Tobold's Blog
Monday, February 16, 2009
 
Can Blizzard fail?

From the open Sunday thread comes an interesting discussion on whether Blizzard's next MMO could fail. Short answer is yes, it could fail, you just need to define the criteria of success high enough. For example it is totally possible that their second MMO doesn't get 11 million subscribers, so some people will define not beating World of Warcraft as failure (by which criteria all other MMOs are failures).

One reader had the theory that the larger a project is, the more likely it is to fail. He cites the Great Leap Forward of Mao or the NHS computerisation programme as examples. But if you read the cited article, it becomes clear that both of these failed because somebody with lots of power and a great vision tried to make a huge system do something it couldn't do, something completely new and different. Does that sound like Blizzard to anyone? It is far more likely that Blizzard will be playing it safe with their next MMO: They will take lots of old ideas that have already been proven to work, and implement them much better and with more attention to detail than anyone else. In an industry where shoddy workmanship is the rule, and quality is the exception, making quality games is as close as you can get to being certain of success.

But as I said, success also depends on how you define it. World of Warcraft was revealed to have had a total investment cost of $200 million, and it makes an annual revenue of $1 billion, with $500 million of that being profit, which is a return on investment (ROI) of 250%. Such a level of success is unlikely to happen again, not without killing WoW, which wouldn't be in Blizzard's interest. But the good news is that a ROI of 25%, ten times less than WoW, would still be a very good investment. And for a game costing $200 million, that would mean a profit of $50 million, and assuming the same profit margin, revenues of $100 million, which at about $200 per player per year ends up being just half a million players. Anyone remember Mark Jacobs defining success as having over half a million players?

So the most likely situation is that Blizzard brings out a new MMO, it gets more than half a million players, but less than 11 million, and some people will call that a success, and others will call it a failure. As somebody commented, some people *want* Blizzard to fail, and will just interpret anything as failure in the light of that. Me, I'll stick to that half a million players success criteria. And to one even more important: Am I having fun when I'm playing Blizzard's next game?
Comments:
Wow, only $500 profit out of $1 billion revenue? Blizzard's upkeep must be ridiculous!

Joking of course.
 
Warcraft isn't an MMO it is now a cultural icon of the rise of MMO's - i doubt anything will ever get the same number of subscribers or into mainstream knowledge (my girlfriend had heard of it and she is a technophobe) as when i first started playing MMO's there was only one i knew about or wanted to try and that was World of Wwarcraft.

Whatever the next MMO blizz makes it will be successful but not like Warcraft 12 million of so players - but that isn't failing, i don't think WAR or LotR online have failed because they don't have 1/2 million subscribers or match Warcraft.
 
All I know is I keep hearing "Sci-Fi" MMO, and if that is the case...it WILL fail next to it's Fantasy counterpart.
But, of course, it will still make all other MMO's look like failures in comparison...because they are all wannabes that people eventually forget about (LOTRO, WAR, TR, etc, etc...)
 
everything, anyone can fail.
even Blizzard. (warcraft adventure for example)
 
Warcraft Adventures didn't fail because Blizzard never shipped it. Likewise with Starcraft: Ghost. They'll sit on that property instead, and release a version later that is not a failure. Same with TF2. The early versions of that game didn't have a chance to fail, because they were never released. They evolved into something else.

As far as how much Blizzard spent on WoW, I think a very large amount of that money must've been in initial R&D, and learning the hard way how to make an MMO when they hadn't done it before. Now there are a lot of knowledge and tools and infrastructure that they'll be able to leverage in any new game that they make.

And yes, the reason WAR has failed is because its sites were set too high. 300k players would have been a huge amount if they weren't counting on so many more to recoup their losses.
 
This assertion is assuming that the current subscriber numbers don't drop off. This can happen easily through attrition caused by new games or boredom. Blizzard needs to come up with something new, and pretty soon. WoW is great, and something for other MMO developers to aspire to. In quality if not design.

However, people get bored and I count myself among them. How many times do I want to roll a new character and grind through Westfall or The Barrens and stomp the same old ground? Does it really make a difference to the overall experience if one time I run Nexus as a tank, and another as a mage. Sure, my personal playstyle will be different, but the experience and the rewards will be just the same. I have maxed out my 8 character slots and am bored with them all.

