Tobold's Blog
Thursday, February 05, 2009
 
What the numbers mean

Yet another post about WAR having 300k subscribers, and what it all means. There were several comments on this blog saying that 300k wasn't that bad, and as Syncaine pointed out, those subscription numbers probably mean that WAR is the number 2 monthly-fee MMO in the US / Europe. So, we just point out that WAR right now has more subscribers than Everquest, and everything is fine? Sorry, but this isn't the olympics where getting the silver medal is quite an achievement. In fact where a game ranks in subscription numbers compared to other games matters very little. What matters, as always, is money.

Somebody invested a large amount of money into Warhammer Online. I don't know how much exactly, but certainly several tens of millions of dollars, maybe even over $100 million. Now WAR is producing a revenue, of which we know a bit more. Unlike WoW, where part of the subscribers are in China and pay much less, all the subscribers of WAR pay a similar monthly fee, around $15 (bit more in Europe, bit less if you subscribe for several months). So 300k subscribers produce a revenue of $4.5 million per month, or $54 million per year. But that is revenue, not profit. Profit is revenue minus costs, and again we are in the dark, as we have no idea how much it costs to keep WAR running and everyone at Mythic paid.

We know that Blizzard has a profit margin of around 50%, from their statement of earnings and profits. So lets hope for Mythic that they are somewhere in a similar range, and thus make $25 million profit per year. If it really has cost them $100 million to develop that game, that means that they'll break even and pay back all that development cost in 4 years, at the end of 2012. But what if the subscription numbers, which already fell from 750k to 300k keep on falling? Syncaine predicts WAR having 500k subscribers at the end of 2009, due to bored WoW players. That could happen. Or it could happen that the numbers keep falling and WAR is down to 100k at the end of 2009. We don't know, and we really don't have enough information about the future to do any more than guessing. The comparison with Everquest isn't really valid, because EQ surely did cost less, and paid back that development cost a long time ago. EQ can live on until the monthly revenue falls below the monthly cost.

Of course the same is true for WAR: As long as they make more money than they spend, WAR could keep going. But companies do close games that still make a small profit, for example Tabula Rasa, if that profit just isn't large enough. If the development cost of WAR was higher than I guessed, and the profit margin lower, how do you think the investors feel if it will take 10 or 20 years at the current rate (which isn't guaranteed to be the future rate) to pay back the investment? At the very least they'll want to reduce that time by increasing profit, which is done by decreasing cost. Which is exactly where the round of layoffs is coming from.

So, 300k sounds nice enough, but as long as we don't know more about development cost, profit margins, and return on investment, it is impossible to say how good or bad 300k really is. Was Mark Jacobs serious when he said he'd need 500k subscribers to be successful, or was that just a random number? It doesn't matter whether WAR has more or less subscribers than lets say LotRO, unless you also have the numbers for the development cost and profits. It's a harsh world, ruled by money, and never more so than in a recession. Whether you or me personally think that WAR is a good game isn't much of a factor in determining whether it will still be around in a year.
Comments:
What determines WAR's future is not just current revenues but also further revenue expectations. The big question is: "does Mythic sees future in the game or not". If not, they will cut back on costs (development, hardware, GM-s...) and hope that some revenue comes in before everyone leaves the game.

If they see future in it for some reason though, they keep on investing to let this future (with future profit) come true. And the hype around the game is an important part of any future. If people keep on talking about it, than it will remain an option in the people's head. By making WoW easier, Blizzard made a serious market repositioning towards the [insert Tobold-compatible word for M&S] players, abandoning the skilled players. Every 1% leaving WoW is 100k customers on the MMO market. As long as WAR has a chance to catch them, there is future for it.
 
