A cost vs benefit calculation

Green Armadillo has an interesting post up, speculating that game companies are introducing more and more RMT elements into MMORPGs because $15 a month isn't enough. Thinking about that, I realized that game companies are getting only a small fraction of my gaming budget. So in this post I'll list what I'm paying to play MMORPGs. Please keep in mind that this is just me, you can definitely play MMORPGs for much less, and of course the computer and internet connection serve for other purposes than just MMORPGs.

I'm buying a new computer for around $2,000 every two years, thus I spend $1,000 per year on PC hardware. My broadband internet connection costs $50 a month, thus I spend $600 per year on that. For my monthly subscription to World of Warcraft I pay $17.50 (at today's € to $ exchange rate), and every two years I buy a $60 WoW expansion, so I spend $240 per year on World of Warcraft. In other words, of a total annual cost of $1,840 for me to play WoW, only $240 goes to Blizzard. That might be an extreme case, but I bet if you do the same calculation for yourself, you'll find that you pay more for your computer and internet connection than for whatever game you are playing.

Now I play up to 1,000 hours of World of Warcraft per year, which according to studies happens to be about what an average MMORPG customer plays, 20 hours per week. When I do a cost vs benefit calculation, I end up with an entertainment cost of under $2 per hour. And if necessary I could easily reduce that to $1 per hour, if I would buy less expensive hardware and a cheaper internet connection. Compared to many other forms of entertainment, that is rather cheap. Of course for all sorts of entertainment there is a huge number of variables, e.g. how much did you spend on your TV and cable provider, and how many hours do you watch TV? But if we look at an example with few variables, lets say going to the cinema, it becomes clear that one hour of a movie costs you considerably more than one hour playing a MMORPG.

So, given that one hour of playing a MMORPG is cheap, and only a small part of the total cost goes to the game company, it is possible to think about MMORPG game companies getting more money out of their players. Personally, I would still play World of Warcraft if it would cost $30 per month, and if you look at my personal cost calculation you'll see that such a price increase wouldn't actually change my cost all that much.

That brings us to the curious fact that among games with monthly fees, there isn't much of a price differentiation. If you buy a car you have a huge price range, from a Tata Nano to a Rolls Royce. With MMORPGs you'll find that most games charge you around $15 per month. However rich you are, you simply can't buy a the "Rolls Royce of MMORPGs" with the $100 monthly fee and personalized customer service, because such a game doesn't exist. You could say that World of Warcraft is the Rolls Royce, and that by charging only $15 per month, it effectively makes it hard for other game companies to charge more, because they'd first need to offer more. Which, given the high development cost of a huge MMORPG (Blizzard once revealed their total development cost including patches and expansions to have been $200 million), won't be all that easy.

Now some players are obviously quite happy that MMORPG subscription fees are virtually capped at $15 per month. But there is a hidden downside: If games can't compete on price, they have to compete on subscription numbers. If you can't offer a more expensive MMORPG, you're forced to make one which appeals to a larger number of subscribers. So if you are complaining about "welfare epics", or games being "dumbed down", be aware that this is a direct consequence of the business model. If you want a game designed for a small elite, it would either have to be more expensive, or it would need to be made on a much smaller budget, with predictable consequences to quality.
- posted by Tobold @ 6:30 AM Permanent Link