Tobold's Blog
Monday, August 24, 2009
 
Booking into Hotel California

As some readers suggested, World of Warcraft is a bit like Hotel California, where "you can check out anytime you like, but you can never leave." That is because probably the biggest single reason why people quit World of Warcraft is that they ran out of things to do. Blizzard simply can't produce content fast enough. So every major content patch and new expansion results in a surge of resubscriptions, proudly presented in a Blizzard press release; and then over the months which follows, without any comment from Blizzard, subscription numbers slowly decline. Note how the last press release, on the announcement of Cataclysm, was curiously free of the usual "WoW now has X million subscribers" phrase, although the footnote explaining what exactly is counted as subscriber was still in it. As far as I know the Chinese servers are still not up again, and in the US and Europe there is a distinct lull, related to Wrath of the Lich King getting old, and the summer holidays. This is most visible via measures of player activity, be it from sites like Warcraftrealms, or services like XFire.

Of course decreased player activity is not identical to decreased subscriptions, it is completely possible for players to be subscribed to World of Warcraft and not playing it. But that is something most people wouldn't keep up for very long, so there must be millions of people who unsubscribe while taking a break from WoW, and resubscribe later.

And once you look at it, you'll notice that unsubscribing and resubscribing isn't all that painless in the context of the monthly flat fee business model. Already the question for how long you should subscribe poses a problem: If you subscribe for 3 or 6 months, you pay $1 / €1 or $2 / €2 less per month. Nice saving? Not if you don't perfectly time your burnout with your subscription period. Getting fed up and losing the will to play is usually something that happens unplanned. So statistically on average you'll still have half of your subscription period left the day you decide to stop playing. You'd need to have played for a year on the 3-month deal, or a year-and-a-half on the 6-month deal, for your savings on the monthly fee to equal the cost of the time you pay for and don't play.

Of course the one game where you are most likely to need one doesn't offer a lifetime subscription. In hindsight it is very obvious that a World of Warcraft lifetime subscription would have been a sweet deal back in 2004. Less obvious is that it could still be a good deal now, for the millions of players who'll often come back to World of Warcraft after having taken a break, or tried another game. At the typical lifetime subscription rate offered by other games, $200, which is equal to about 15 months of monthly fees, it is still quite likely that you'll spend this much time in World of Warcraft over the coming years, even if you just play 6 months after each expansion. While it is possible that WoW has peaked by now, the servers will be running for many years to come, and Blizzard can easily keep their current "live team" churning out content patches and expansions for another decade. So personally, if Blizzard started offering a lifetime subscription to WoW now, I'd take them up on it immediately.

The even better deal for most people would be the one that the players on the Chinese servers are already enjoying (if the servers are up): Paying the equivalent of 5 cents per hour. Now of course the purchasing power in China is less high than in the US and Europe, so if a pay-per-hour business model came to here, it would probably cost more. But even at 15 cents per hour, you'd need to play over 100 hours per month before this became more expensive than the monthly fee. And on a pay-per-hour plan you don't pay anything if you go on holidays, or take a break from WoW. Also there is no more hassle of unsubscribing and resubscribing.

The one thing that World of Warcraft does well with regards to people taking a break, is that Blizzard never deletes your characters or other virtual possessions. Other games, like Final Fantasy XI, had the habit to delete your characters after 3 or 6 months of inactivity, then found that this seriously hampered any "come back to us" marketing efforts, and had to furiosly backpedal and offer character reactivation services. Games with player housing, if that housing isn't completely instanced, suffer especially from that, because the alternatives are having either having neighborhoods of abandoned buildings, or resubscribing players finding their house gone and their favorite spot taken.

I wonder whether Blizzard will ever offer better deals to people who frequently take a break. Of course the very notion that a deal could be better for the subscriber implies that the deal is less profitable for Blizzard, so this isn't all that likely. But I'd love to see alternative subscription deals, like a lifetime subscription, or a pay-per-hour alternative payment method. And once the second Blizzard MMORPG comes out, I'd sure be interested in a deal where subscribing to both costs only a little more than subscribing to just one of them.
Comments:
And once you look at it, you'll notice that unsubscribing and resubscribing isn't all that painless in the context of the monthly flat fee business model. Already the question for how long you should subscribe poses a problem: If you subscribe for 3 or 6 months, you pay $1 / €1 or $2 / €2 less per month. Nice saving?