Did you take into account the amount of boxes sold and revenue for those boxes? It was something like 1 million sold in the first few months right? at £25 or whatever it was in dollars. I am not sure how much profit is made from each sale but they must make some money from that too
 
I prefer to think of WAR as another "Wannabe" thanks to numbers like that.
My goal for any MMO for it to be a "success" is the 1 million mark. That does not seem like too lofty a setting to me, and also says "Hey, there is enough interest in this game" to be worth playing.
Look at console titles, which can sell multi millions of copies. Can you imagine how many play Halo 3? Call of Duty? online?
Yet, here continues the stream of half smoked MMO's, one after the other, and not one, except Guild Wars (which everyone says is not an MMO...) has had the success of WoW.
Everyone can keep drinking the MMO genre kool aid, and say "Oh boy, 300k...they are making a profit", just like they do for the oh so lame LOTRO. But, none of these are successes.
We can call them the Wendys of MMO's.

When it comes to the end of the day, people can either have McDonalds (WoW) MMO or Wendys (Every other) MMO.

9 out 10 will pick McDonalds..
 
There is one thing I havn't seen talked about in this discussion.

WAR just launched in russia. That must raise the numbers a little.
 
@Gevlon:

"By making WoW easier, Blizzard made a serious market repositioning towards the [insert Tobold-compatible word for M&S] players, abandoning the skilled players. Every 1% leaving WoW is 100k customers on the MMO market. As long as WAR has a chance to catch them, there is future for it."

The "skilled players" who the game is easier for are PVE players. WAR is not a good fit for the average WoW end game raider in search of a real challenge.
 
Sorry for the long post, but this is a culmination of a lot of thoughts I've been building while reading all the "300k" blog posts over the last day.

TLDR version:
300k is a good number
WAR's not failing
WAR's got MMO tourist negative word-of-mouth inertia to combat
WAR and WoW both are good games

Fair disclosure: I play WoW (Tichondrius) and WAR (Ironfist). I like each for their different focus and atmosphere, and am lucky enough to have the cash to afford both. I play casually with about 15 hours total time divided between the two each week. In WoW: 2x80s, 1x30. In WAR: 1x40, 1x25, 6x10ish.

I get a kick out of people talking about WAR like it's a failure. With 300k subscriptions, I believe it's either close to or at the #2 ranking MMO on the market. I don't count that as failure in my book. Also, they haven't expanded to China yet. That will cause numbers to skyrocket. I believe WoW issued a press release regarding breaking the 1 million customer mark on Aug 29, 2005 - 9 months after release (which included Chinese accounts). They started right out of the gate with 250,000 subscribers almost immediately - solely based on hype. I'll be curious to see how WAR is 9 months after release if they've also expanded into China. Stay tuned for news on June 2009. IF they are in China, I'll predict 750k at that time....or I'll shave my head. =D

Anyway...

I see two minor problems with WAR that are more perception-based rather than some inherent flaw in game design or hardware limitation:

1. Server population - on a low population server, there really is much less to do. Once you are on a medium-to-high population server, there is lots of activity across all tiers. There is regular open rvr going on to assault forts, and many people are running alts at lower levels. I disagree with Tobold's assessment that not enough people can be supported. Current battles have 200-300 people in the zone with not much lag at all. The lag only kicks in near final battles in forts. Since they can already have 200-300 people in a zone without much lag, there is something other than hardware causing the additional lag spikes in forts. I'd bet that gets resolved. Besides, any fights over 100+ people are just superfluous. I can't see or interact with many more people than 100. The rest are just a sea of random red names. I'd say only the closest 50 might influence my fight.

2. Lack of advertising - so many people who play WoW are very casual, and they don't keep up with the MMO industry. I know of quite a few people in my guild who have been with us for years, are tiring of WoW, and who have never heard of WAR. In a game where pvp is the focus, you need enough critical mass of players to enable such player-driven content. Not getting the word out to the larger MMO customer base is a mistake. WAR needs its Shatner commercials. I can see it now... "I'm William Shatner. And I'm...a Squig Herder!" Or maybe put some clips in of Yule Brenner as a Warrior Priest. ;-)

Back to WAR issues...

