Tobold's Blog
Monday, April 19, 2010
An inconvenient truth

What do you call a middle-aged geek?


While of course bad jokes aren't accurate pictures of the truth, there is an obvious link between geekiness and earning potential. Not every geek ends up as a quant in investment banking, but there are a whole lot of average geeks out there with a degree in engineering or science, and job prospects and salaries are good in that area. Why do I talk about that on a MMORPG blog? Because middle-aged geeks are an increasingly important demographic for MMORPGs. The people who played Dungeons & Dragons or the first computer games on the C64 during the 80's at college are now playing World of Warcraft. And nowadays they have a lot more money.

But compared to other hobbies that well-off people tend to pursue, like skiing or golf, playing a MMORPG is incredibly cheap. For the price of a single high-end golf club, you can play World of Warcraft for a year, and buy an expansion to boot. Computer games are still priced like children's toys, but the people playing them often aren't children any more, and have much more disposable income.

Game companies are waking up to this, and their answer is an obvious one: Price differentiation. Price the game in a way that children, teenagers, and the less fortunate still can afford the basic version. And sell luxury to those players that have too much money (and often not enough time) on their hands.

And that works! Hundreds of thousands of people bought the sparkly pony for $25. And sometimes you don't even need to sell something. To my great surprise one person donated $100 to my blog. As much as some people might rail against the "unfairness" of expensive extras, the money and the demand is clearly there, just waiting for game companies to cash in. That doesn't mean there won't be any affordable games in the future, price differentiation works by offering something for everyone. But we will see more additional offers. The sparkly pony isn't much good as a status symbol, because too many people have one, so how about a $100 sparkly dragon? And there might be additional services as well, like premium accounts with better customer service. That is about as "unfair" as 5-star hotels and Rolex watches are "unfair".

As much as we enjoy the escape into virtual world, the inconvenient truth is that the real world isn't egalitarian at all, and even virtual worlds run on real world servers that cost money, and require real world people to run them who want salaries. The economic realities of the real world swap over into the virtual world, and this is a trend that will only become stronger. More merchandising, more virtual goods, more premium services, that is the future of MMORPGs. Because companies are under a moral obligation to maximize profits to the benefit of their shareholders, they are not welfare organizations for the benefit of those with no money and too much time. And game designers who want to express themselves artistically will make indie games, because, frankly, expressing yourself artistically while spending the $50 million of an investor to make a game that flops isn't exactly moral either.
Great commentary, Tobold.

To those who believe Blizzard is selling out by offering pets, sparkly ponies, cosmetic changes, transfers, or future services...

People have already been buying multiple accounts, power-leveling, buying gold, epics, having better computers or doing other things to use real life money to gain in-game advantage long before Blizzard offered such services.

I believe more choice can only help the consumer. So you think a sparkle pony is a gawdy waste of money? Not a problem, let people enjoy it and be glad that Blizzard is financially successful to continue to develop great games like Cataclysm, Diablo 3, Starcraft 2, and TOP SECRET MMO.
I agree. It is the future. It makes immersive worlds almost impossible, but it's just the way it is.

I often said, I'd much prefer to pay 100€ a month (hell, for a good game I could pay 300€ a month!) and have no RL influence on the world, but I'm in the minority, it seems.

Game companies, however have a problem with me, because I will never participate in the microtransaction stuff. You want my money? Make a game I like!
Although I'd never actually buy any of them, I really like how Blizzard can sell cosmetic pets and mounts. It pulls focus away from the unbalancing payments that most F2P games use and also further shows how much people still care about unique character customization that doesn't revolve around stats.
The trick for a game company is to achieve price differentiation without appearing to rip people off. Since different customers have different views on what constitues a rip off that is a tricky balance to achieve. ACtivision-Blizzard seem to be handling this extremely well with a one step at a time approach training their customer base as they go. First a $10 pet (softening the blow a bit with some charity tie in) then a $25 horse next a $50 dragon and so on.

This pattern cannot continue indefinitely though because the number of items sold will eventually fall as the price rises. Activision-Blizzard might be able to sell a handful of $5000 sparkly dragons but they would make far more money selling a hundred thousand $25 horses.

In fact a curious feature of the recent Activision-Blizzard offers is that no only is the company training its customers to accept these offers. The customer's are also training the company as to what is the most profitable price point. If the £25 horse had been a failure then you can bet the next offer would come back to a $10 or $15 price point. The success of the $25 dollar horse on the other hand means that the next offer is likely to cost more: $30, $40 even $50 perhaps.