At some point I will end up cancelling my sub until the next new thing comes out.
Blizzard's next new game would do well to bear this kind of churn in mind, and design it to scoop up all those ex-Wow players who are desperately after something new, with the quality of WoW but completely different. They may have 11 million players now, but who knows how many will remain in one years time?
 
here's a thought, and call me crazy:

diablo 3 will come *just in time* for everyone that's sick of wow, and it will be be hailed as everything wow isn't... immediately pick up and playable, doable is very short bursts, and hack and slash quick and dirty.

then people will get shiftless, and yearn for something deeper to sink their teeth into...

pow! new blizz MMO. doesn't matter what it is, it isn't wow, and they tired of diablo 3. people will still continue to play both wow and diablo 3, but there will also be the hot younger sister on the scene as well.

omg my life is doomed.
 
"It is far more likely that Blizzard will be playing it safe with their next MMO: They will take lots of old ideas that have already been proven to work, and implement them much better and with more attention to detail than anyone else. In an industry where shoddy workmanship is the rule, and quality is the exception, making quality games is as close as you can get to being certain of success."

If you haven't realized yet, this is their formula for ALL of their games. None of their games are particularly innovative in any shape or form.

They just made them really good/attractive.

"But as I said, success also depends on how you define it. World of Warcraft was revealed to have had a total investment cost of $200 million, and it makes an annual revenue of $1 billion, with $500 of that being profit, which is a return on investment (ROI) of 250%. Such a level of success is unlikely to happen again, not without killing WoW, which wouldn't be in Blizzard's interest. But the good news is that a ROI of 25%, ten times less than WoW, would still be a very good investment. And for a game costing $200 million, that would mean a profit of $50 million, and assuming the same profit margin, revenues of $100 million, which at about $200 per player per year ends up being just half a million players."

Erm, if I'm understanding the definition of ROI correctly, you would have to include the running costs in the calculations, which would mean that the ROI for WoW would merge to 100% ROI given those profit margins. Similarly, the ROI would eventually merge to 100% given the same profit margins but with lower revenues, albeit much slower.

Really, getting 100% ROI is an extremely good investment, and getting that on any investment can most definitely be defined as a success.
 
Added the millions for Caleb.
 
" "It is far more likely that Blizzard will be playing it safe with their next MMO: They will take lots of old ideas that have already been proven to work, and implement them much better and with more attention to detail than anyone else. In an industry where shoddy workmanship is the rule, and quality is the exception, making quality games is as close as you can get to being certain of success."

If you haven't realized yet, this is their formula for ALL of their games. None of their games are particularly innovative in any shape or form.

They just made them really good/attractive. "

That was the point of that paragraph.



To see if Blizzard's next MMO will fail or not, we should probably wait for starcraft 2 and diablo 3, and see how they work out. If they don't work well, it may be that Blizzard is slipping and the MMO won't work out as well, if the games are still good, it seems more likely that the MMO will do well.
 
Isn't the better question, can a subscription based MMO fail? At least monetarily, even Age of Conan made its money back by now. The profit margins are so damned high its incredible. 100% ROI, 250%, whatever, the money is rolling in. Between box sales and subscription payments, all you really have to do is hype the hell out of an MMO to at least make your money back.

So it's pretty neat place to fail in.
 
Everyone keeps thinking that the next MMO will be starcraft, I think that blizzard will shock us all with a brand new title, new theme, and new storyline.

Also it may be years before their mmo comes out, didn't they take like 5 years to finish vanilla wow? (I understand they'll be much faster this time, but how much?)
 
Here's the best reason for not wanting for Blizzard to fail--that the gaming industry will eventually learn to emulate Blizzard's methodology and start shipping more reliably good triple A games.

Innovation will be left to smaller ricks--at the extreme end the casual gaming market. The real trap is that an idea may look good on paper, or single player mode, or small groups, but fail under the most extreme circumstances: MMOGs where thousands of players are beating on the same mechanics for 100s (or more) hours.

While deep innovation would be lovely in the MMOG space, considering its extreme environment, I think there are real limits to its appeal and suitability.
 
Blizzard isn't stupid. They know WoW is going to eventually run it's course. I think alot of MMO vets are getting tired of the Fantasy genre. We have been stuck in the 15th century for 10 years now. If Blizzard created a SCi-Fi MMO, new storyline no StarCraft, they could lure over the "vet" MMO players for the first year. Have it Hardcore again for a year then tapper off like WoW has into a more casual game. As people get tired of WoW they will transistion to the new MMO.