The biggest problem I see with WAR is negative word of mouth. I believe it was the blog, Hardcore Casual, that coined the phrase, WoW tourists, when noting the phenomenon of bored WoW players visiting every new MMO to hit the market, and quickly bailing back to WoW when they found it wasn't exactly like what they were used to. I believe a sort of schadenfreude is going on where people who left WAR rationalize that it must has sucked beyond belief for them to leave, and they now relish in talking down the game and imagining all those misguided WAR players who are suffering with a pile of dung game.
So many people look at WoW through rose-colored glasses. They forgot the god-awful bugs WoW had at release time. The constant server crashes. The rotten customer support. I've been in almost every MMO from release time (even Age of Conan), and I can say that WAR was much better off at launch than just about every MMO to come before it - even WoW.

Going back a bit in memory here....I believe the paradigm is that for every 1 negative comment you need 7 positive comments to neutralize the bad impression. Well, the tremendous volume of overly negative MMO tourists has built up quite an obstacle for WAR to overcome. And in the MMO community, there also seems to be an overly rabid action/reaction to those who come out positive for any MMO other than WoW. I'm sure I'll get screamed at for rampant WAR fanboyism. I've asked a few bored WoW guildmates if they were interested in WAR, and the response I get most often is that they've heard too much negative press about it, so they'll pass.

Let's look at the negaholics biggest claims:
1. WAR pve stinks compared to WoW. I say it's equal to WoW's pve. WAR's quests are the same as WoW's. Click a guy, skip the text, kill 10 foozles, turn in quest. Same stuff.
2. WAR has no endgame. Depends on how you define endgame. WAR's endgame is pvp in T4 and pushing to the enemy's fort. Lots of that goes on now. Also, you can take short trips into the end-game city instances and Lost Vale. What endgame did WoW have for a long time after release? Remember when Dire Maul was considered endgame. That's not much. Also, up until WOTLK, VERY very few people saw the endgame WoW instances because they were too hard. Wasn't it something like 1% of the server population that saw Sunwell? If the barrier is impossible to break through, then that endgame content doesn't exist to me. If you weren't in a serious raiding guild, WoW's endgame consisted of grinding various reps and daily quests while running the same heroic instances ad nauseum. That's not a lot of variety.
3. The game is laggy and crashy. It was no more unstable than WoW at release. It never crashes any more. Also, WAR can support more people in a zone than WoW at this time. Try putting 600 people in a zone in WoW and see what lag/server crashes you get.
4. The instances stink. WAR never claimed it was going to be a dungeon crawl, gear-based DIKU MUD. If you went to WAR expecting Molten Core, you went there with the wrong suppositions, and the game probably isn't for you.

WoW's great for scripted, instanced dungeons and for those who like to play a gear progression game. I have fun mapping out the incremental gear upgrades and what I should go for.
WAR's great for large-scale, open pvp that levels the playing field by not being so gear-based.

Try em both out. =D

mm
 
Maybe its the time for low-cost-mmos?

Greets from Germany!

Yitu - http://ao-lai.blog.de
 
Oops... Altruisms and hyperbole are a no no:

"It never crashes any more."

I should edit that to say, "For me, it hasn't crashed in ages."
 
@mm69: I CTD'd last night :)
 
WAR must have recovered a fair chunk of money by initial boxes sold and the subscriptions for the first 1-2.5 months before settling at 300k by the third month. It is very hard to predict whether or not WAR will grow or shrink by next December, however, it seems like they're willing to make a strong run for it and EA will back them.

The layoffs at Mythic weren't just because they didn't meet expectations. EA is laying off 1100 employees and shutting down 12 studios company-wide. The 60-130 Mythic employees accounts for 5-10% of that.

WAR urgently needs to make some smart, sweeping changes or I agree with you, next December will be even worse.
 
Evidence that Warhammer will last.

http://www.massively.com/2009/02/05/vanguard-celebrates-its-second-anniversary-game-update/
 
In terms of determining their success really boils down to comparing how much money they made vs how much they invested. If they were depending on 500k+ subscribers to make money over the course of the year, then they failed miserably.

