wow that with a higher price could kill it right there.
I don't think the price of war will be higher than the rest od the market, would be suicide...
Although I think WAR might charge a higher subscription fee, and most people interested in the game would be willing to pay it, it would be a risky marketing move to charge more than the industry giant, WoW. If it didn't clearly offer MORE than WoW (rather than just different than WoW) charging more would risk losing subscribers.

I can't imagine the WoW subscription rate going up. Certainly their management must be sorely tempted, but there's a lot of bitterness in the WoW community already over the fact that Blizzard is literally rolling in money from this game but doesn't seem to be putting much back into it. Raising the price would be insulting to a lot of players when they're already making hundreds of millions of dollars in profit a year.

That said, MMO subscription prices are going to rise eventually. WoW is the only reason they haven't done so already. Once the popularity of WoW declines and direct competition is more viable, we'll start seeing subscription rates of $19.95 or even $24.95. I'd expect to see that start with the true 'next generation' MMOs, whenever they show up (no, WAR and AoC are not next-gen).
I wonder if the new MMOs charged $10, what would happen? I mean if I was in WoW at the moment paying $15, $10 more to try a new game like AoC or WAR wouldn't see so bad. Then in a year they could go up if they wanted.
Read the quote about the subscription costs again: "We can confidently say that we won’t be more expensive than any other MMO out there."

That's where I base my assumption that it won't be more than $14.99.

And really, is EA or Mythic going to be stupid enough to go against WotLK with a higher subscription fee? That would be the most foolhardy business decision this decade.
Soemtimes charging more implies 'value' so I think they just might go up against Blizzards mots (more of the same) with an increased subscription fee to match inflation, especially since the economy is doing the watoosie all the time and the U.S. dollar is losing value.
The only problem I see with EA-Mythic trying to increase the subscription cost(at least US side) is they have already mentioned that all the servers will be in Virginia. Which means all people who do not live near this epicenter of server cluster will be suffering from server lag and more making a poor quality of game play for those people. One of the best ideas I've seen from Blizzard (I doubt they started this) is the regionalization of server clusters. Things may have change at EA-Mythic on this front, and I hope so, but this may turn away customers they want.

As for those mentioning a higher cost may detour players from joining at launch, it may actually be a good decision. A somewhat smaller launch filled with more adult players will help ensure that the bugs, which are inevitable, will be taken care of in an enviorment which more mature players will be willing to overlook and get fixed quickly.
I'm going to be watching for MMO price increases like a hawk.

In all seriousness it seems like the MMO market will only raise the subscription cost once a clear market leader has been established and wants to risk it. Others will then follow as seen with every MMO after Everquest raised their price.

Luckly this trend hasn't been true with World of Warcraft since Blizzard just like a dps happy rogue is in love with large numbers. Their huge climb to an all time record in subscription numbers would have been hampered by a rate increase.
I'd gladly pay $20 for WoW if it resulted in fewer immature players. Also, IMO, I won't play WAR at any price -- I'm too spoiled by the UI and polish of Blizzard games now.
Well when I commented on Blizzards pricing policy on paid transfers, they went & added 0.01p to the price, so lord knows how much Tobold has just cost us!
If I'm lucky, I may get in 15 hours in a week on WoW (couple hours here and there at night) so increasing the price would be a deterrent to me. I'd probably not go beyond $17 before I cancelled subscription. $20 is just way to much and since I haven't played a single player game in the past 2 years, i could just hit the bargain bin once a month and spend about the same or less.
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