You are 100% right. For these reasons I only use 1 month subs and always unsubscribe the second after I resubscribed.
 
Strictly speaking, if a company offers a life-time deal worth, say, 15 months, it is stating one or both of the following things:

1. We really don't know if this game has the power to pull for more than 15 months. Heck, we're not even totally sure anyone will re-sub after the first free month. How about a little leap of faith? We'll send you some nice printout in return, too...

2. We're broke. Like, badly. We know this likely will come back to bite us two years from now, but, seriously, if we don't bunch up some cash right here and now, there won't be anything to bite in two years anyway. Besides, most of you lifetime-fanboys will be disillusioned and burnt out by that time anyway (and playing WoW again), so, who cares, really?

Blizzard operates from a position of power. They don't need a lifetime deal, they know they're better served with the subs. For another 2 years or so. When you see a WoW lifetime offer, regardless of the then official subscription numbers, that's when you'll know that WoW is going south (and/or their new MMO is close enough to release).

And a pay-per-hour model? No, thanks. For the same reason I have a flat rate for my internet connection. As we quickly established back when those were new and expensive, having a flat rate isn't necessarily about saving cost, it's about saving your nerves.
 
Funnily enough, I unsubscribed at month 1 of my 6-month subscription after WotLK.

In any case, the pay-as-you-go plan in China is (at least partially) a response to market demand: There's plenty of local MMOs with similar payment plans adapted to the cybercafe playstyle. That is not the case in the West, where the average player probably plays from home at somewhat regular times. Lacking the (obvious) market demand, Blizzard (and any other company) will not adopt a plan that could result in less profit. No beancounter wants to be the one that kills the goose that lays golden eggs.

To get rid of that resistance to change, Blizzard could conduct an experiment: Offer an alternative plan to a handful of customers and see what they do. With some hard data to work with, Blizzard could extrapolate and see how their revenue model could change.
 
For God's sake don't put the idea of paying "per hour" into anyone's head!

You know it wouldn't be any 5 cents an hour here. You'd be lucky if it was 50 cents an hour.

Personally, I pay the basic monthly sub for every MMO I subscribe to. I have absolutely no interest in micro-managing my finances to save two euros a month here or there. I don't look at that level of detail of what things cost in any other aspect of life, so why bring it to game subs?
 
Strictly speaking, if a company offers a life-time deal worth, say, 15 months, it is stating one or both of the following things ...

If that was true, then how come nearly all goods, e.g. cars, are sold like that? You pay in full at the time of purchase (unless you are leasing), which gives you the rights on the cars for its complete lifetime. According to your interpretation that would mean that the car company thinks the car will break down soon, or is broke (the latter of which is probably true at the moment, but the business model predates that).

Buying a single-player game also has you paying up front for a game you haven't played yet. So I'd say your list of possible reasons or things that a lifetime subscription says it extremely limited and incomplete. The complete list would be a lot longer, and contain items like a loyalty bonus, or offering added convenience.

flat rate isn't necessarily about saving cost, it's about saving your nerves

How can you, in the same comment, first completely dismiss lifetime flat rates, and then praise monthly flat rates? Shouldn't the same argument of "saving your nerves" apply to lifetime subscription? Why would an arbitrary time of one month turn out to be the absolute optimum for every possible subscriber?

Note that I'm talking about offering alternatives, not suppressing the monthly flat rate. I don't see how any customer could possibly be worse off if IN ADDITION TO the monthly flat rate, there was also a lifetime subscription and a pay-per-hour option.
 
So the discussion is drifting again towards the usual topic. Let me help ;)

I agree that life-time deals are problematic. The differences between a car and a game company are:

1) The car company has a reputation that is extremely valuable for them. Exept for Blizzard no game company has this kind of reputation and even if they had the MMO reputation would not 100% apply to the RTS repuatation.

2) The car is your own. You can use it no matter what the company does. The MMO cannot be played after the company shut doen the servers, and is much less fun if most people left the game after 60 days.

3) But I also agree that a per-hour deal is very bad. I stated why in many posts before. That fact that it goes on your nerves is one of many reasons.

A monthly fee is a golden midle ground between lifetime and per-hour.