Also, I can understand them coming out and lieing about their numbers: the more hype the better chance to get more customers, especially wow players leaving for a more 'skilled' game.
 
The WOW tourist phenomenon (thank you Syncaine) deserves more study I believe. Perhaps the outlook is not as bleak as it once seemed for second tier mmos. Several games which experienced massive drops in population after launch now seem anecdotally to be attracting new customers. Lotro, EQ2 and even Vanguard have all come back on the radar again and of course EVE continues to go from strength to strength. Perhaps WAR and even AOC just need to work themselves through the inevitable post release dip and continue delivering quality content in order to start attracting new customers again.
 
And why do companies cancel a game if it doesn't make "enough" profit? Because, while you are running your not-very-profitable game you are blocking resources that you could use more profitable. That is called "opportunity cost" (at least in Germany, always be careful on the technical terms).
 
I think the one little bit missing from your analysis, Tobold, is interest.

That is the mechanic that investors have in place to keep their investments from kiting them around forever.

For a game to be viable it has to at least be making cost + interest on capitol. If it can pay off some of that capitol then its costs go down too--but just covering current costs of running the game doesn't cut it.
 
Was there really a point to this post? You could have summed it up with:

"We don't know what WAR cost or what WAR's profit margin is so we don't know if it's profitable".

This is true. The rest of the post is rampant speculation. I haven't heard anything to suggest WAR cost 100 million to develop. Maybe it did, though that seems unlikely. The numbers I've heard were more around 40 million, but that too, is rampant speculation. Even if it did cost 100 million, at 300k subscribers they'll have recouped their investment long before 2012 due to box sales.

I think there's one real indicator of profitability or belief in future profitability -- WAR is continuing to develop content at a fast pace, and that requires re-investment of profits into the game's development. If there was no profit, development would be stopped or slowed, not continuing at the frenetic (compared to Blizzard) pace it has been. Mythic is part of EA, and EA is very profit driven - they axed Earth and Beyond because it wasn't profitable ENOUGH, not because it was unprofitable. If WAR wasn't recovering it's costs EA would drop it, write off their losses, and move on.
 
@mm69 -

"The game is laggy and crashy. It was no more unstable than WoW at release. It never crashes any more."

Too bad it isn't 2004 still, WAR might have a chance then. But WAR has to compete against WoW as it is today, not WoW of 2004. "I suck as bad as you used to" doesn't cut it.

"WAR pve stinks compared to WoW. I say it's equal to WoW's pve. WAR's quests are the same as WoW's. Click a guy, skip the text, kill 10 foozles, turn in quest. Same stuff."

Yeah for insulting, simplistic generalizations! Using that logic, WoW battlegrounds = WAR scenarios, and since scenarios are the only place any regular PvP happens in WAR, you might as well play WoW, since most of your friends are probably there already.
 
The only way 300k would be a problem is if whoever did the budget for WAR estimated its subscription numbers SHORTLY AFTER LAUNCH would be WoW-like. If that's the case, WAR is f'ed.

But lets be honest, does anyone actually believe that? I know we all made our predictions, and everyone was wrong, but even talk-to-much-Mark said 500k, and I doubt he said that predicting a drop of 50%+ of his base after box sales. Selling 1.2 million boxes at FULL price (or more, in the case of the collectors edition) is a big deal, MMO or not. That alone gives WAR a large base of players who already have an account, and with better content might come back and check it out again, having to only drop $15 for a month.

In terms of profit potential, that's huge, so unless EA has zero faith in Mythic to improve WAR substantially (like they have already done with DAoC), it's going to get support. Now it's Mythic's job to show they can back up the talk and actually deliver.
 
@tagn

Show me any MMO that has released that is as stable and bug free as a 4+ year old MMO like WoW. By your logic, all other MMO publishers might as well pack up and never try to release competition. Also, as you quoted, I said it no longer crashes (and added an addendum of "for me").