Should customers acting in their own interest band together and refuse to buy this type of product in an effort to keep the prices down? Well if you are a free marketeer the answer is no. Customer collusion is just as damaging to a market as supplier collusion. Customer collusion whihc keeps the price low will result in under supply (less sparkly pets).
I agree Tobold. I also agree with Blizzard's current RMT model.

There will be a great temptation for Blizzard to take things to far (e.g. sell a Legendary via RMT), and I hope that they won't. Doing so will alienate many of their customers.

So, RMT will be the way of the future. And some companies will get greedy and come up with a "bad" RMT model. The successful games will have a good model.
This is true to a certain extent but there's a real danger of killing the goose that lays the golden eggs as was seen in the Allods cash shop fiasco.

WoW is the top game for a number of reasons one of which is simply because everyone plays it. If it cost as much to play WoW as to play golf then not only would most people not play but the few who could afford it would be better off not playing it because there's no point paying loads for virtual items unless there's people to show off to.

It's probably inevitable that at some point Blizzard will start direct selling game advantage and that's when people will start leaving because of cost. Whether the overall result is profit depends on whether the cash shop balances the lost subs.
It's probably inevitable that at some point Blizzard will start direct selling game advantage and that's when people will start leaving because of cost. Whether the overall result is profit depends on whether the cash shop balances the lost subs.

This is the real danger that I was alluding to as well. Companies that "compromise" themselves for short-term gain will lose out in the long-run when customers dissatisfied with such an approach will not play their other games.
"That is about as "unfair" as 5-star hotels and Rolex watches are "unfair"."

A lot of people DO think those are unfair, although probably not many of them play MMOs.
Remember that the original Everquest tried to experiment with this through their Legends server, which promised much higher level of GM support, many more live events, and so forth, in exchange for a much higher monthly fee- $50 I think it was instead of $15. I wonder if we'll see more attempts to do something like this in the future - on the low end free-to-play servers supported by RMT, and on the high end gold-plated premier pay-by-month servers offering more content and better support.
A small quibble with an otherwise well written piece:

"Because companies are under a moral obligation to maximize profits to the benefit of their shareholders, they are not welfare organizations for the benefit of those with no money and too much time."

This is hardly a moral obligation. Far more plausibly, this is a legal one (shareholders in the USA can sue the board of directors of a corporation if they think the board is not protecting shareholder value, though I am not sure how this works in other legal systems). At least, you'd have to provide a fairly substantive argument to defend the claim that shareholder value is a moral good.
<--- "Rich" old geek. Yes I admit it. And I love to spend money on games. I run 5 WoW accounts, 2 eve accounts and god knows what others too.

Another thing you shouldn't forget is that blizzard currently learns a lot about selling in game items both in terms of operations (web, payment etc.) and in game balancing.

So they can go free to play with WoW if it declines at some point in the future. And their customers PAY them that they learn. Win-Win scenario.
"Time is money friend." and my time is valuable. The only reason I didn't buy the pony is I'm not playing right now, and it looks kind of dumb. The utility of it, especially for altaholics, is very convenient. Hopefully they release another soon with a better looking model.
EVE is interesting in that way. Due to the mechanism of it's time cards, it panders both to the rich and the poor. The rich can do away with the "grind" of EVE buy buying timecards and selling them. The poor just have to be good enough to make over 300mil isk a month and they can play using their isk instead of their cash.

I've known both types. The "use cash to buy plex to fund our ship replacement fund" and the "use isk to buy plex to pay for my main/alt accounts".

It should be noted that once you hit level 4 missions it is pretty easy to spend one week out of a month grinding level 4's and you've got enough isk to buy a plex leaving the other 3 weeks to get more isk to fund your in-game expenses (ship losses and what not). If you're a market whiz - you effectively play for free since most serious market players end up above 10 bil and have profit margins in the billions per month.
I am your perfect subject Tobold, I used to play D&D at school, I played ZX-Spectrum and C64 games. Now I am 37, pretty well off and I play MMORPGs and buy sparkly ponies lol
There is one service I would probably pay 3 times as much per month if Blizzard would offer it: Age-Verified Servers. Without getting into the old ageism debate, let's just say that for whatever reason, I'd happily plunk down more green to play on a server that was 21+.
@Roboticus I totally agree with paying more for a specific type of server. I would love one with qualifications of being a 30+ age and an IQ + EQ exam to play on it.
The moment Blizzard monetizes upgrades that provide advantage like armor and weapons I'm out.
Joel does a great job giving us a 401 in economy. I often end up linking that article.