It protects you from a company that doesn't care about reputation and it evades all thoise problems connected with microtransactions and per-hour deals.
 
I used a three month plan. That meant that when I stopped playing, I still payed for two months. If I resubscribe, it'll be for one month periods.

I'm one of those players who will keep coming back to WoW after every expansion or when it starts to tickle again. As it is now, they can't produce the content faster then I can consume it. Not even close. An expansion is good to keep me busy for 6 months or so. But it starts to tickle again after 3 months without WoW. Maybe it's the cataclysm news? Maybe because I'll have to enjoy the old content before it's deleted? I'll resubscribe eventually.

And Blizzard would be cutting in their own fingers by deleting accounts. That would mean that I wouldn't buy the next expansion. Levelling a character to the old level cap every expansion does not look that appealing. I'm surprized to see other developers are dumb enough to delete characters. It's preventing your customers from returning.
 
If that was true, then how come nearly all goods, e.g. cars, are sold like that? You pay in full at the time of purchase (unless you are leasing) [...]

Unless I'm leasing. I recently spoke to our car dealer. There has been a government funding in Germany over the first half of 2009 for new car purchases. He says he hates it. Why? People who actually buy a car, he says, are people whom he's likely not to see for another 10 years. Maybe more. This isn't what makes his business really profitable. If manufacturers/vendors could pull it off, all deals would be leasing.

According to your interpretation that would mean that the car company thinks the car will break down soon, or is broke (the latter of which is probably true at the moment, but the business model predates that).

Predate or not, we can probably agree, that currently production is pretty much all about throw-away goods. You don't get repairs, you get replacement. If you're lucky, that is, because your device will most probably break down just a few weeks after the guarantee period runs out. This is (inverse causality to the one you offered) a direct effect of the dominance of the "buy once, keep forever" deals. They offer it, because that's what the market is used to, but they don't want you to keep it forever in exchange for just a one time fee. That's why stuff is (relatively) much cheaper now than it was 50 years ago - because it breaks down quicker, thus making you take your money and buy another one. It is, in a way, an artificially effected subscription to production.

Buying a single-player game also has you paying up front for a game you haven't played yet.

I beg to differ. A single-player game offers you X hours of content in exchange for Y amount of money. After that, the game is "over", and you take another Y money to purchase another Z hours from another game. An MMO, in theory, is infinite. But I'm not really telling you anything you don't know here ;)

So I'd say your list of possible reasons or things that a lifetime subscription says it extremely limited and incomplete.

Again, I beg to differ. The list I offered was specifically meant to hold for developers/publishers of MMOGs, that is, players in a relatively small, unpredictable, volatile and (currently) heavily monopolised market.

The complete list would be a lot longer, and contain items like a loyalty bonus

Oh gods .. yeah, I had my share of LotRO lifetime subscribers and their outright amusing sense of entitlement. It's maybe another reason why I'm sceptical about lifetime subs, because many players (not you, as I'm quite sure) tend to misinterpret what is simply a business deal as a badge or honour - a notion happily fuelled by the provider.

How can you, in the same comment, first completely dismiss lifetime flat rates, and then praise monthly flat rates?

No-no, wait. I didn't say lifetime subs are bad deals for the player. I said they are inherently non-optimal deals for the company (ahem .. you said that yourself, too!), which means, that if they are offering it to you, they either don't really expect you to get your deal's worth, or are in a miserable enough situation to mortgage earnings tomorrow for earnings today. If neither of those two factors holds true, a company will/should always opt for the potentially infinite income through monthly subscriptions.

At least where I live, there are no offers of lifetime internet flat rates.
 
Few things you should be reminded of. In China, it costs way more. Even though exchange rate is heavily in our favor, the purchasing power of their currency is the same. Meaning they are paying a lot more than 5 cents, and we would be too if they implemented that system here.

They play a LOT LOT more in China. WoW addiction is common and even my own cousin played 40+ hours a week, so it makes sense to pay hourly.

Come check out my WoW/Gaming blog at gametopiaplanitia.blogspot.com
 
Remeber the old school days of playing at the video game arcade?

I would easily spend $20 over the course of an hour of playing several games with my friends.

$15 a month is a value compared to that.
 