"Yeah for insulting, simplistic generalizations!"..."you might as well play WoW, since most of your friends are probably there already"

Heh. There's that "rabid" reaction I was referring to. People just feel so passionate when discussing WoW v. WAR that they have to go on the offensive and get borderline obnoxious.
I'm not using an insulting generalization. What is insulting in my statement? Search blog comments for WAR + pve + sucks or other variations of similar complaint language (sucks/blows/bite/awful). It's an often trumpeted mantra for those who like to point out WAR weaknesses. My response was that "I say" they are equal. I'm standing by my opinion that they are equal. After thousands upon thousands of hours in WoW and about 200 hours in WAR, the general exploring and questing in WAR = WoW. I'll give props to WoW with their deathknight starter quests. Those do take questing to a next level. However, that's just a small fraction of WoW quests.
Our guild is split 50/50 in WoW and WAR. We have people who love WoW and would never dream of skipping out. We have people who love WAR and would never dream of going back to WoW. And we have people who, like me, like aspects of both. Oops...we also have people who are sick of all MMOs and just hang around in vent to chew the fat while they play Left 4 Dead.

"WoW battlegrounds = WAR scenarios"

I agree. They are equal. Both attempt to balance force number, have level limits, and have some specific goal to achieve victory points. When it comes to pvp mechanics, I personally prefer those in WAR. Personal preference.
We must be on different servers if you play WAR. Most of the time I play, it's 90% open rvr. I queue for scenarios and head to the open rvr hotspots. Maybe in 20 minutes, a scenario pops. Initially, after release, I would agree that only scenarios was where the action was at. That's because people followed the path of least resistance, and scenarios were way too rewarding. Now, the fastest way to level is to do quests while staying queued for scenarios that pop every 10-15 mins...taking the ocassional break for open rvr when you side was pushing to lock T4 and locking lower tiers helps.

mm
 
@syncaine

"players who already have an account, and with better content might come back and check it out again"

You've probably seen several blogs say they're re-upping their account to check out WAR again for vairous reasons, so that does carry a lot of potential.

I'll be real interested in seeing how many 3-6 month subscriptions get renewed. That could cause a large drop in subscribers or solidify the current core of subscribers. So End of Jan and end of April will be key dates for WAR, I'd bet.

mm
 
As others have pointed out, WAR probably sold upwards of 1m boxes at $50/box. I don't know the exact profit margins on box sales, but my understanding is that they're really high. That could be $30-40m right there. And as long as we're throwing rumors around, I've seen $50-70m development costs for WAR posted in several locations. With profits of $2m a month (300k subscribers, $7 profit/person), WAR can cover and maybe make a small profit. Which is enough to induce moderate layoffs from EA. Which is exactly what we're seeing.

It's possible I could get bored with WoW and reup WAR, if LoTD really is something different and they take the teeth out of the leveling grind. Darkfall is guaranteed to be a mess, I'm no longer sure what Aion has going for it, and nothing else of much interest is coming out this year. Of course, for any of that to happen I would have to have my RSI go away so I can play more WoW in the first place rather than just posting about it at work :P
 
Another key difference between WAR and TR, TR did horrible in box sales, so right up front they were in trouble with debt. That makes that 'to profit' time line much longer, and leaves less hope for a returning fan base. I bet you if TR had sold 1mil+ boxes, and 2-3 months after dropped to 100-200k or so, it would not have been canned. But when you sell as poorly initially as TR did (and you have the bloated budget they had), not much room for hope.

And as for WoW = WAR in battlegrounds, if you like having a choice of 4 vs 20, using a PvE engine vs a PvP one, and having gear determine 95% of the outcome, then yes, totally equal. WoW does have that amazing community going for it though... Come on, really? And for the average player, how much time is spent questing from 70-80, and how much time is spent at 80 doing dailys or instances? We sure focus a lot of energy talking about a part of the game that is ignored once you reach the 'real' game.
 
@mm69 -

"Heh. There's that "rabid" reaction I was referring to. People just feel so passionate when discussing WoW v. WAR that they have to go on the offensive and get borderline obnoxious."