I'm fine with Blizzard selling ponies and other fluff items. As long as paying customers don't have an ingame benefit it's all good to me.

Price differentiation is something we're seeing more and more these days. Blizzard will also give us a deluxe version of SC2. You'll get an art booklet, an extra dvd with commentary, an action figure, a wow pet, a cd with the music... Nothing that will give you a benefit against other players but you'll probably pay twice the price.

Adding extra weapons to the DLC package like Bioware does with Dragon Age? That's a bit more problematic to me. But since it's not a multiplayer game not having an imba sword won't change that much in the end. It's a border case to me but I definitely prefer the way Blizzard does it.
It would be nice to see them sell real-estate in-game for real money. Those people's houses or palaces would not give them any advanatage in the game but anybody could stroll over to the rich people's part of town and see what they've got. What would be even more interesting would be if the amount of real estate was limited and if they auctioned it off. I am thinking of World of Warcraft but I guess it could happen in another game. I know there is Second Life but I mean a popular game like Wow. I would get a kick out of seeing some guy's palace that he built on land he bought for $5,000 in the elite district of Orgrimmar or wherever.
I am middle aged, and named Richard, and I approve of the first two lines of this post.
Another middle aged geek here.

I donated $20 to you today because your blog, sweat & tears is worth a hell of a lot more to me than a My Little Pony mount.

I agree with a free market approach with nearly everything (as most Americans do), but blizz needs to take care of their brand.

Too many cute ponys and silly motorcycles running around my D&D world and I'll move on.
Hmmm, if you consider the sparkly pony to be equivalent to the motorcycle, which costs around 18k gold, Blizzard is indirectly selling gold for a rather cheap rate, cheaper than what the gold spammers in trade chat offer.
"I donated $20 to you today because your blog, sweat & tears is worth a hell of a lot more to me than a My Little Pony mount."

Actually, that means you think he's worth less than the mount ;)

At the time EQ was still 12.99 a month and the Legendary Server was 19.99 a month. It was the first EQ server where you got to take your items with you when you transfered. Prior to that if you did a server transfer you went naked and penniless.

There was a 3 month wait to get on that server, so yes it was a major success. They got special items that were specific to their server and they got the content released first. So because they paid more they got better service and better items.

No one really minded back then though.
Blizzard/Activision have definitely discovered this too and are obviously catering their games towards players with more disposal income.

I'd also add that they've realised that players with good incomes tend to also have less time to play and thus need more accessible and less time-demanding games which is exactly the direction WoW is going in (not a bad thing, just an observation).
I have two passions. Gaming and Music. I have done each for over 30 years. I will place any amount of money into my passion if I feel it improves my game.

Buying vanity items does nothing for me, however services which eliminate grinding does. I can use these items to circumvent the mundane aspects of the game so I can spend my limited playing the portion of the game I like best.
I'm only 26 and just buying my first home, so I'm neither rich nor middle aged, but I'm aspiring to both.

Getting older takes time, however ;)
We had several guys in our guild running multiple accounts back in the day. Usually they had tanks or healers on them. Each would have 3-4 guys from the guild who had access so they could switch over to fill whatever niche was necessary. Also meant that leveling and gearing up happened pretty fast on them.

This was back in vanilla when leveling took serious time and pretty much only warriors could tank at 60 and 50% of the guild was hunters or rogues so there was always spare DPS guys online who could jump on a tank or healer account.

Many in the guild had come from other games where the guild would have dedicated crafter accounts, etc...
"A lot of people DO think those are unfair, although probably not many of them play MMOs."


You are referring to 2 groups of people. Communists are one. The other is those who are unfortunate but instead of seeing it as their own lack of motivation or ability they see it as the fault of society.

IF people had no incentive to earn more money (ie buying a nicer car), then why would they attempt to do so? Anyways, I think the failures and issues with commmunism are well-documented so I won't get into them here.

Interestingly enough, the countries that were/are communist are really not actually "communist" as most people think of it. It is impossible for a true communist system to ever work, and in practice never has. Also, in every instance the leaders (founders) have always made themselves more "equal" than the rest.

But digress. To get back to the topic, let me first state this:

Blizzard (or any game manufacturer) has the right to offer any and all services they wish. Its not an issue of what they can do, but what they can do and not alienate as many customers as it takes to lose the profit from the RMT. With Blizzard this is a bit different, as with SO many subscribers they have a much larger margin of error.

The way I see it, a company should aim to market items in a very specific light. A company like Blizzard has (so far) done this in the ideal manner, with items that have no gameplay effect. They have a solid and stable population of players, and have really no need to make RMT items "must-haves".