You guys seem to be singularly unable to separate the payment period from the payment amount. Imagine a game offered the following three alternative payment models:

A) A $15 monthly fee
B) A $50 lifetime subscription
C) A 1-cent-per-hour payment model

Obviously B) and C) are great offers for nearly every player! In the case of WoW, the Chinese 5-cent-per-hour model, if directly applied to the US/Europe would still be an advantage for most player.

So your only argument against other payment models is that you'd fear they would cost much more. Without even knowing the price! Which is about as valid an argument as if I said that monthly fees are bad, because Blizzard could easily raise the monthly fee for WoW to $100.

The market has changed since we paid dollars per hour for internet access or to play rather bad online games. A company offering a $1-per-hour MMORPG is as extremely unlikely as them offering a $100 monthly flat fee. The only version of an alternative payment plan that would be taken up by any customers is one that gives them some advantage. In convenience, or in paying significantly less for less usage. The people who play 40+ hours a week would stick to the monthly fee, but those are a minority.
 
Obviously it all comes down to the numbers, Tobold. But within reasonable numbers the payment model is what counts.

If a company offered a lifetime sub for the price of 10years of monthly subs, the criticism doesn't apply..

If they offered a monthly sub that costs as much as a hourly sub for a player who plays 5 hours the month, I'd obviously take the hourly sub.

Within reasonable numbers, however, a lifetime sub is a bet against the game company. They bet that you won't play longer than X months, while you bet that you will. That you are in a bad position to make this bet, is obvious ;)

An hourly sub is a bet that you won't play more than X hours the month. You are in a better position here, because the game company actually bets that their game is good (in contrast to the lifetime sub).

Therefore I'm more understanding when it comes to hourly subs, but unless it is really low, the monthly sub also buys me the feeling that I can just afk and stand around in Orgrimmar or wipe the whole evening, or wait for that guy a little bit longer, without losing my money.
 
Erm, Tobold, at no point did I, at least, argue based on the cost of the different models. Having different models to freely choose from* is definitely an advantage for the customer. But allow me to quote yourself:

Of course the very notion that a deal could be better for the subscriber implies that the deal is less profitable for Blizzard, so this isn't all that likely.

That's it. That's my entire point. Or, your entire point, whatever.

Let's not fool ourselves, game providing companies are business enterprises. Their goal is to earn money (I'm not ruling out the idealism of making a fantastic game, mind you, but if that fantastic game doesn't generate revenue, it'll die). Their rational choice of subscription model must and will be (taking marketing into account) one of generating the highest winnings. And now comes the point: what model a company expects to be the most profitable, does tell you something about their own state of affairs and their own expectations of the game's success.

There are indications, that at the time of LotRO's launch, Turbine was breathing very thin air. We won't know for certain, because Turbine is privately owned and thus not obliged to disclose, but the hints are there. It is possible, that without the lifetime money, LotRO would have folded within a very short time, rather than becoming the reasonable success that it is now. If the aforementioned is possible, then it is also possible, that it would have folded despite the lifetime money, which wouldn't have been quite as pleasant for those who bought into it.

So, when Cryptic gives you so many options to put money into their pocket up-front (both lifetime and micros), I am not saying they are charging you more or selling you a bad deal. I am just inviting you to hold on for a second and wonder about their possible motivations. That's all.


*
When I say "freely choose from", I mean a model that can be taken up at any time, by any customer. What I do not mean is:
- "limited offer runs out 2 months before release";
- "only during a 2-week period of our anniversary celebration";
- "only eligible if you have purchased a Special Collector's Edition (i.e. given us even more up-front money).
Those are not actual options, but just bait, sniping directly at your impulse control, creating a sense of urgency to make you buy something before you can really take the time to evaluate the offer's worth for you.
 
Per month tarrives are considered cheap by people.

Just check at other things. Internet abbos used to cost per minute. Now they're per month and cheaper. For a lot of people paying a montly abbo for your cellphone is cheaper then paying per minute/sms. Or they used to insert coins into a machine each x minutes and now, a monthly abbo is cheaper.

Hourly rates do not have to be more expensive but I think it's just engrained in people that monthly abbos means cheap.

Personally, I think more options is better. But people hate choosing. You'll have to get out a calculator to figure out if system A, B or C is the best for you. And it might change the month after.
 
Their rational choice of subscription model must and will be (taking marketing into account) one of generating the highest winnings.