Yes, and I was mocking your doing so with your statement about WAR and WoW PvE being equal. I'm sorry it appeared to go over your head.

"Show me any MMO that has released that is as stable and bug free as a 4+ year old MMO like WoW. By your logic, all other MMO publishers might as well pack up and never try to release competition. Also, as you quoted, I said it no longer crashes (and added an addendum of "for me")."

What I was saying is that you cannot argue that something used to have problems as an excuse for something that currently (as other people have said) does have problems.

After all, as you said, WoW had problems at launch, and yet it took off in an environment where EQ, AC, UO, and DAoC all already existed and were, presumably, stable. What is WAR's excuse?
 
We need to consider also planning and expectations. (both tied together)
If you plan to spend a lot of money is just because you expect to have a lot of customers (or few paying a lot but that isn't our case).

At launch you also have to plan on how many servers to buy (or rent), customer support, new office for GM's and so on. All this has a cost and you could spend a lot of money if you plan to have a lot of customers.

They planned to have a lot, at first probably a lot came but soon they left....
So now they have operative costs that for sure are bigger than Blizzard. So less revenue than that 50% of monthly fee.
 
WAR cost $40-$50 million to develop. Age of Conan was roughly $25 million.
 
I think subscriber numbers are kinda silly in comparison to something like WoW. Any other game is just going to drop dramatically in subcribers but the fact that WAR went from 750k to 300k is a HUGE loss. That number can only drop more, and may only mean that WAR will die eventually.
 
"Show me any MMO that has released that is as stable and bug free as a 4+ year old MMO like WoW. By your logic, all other MMO publishers might as well pack up and never try to release competition."

If your game is buggy and crashy, nobody gives a damn about your whiny "oh but they've had 4 years to fix bugs!" excuses. All they care about is that your game is buggy and crashy.

If you can't delivery a quality product, then you're right, you might as well pack up and never try to compete.

Note that I am not offering an opinion here on WAR's quality, I have not actually played it since release, I was in the beta and ultimately my final decision not to purchase was not determined by bugs or stability. I'm just saying, much as tagn did, that "we suck, but that's OK because the competition sucked when they first released too" is not much of a selling point.

p.s. to mm69, I would consider myself a WoW Tourist, having checked out EQ2, EVE, LOTRO, CoH and WAR, all while on bored hiatus from WoW. I didn't stick with any of them, but not because they "weren't exactly like what I was used to," but simply because (for all their good points, and they all had them) they weren't AS GOOD as what I was used to.
 
WarHammer Scenario's are nothing like wow battle grounds...Firstly you can quest in war scenarios, secondly you can level beautifully in war scenarios, thirdly the avatars are designed to be ballanced in war scenario's.WOW is a pve engine and is not a good pvp game.Thirdly your charachters stats get increased in war if you are a lower level in pvp.You can also join a scenario as a group in war.The eniviroment can also hurt you in warhammer scenarios...Like sprays of lava firing up from beneath the lava lake in pvp zones.

War also introduced puplic quests which wow does not have they only have raids. Public quests are like raids on your world map and therefore are alot easier to come across and organise.

None of the above apear in wow pvp!

And lastly. WarHammer scenario's are ready at a click of a button..You don't have to fly for 15 minutes from one end of the map to the other to firslty find a group and then join a long waiting list for pvp batlegrounds. All you have to do is click the button in the corner of the screen and join up 2 6 scenarios per tier(even more when there is an event)
 
Next up!

300k in europe and n america..you are all forgetting about oceana and russia..those numbers where not released.
War will aslo be launched in asia within the next few months.Come on guys give war a chance it is not in competition with wow as it is a pvp game.Those who like gr8 graphics and pvp go to war and those who like cartoony graphics and pve content engine go to WOW.it is not difficult..Infact war is the only real pvp focussed mmo on the market!So those who want to fight against real people will have to play war coz wow aint cuttin it in pvp
 
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