However games with far lesser production values, players, and profits has far less to lose. They see it as a gamble worth taking, that they will make more from the RMT than they will lose in subscribers/players.

This is even more prominent in F2P games. If a player is giving nothing to the company, then instituting RMT that may alienate them is risk-free. Option A)lose player (no profit loss), Option B)keep player, no purchase (no profit loss, potential for future purchase) and Option C)keep player, RMT (profit gain) all have one thing in common. There is no way they can lose income.

To be more specific, as long as they dont lose so many (or all) their players that they stop having any purchases all together.
Sorry, one last thing to add.


Despite the no-doubt greater profits from selling $25 ponies, this isnt mutually exclusive with selling $500 dragons.

As Tobold referred to, price differentiation is the way commercial companies maximize profits. For example instead of just having the Gap, they have Old Navy, the Gap, and Banana Republic. (clothing stores, all under the same corporation) Each caters to a different price segment, therefore getting the most money from each potential customer.

So WoW could have $25, $40, $65, $200, (etc) items. So you, the consumer, will always do one thing (assuming you are intending to purchase something. You will buy the most expensive item that you can afford/justify/etc. Ergo, through price differentiation Blizzard gets the maximum amount any individual can/will spend.

Personally, if I was Blizzard I would go a step further. Something that really sets apart certain products is limited availability. So if there were say, only 10 of one item per server, Blizzard could charge exponentially more for it.

It would be tough to measure what they lose by limiting it like this. And to make it feasible to execs I would assume that these limited edition items would therefore initially atleast be very expensive.

So now they have a $500 flying mount that is one of only 25 on the server, and its sold out very fast. What they could do is release these limited editions periodically and regularly. You enter a lottery for it each month and 25 are randomly selected.

These are just ideas, and as I write this I see flaws that some people would be very agro'd about.
The wisest advice I ever received, I now pass on to you:

Don't spend it all in one place.
Once again the myth of cheap mmorpg entertainment is repeated happily.

More hours you can spend gaming is NOT a possitive, despite how much you've had it reinforced into your that it is.

And I don't know why your so supportive of companies - what, do you think devotion to them means they'd take you into the fold or something? Your supporting something that when push comes to shove, wouldn't support you. How does that make sense?
@Callan S:
Once again the myth of cheap mmorpg entertainment is repeated happily.

More hours you can spend gaming is NOT a possitive, despite how much you've had it reinforced into your that it is.

I completely disagree with the author of the article you linked. The author measures 2 games (single player vs mmorpg) and assigns an arbitrary fun per hour rating for the game. As the author prefers the single player game, it scores better in terms of fun/hour.

Different people will have a different fun/hour score. For me, an mmorpg will be higher. For my brother, for example, the single player will probably have a higher fun/hour.

Also, Tobold is making a commentary on how companies have caught up with the fact that RMT = big $$$. The challenge for companies now is to implement this RMT in such a way as to not alienate customers.
"he challenge for companies now is to implement this RMT in such a way as to not alienate customers."

Considering that the f2p game Metin2 as an exmaple has over 7 million players in the western world the industry has learned that already.
Getting older takes time, however ;)

The advancement system of Real Life remarkably resembles that of EVE Online. ;)
Your post is well articulated Tobold, and I appreciate the legal, even moral, repsonsibilty a public traded corporation has to its shareholders.

However, I take Jonathan Blow and Chris Hecker's line on developers' moral responsibility not to exploit players. At some point - and this is more true of some social network games - the monetization of MMORPGS started to shift away from an egalitarian subscription model to one in which a player is essentially paying for pulls of a heavily abstracted slot machine arm.

I find gambling in general distatesful, and since the appeal of the often repetitive gameplay in MMORPGs stems from the same chance at reward, MMORPGs have always occupied a nebulous ethical domain for me. To leverage the mildly addicting gameplay of an MMORPG to generate impulse purchases for virtual items or advancement is repugnant and not something, as a student game programmer/designer, I ever want to be involved in.
Your post is well articulated Tobold, and I appreciate the legal, even moral, repsonsibilty a public traded corporation has to its shareholders.

A company has no moral responsibility to maximize dividends. Even if every single US citizen thought otherwise, the overwhelming majority of people don't and neither would the companies in their respective countries.

In the German constitution you find:
(2) Property entails obligations. Its use shall also serve the public good.

The leadership of a company has agreed to do a job. The job depends on the contract.

Usually it says something about long term success, not maximizing shareholder value.
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