There is the famous article on why variable pricing is better than fixed pricing" which applies here. Basically Blizzard could maximize their profits by offering different payment models, with people choosing the one that suits them best. The person who has lots of money or trust into Blizzard would take the lifetime subscription, the hardcore player online 40+ hours a week the monthly flat rate, and the casual player who plays WoW on and off the hourly payment game card. The trick is to balance that in a way that the added income from people who wouldn't pay if there is just a monthly fee option is greater than the loss of income from people who would pay anyway, and now pay less because they found a more optimal option.

But just because the monthly fee model is optimal for SOME, that doesn't mean that other options couldn't be better for others, thereby increasing the number of players, and ultimately making Blizzard even more money, even if the income per player goes down a bit.

Having played a lot of MMORPGs I constantly get bombarded with offers for "come back and see what has changed for free" or "recruit-a-friend and gain a zhevra mount" or whatever else the various marketing departments churn out. I've learned to regard these offers with a neutral eye, neither being "baited" as you call it, nor directly dismissing all marketing as a scam. Any additional option, time limited or not, is better than only having one option. You just need to learn to only take those offers that are of advantage to you, without complaining about offers that are more suited to somebody else.
 
I'd welcome more choices.

My guess, why Blizzard doesn't do this:

1) They just don't like to offer a bet that you won't play the game longer than X.
They don't like it if you win this bet and they don't like it if you lose this bet. They also don't like the signal such a possibility sends to the market.

2) Hourly costs can cause these problems:

- People are bankrupted - bad publicity. There are already enough people who starve to death cause of MMOs or get a heart attack after not moving the legs for three days. The industry really doesn't need this.

- People play less, because it feels costly and then lose interest. MMOs are like cinema. A break every 5 minutes makes the movie worse. MMOs are more fun the more you play them.

- It requires more effort (also financially) to make such a system work flawlessly.

- You really don't want to have people in a group who flame you, because you are not only wasting their time, but wasting their money. This does have a significant effect on all other players as well.

There are probably more reasons. These are just brainstormed in 10 seconds
 
They don't do hourly because Wow's player base is casual. An hourly rate, even at 50 cents an hour, would most likely net them much less per month on average than a flat sub fee. It would also serve as a monthly reminder of how much time you are wasting (something Blizz doesn't want you thinking about).
And if they did it both ways, its the worst of both worlds; the hardcore people are playing 80 hours a month for peanuts per hour, while the casuals are playing 10 hours a month for peanuts. You go from $30/mo in revenue to $17.50 or so. Terrible business decision. In a situation where no player is getting screwed, Blizz screws itself.

And that is why they don't do it.
 
Thanks for the link Tobold, followed and read. The principle described I learned as price discrimination in my very forgettable economics lectures. Those were not quite as entertaining as the article, but still kind of, sort of, informative.

The thing is (and that's what the article is explaining), that price discrimination, or segmentation, is not about offering every customer a volley of options, so they can pick their best deal (which is what you are asking for in this blog post: give me the opportunity to pick the model I think suits me best), but instead forcing every single customer into a deal as bad as it can possibly be before they start calling you names; thus transferring customer surplus into producer surplus. So, Blizzard would basically track down all those who tend to AFK at the bank and put them on hourly pay, find out who's unlikely to stay longer than a couple of months and make them buy lifetimes, and so on.

As the article points out (and as I've learned), not only is the very discrimination pretty hard to pull off with a high precision (which is lucky for us, because if it was broadly feasible, none of us would have any "spare money" left, ever), but even if you manage, like in the airlines example, people will hate your guts. But then again, it's not what you were asking for, anyway.

Oh, and as pointed out by others, even the existence of a per-hour model would infuse a rather uncomfortable element into the culture. Anyone misses the times of playing with people who are on dial-up? Me neither. As a matter of fact, I might be even actively put off a game offering a time-based pay option for fear of an "omigawd, faster faster, I only have 5 minutes left before I have to beg mommy for a new game card!" culture. No .. no .. really, no.
 
resubscribing isn't all that painless

Well, it is if your account was hacked, and then you report this, so after Blizzard finds out it was hacked and that the hacker used another credit card (not your own) they then ban YOU the original owner for using a fake credit card...and then say they will not reinstate until YOU have paid for the played time.