I think 500 sub's is the success point for MMO's from a bottom line view. However as a player, if it doesn't break atleast a million it's nothing compared to WoW. I'm not trying another MMO that isn't made by Blizzard until it's been out for ateast 6 months now. I'm tired of paying to beta test.
 
Well the biggest problem for Space based MMO's is fun methods of interaction haven't been worked out well yet.

WoW in a lot of ways is just Everquest with a better UI and less grind. The roots of MMORPG's are very old in many ways dating back to the first computer games -> adventure.

Space games are not as mature and it is far from clear what basic components are present in a space based RPG game.
 
@Toxic

Unfortunately, it does not matter how quickly an MMO makes back its development money, but rather if the game has paid it's shareholders what it promised. In the case of Tabula Rasa, not only did it NOT make back it's development cost within a year, but the investors were also unimpressed. Thus, rather than letting it ride and eventually get the money back, the plug was pulled.

@Nobs

I think it is inaccurate to say that they know WoW will run its course. If not for the sequels currently in development, even Starcraft and Diablo II might have had a few more years left in them in spite of aging graphics. Blizzard simply does what it wants to do WHEN it wants to do it. There is no panic involved, no "Hey, boss, we better get cracking before WoW fails."

@tacklebeth

I think that space games are mature enough in their own right. It's that fantasy is far more popular. For some reason it is more fun to play a game with lizard men who are armed with swords rather than lasers. There is a market, but it has consistently proven to be a small one compared to fantasy.
 
Nobs, that's a bit of a catch 22, there. Waiting for early adopters to hammer out the live beta phase is one thing, dismissing a game from consideration because it doesn't hit a critical mass that only WoW has really nailed is quite another. If everyone waits for the 500k number to be broken, the game fails. The bandwagon effect won't sustain 500k subs.
 
Hound I don't really believe that.

Sunk costs are sunk costs. If the game was making any kind of profit they wouldn't kill it just because it wasn't returning their cash fast enough. That just doesn't make sense to kill it because it isn't making as much money as you'd hoped when all you'd have to do to milk it for a million a month just by paying the electricity bill. To do otherwise is cutting off the nose to spite the face.

TR was losing money or barely breaking even on operating costs with no hope of making a profit; otherwise there is no reason to kill it for an investors point of view.
 
Actually, the ROI is far higher than 250%. Sickening to think about.
 
"yes, it could fail, you just need to define the criteria of success high enough."

I laughed when I read this. It's clever, and 100% true. I don't see Blizz cranking out a BAD game any time soon, and a game doesn't need to reach WoW's success for a company to consider it worthwhile.
 
@Hound
All MMO's run their course. Blizzard would be idiots to think WoW can sustain 11 Million players for another 4 years. They need something in the pipe now to catch them. Blizzard takes forever to release a game so if we hope to have a new Blizzard MMO by 2012 it needs to be well into production by now. If WoW holds on until 2012 with over 10 million people I will be amazed too.

@Tesh
After playing AoC and WAR I reserve that right to be pessimistic. Until game developers start releasing quality games when they launch I think all gamers should stop buying them. All we are doing is encouraging this mind set of "patch as we go" that is plaguing the MMO industry.
 
Tobold, can I ask where you got your $200m figure from? Articles I read a bit after release had competitors throwing around numbers in the $50-100m range. Or is the $200m the total amount spent on development over the lifetime of the game (with an additional $500m a year going to maintenance costs)?
 
My source.
 
Nobs, I'm all for making devs honest and not paying for beta testing. I wait for games to go on sale, myself, and I hate the sub model because I think it doesn't fairly represent costs. I'm just pointing out that 500k subs isn't the best indicator of quality when the game is still being worked out, especially since nobody but Blizzard has that kind of player base.

Put another way, if you wait for a game to be popular, you may well be missing out. If you wait for a game to be "done" or "fun", that's quite another thing. Popularity != playability. Also, if a beta testing game hits 500k subs, and *then* you jump on board, you're not sending the devs the message that you're waiting for complete games, you're just showing that you follow the herd, at least as far as the numbers go.

I know, that's not quite what you're talking about, and I completely agree with waiting for a game to be in a playable state before buying in. That's part of why I like the microtransaction F2P model as seen in Atlantica Online, Puzzle Pirates or Wizard 101; you can play in their games for a while (far longer than a ten day trial) before ever spending money, and when you do decide that the game is worth the cash outlay, you have tighter control over how much you spend and what it does for you. In my mind, those devs earn their money by providing a quality experience, rather than taking money up front and then running the risk of reneging on the implied deal.
 
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