HUH??

Yea...not very effecient.

I will not be going back.
 
Well, you can go on to invent examples of extreme situations how specific customers would be hurt by the specific business model that suits them least, and I can go on to invent examples of extreme situation how specific customers are being hurt by only having the one monthly fee option. That isn't going to get us anywhere.

All I'm saying is that choice is good. And for example MMORPG lifetime subscription is something which has NEVER been offered as a single possibility, it is always an alternative offer to regular monthly fees. Just like in the Champions Online lifetime subscription I can't understand why people complain about an ADDITIONAL offer, which they are completely free to take or leave, and which doesn't impact the existence of the regular monthly fee offer at all. How can the choice between two ways to pay ever be worse for the customer than just having one possibility?
 
Raph Koster proved this trend true for every single MMO on the market. Not a unique Blizzard or WoW phenomenon. Koster had it nailed down to a science.
 
Of course the very notion that a deal could be better for the subscriber implies that the deal is less profitable for Blizzard, so this isn't all that likely.

@Rem: That statements would only be true if the player would always keep paying, regardless of what payment options were available.

There is also the choice of not paying and playing. If alternate payment options would help to keep a player that would otherwise leave, then it may be a win for both parties.

Look at offerings for mobile phone accounts from various telcos. You can usually find many different payment offerings there, which enables them to get customers for a number of different usage patterns.
 
That statement isn't mine, but Tobold's, to begin with. He just choose to ignore it himself for the rest of the discussion.

That being said, mobile phone accounts are a great comparison. Let's have a look.

1. Mobile phone deals always come with a "but". As in, "you get a cheap per-minute rate, but a high base cost", or "you're free of base cost, but at a horrible per-minute rate", or "you get infinite free minutes .. but only into our and our partner's net, everything else costs extra", or "you get this great deal, but only if you sign for 5 years".

Blizzard's equivalents for those offerings would be something like "you get a lifetime sub, but can only play 2 hours a day max, spare minutes non-transferable", or "you get to pay 10$ instead of 15$, but have to subscribe for a year at a time". That last one sounds familiar? Sure, because it's already in place. The first one perfectly nails it as well, in fact: you sell convenience to the casuals, but (and this is crucial) keep those who would pay you anyway from riding the cheap offer.

2. Cell carriers all offer basically the same thing: mobile telephony. Thus they are in a competition, and constantly trying to 1-up each other by making us think, that if we take their super-special-family-friends-weekend-holiday deal, we'll save 5 cent per month in the end.

Blizzard is the only provider of WoW. And no one (statistically speaking, and thus w.l.o.g. ignoring uncle Larry's third cousin's hair dresser's son's friend) decides on which MMO to play based on cost. For that, the requested prices are generally too low, too close together and too transparent (because we don't have a dozen different "but"-based subscription models - yet, but choice is always good, right?). It's the general consensus that "subscription-based MMOs all cost basically the same", and thus people decide what they want to play based on, well, what they want to play! And if they decide they want to play WoW, they automatically pay Blizzard. So, no need for clever commerce here (at least now).

3. No mobile carrier offers an unlimited lifetime flat - and if they do, the small print takes a lifetime to read.

Just like Tobold tears his hair not understanding how a consumer can be opposed to choice, I tear mine not understanding how the following can be anything but obvious. You are a company. You have two pricing models:

A) generates 100.000,00 USD revenue
B) generates infinite revenue

Which one do you choose? And if you choose A), what should I, as the consumer, assume about your business model from that choice? As Nils pointed out, even in the case of a lifetime deal, I do not purchase our product, but always subscribe to it, meaning that my further enjoyment of the product, or even the ability to use it at all, are strictly tied to your future maintenance of it.

An unlimited lifetime offer is not an appropriate tool to lure in those with a lower willingness to pay. Already because for that sake, you would usually look for a model with a lowered entry cost, rather than drastically raised. But even worse, because it doesn't have any protection built in against a power-consumer taking it. Thus, for a company with lots of power-consumers, it would be a horrible deal to make.

TLDR: I very much liked Nils' analogy of a bet. If a company is eager to bet with you, that their product is not as good as you think (possibly before even letting you try it), doesn't that have to make you just a tiny little bit wary? No? Okay, carry on.
 
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