Tobold's Blog
Wednesday, July 21, 2010
The million-subscriber MMORPG

Some weeks ago Ayane from Moon over Endor posted a well-documented list of upcoming MMORPGs. I don't really keep up to date with the various announcements, as video games not always make it from announcement to release, so my interest in new games usually starts with the beta. But I must say that from what I read about upcoming games like Star Wars: The Old Republic, Guild Wars 2, or Final Fantasy XIV, I'm cautiosly optimistic that we might approach the next phase of MMORPG market development: The phase where we get more than one million-subscriber MMORPG in the western market.

While right now several games claim to have over a million "players", most of these are Free2Play, and simply count everyone, even if they just created an account once, played for 5 minutes, and then uninstalled the game. Of the monthly subscription games only a few games even sold a million copies, and only World of Warcraft managed to hang onto over a million subscribers in the West for more than a year. That has led some people to say that WoW is a special case, and no future MMORPG will reach the million-subscriber level of success. I even have a bet going with syncaine, who claims not even Blizzard's next MMORPG will retain over a million subscribers after 6 months.

I believe that the MMORPG market is quietly growing. As mentioned previously, the apparent stagnation of World of Warcraft at somewhere around 11 million subscribers (of which an unknown number, probably above 5 million outside Asia), combined with still strong sales means that there is a growing army of ex-WoW-players. That means the potential market size is probably already larger than 10 million players in the USA and Europe. Thus a "next big thing" game capturing 10% of that market isn't really that outlandish.

What I believe will be the important factor for success is not this or that feature of a new game, but rather old-fashioned execution. The phase in which MMORPGs could afford to launch half-baked and full of bugs is definitively over, and I would claim that many of the spectacular failures in the past years had more to do with quality than with features. This is one reason why I am optimistic for the future. Not just for Blizzard's next MMO, which is still far out, but also for games like SWTOR, GW2, or FFXIV.

So will that get us some radically new gameplay? Well, yes, eventually, but that is more likely to be an even later phase. We *first* need to have a couple of million-subscriber games or similar financial successes for games without monthly subscriptions. Because a game with a million subscribers and a classic cost structure brings in about $200 million a year, and only if that is a level of success which appears possible will companies be willing to spend over $100 million on the development of a new game. Which is the kind of money needed to be competitive in terms of polish and looks as AAA-game. I think at first companies will play it safe, and SWTOR will be a lot like WoW with jedis and voice-overs. Only after the market has seen several big and successful games will newcomers feel the need to differentiate and design new sorts of gameplay that aren't based on levels, and quests, and static abilities on hotkeys. But innovation might be closer than we think, Guild Wars 2 has some interesting ideas on structuring the flow of the game differently than classic quests do, although of course GW2 isn't subscription-based and thus is a bit out of my million-subscriber game competition.

So I do think that MMORPGs still have a bright future. Only it will take some time to develop. But if I look how the genre has grown in the last decade, I'm quite optimistic of seeing further growth and a lot of interesting games in the next decade. In 2020 the million-subscriber MMORPG or games with a similar financial success but different business models will appear less exotic than they are now.
I think WoW was the first MMO to popularize the genre. The easy gameplay coupled with cartoon-like graphics appealed to a large cross section of the public like no other MMO that had come before.

I also think most people continue to play WoW out of habit and to be with friends within the game.

Can another MMO match WoW's success? I doubt in the near future. The only big budget MMO that could possibly come close is SWTOR and I predict that will only achieve a maximum of 2-3 million paying players before settling in to a lesser number.

The Star Wars universe is a strong draw but still does not have the mass market appeal of WoW to people who do not normally play games. Many of my WoW playing friends (I do not play WoW anymore) have this as their only PC game installed on their hard drive and wouldn't even consider playing other games.
I hope there are more choices with excellent execution.

Can you recommend any good sources on the economics of MMOs and specifically how many developers they can support? E.g., Did I read here that Blizzard gets about $7/user/month after direct expenses? About how many developers can $15m/month gross revenue support?

There is much whining in the EVE forums about there not being 300 developers on EVE. I just don't see 350k subscribers can support near that number.
You know, as much as you and most gamers decry WAR and AoC as "failures," those games turned a profit in their first year. How many businesses do that?

You are a gamer, and from your point of view you assume developers are "learning from those mistakes." From an investor's point of view, those were successes, and it's more likely they will focus on flexible server availability (to streamline those profits) rather than game innovation.
Samus, did those games turn a profit as in pay off their entire development cost and have a net income from concept to execution, or simply turn a profit as in the income for the year was greater than the outlay?

Given the time and cost constraints on starting up a big MMO these two things are drastically different and I would be blown away if those games you mention actually paid for the total investment to make them in a year. Investors don't want companies to just barely run in the black after being a giant money pit for years to get up and running.
AOC sold a million boxes by day one, give or take. Say they make 25 bucks a box. That's 25 million in revenue day one.

Say half that million actually paid 15 bucks after the first month. That's 7.5 million. Now AOC crashed pretty hard, but even at 100000 steady players that's 1.5 million in revenue a month. that's 15 million for the rest of the year. So they probably easily cleared 40 million in revenue in year one.

AOC cost around 30 million to develop. Say 10 million to fix the game, run the servers, etc. They easily broke even in year one, and that was on an unmitigated disaster! In fact they've probably turned a profit that would be considered a respectable success in most other industries. Funcom hasn't declared bankruptcy quite yet.

It's napkin math, but the napkin math would indicate that it's pretty hard not to at least make your money back on an MMO as long as you hype it up as much as possible.
Yes, I'm talking about covering their entire development costs. I got some different numbers than Toxic because I looked at revenue and subscriptions in the first 6 months. While both games settled at around 100k players eventually, most people who bought the game stuck around for a few months.

Both games sold over 1 million box copies, so there you have $50 million in revenue. Both games averaged over 500k subscribers for the first 6 months, but we'll go with that. So that's another $45 million in revenue in subscriptions. Overall, both games likely passed $100 million in revenue in their first year.

I can understand your surprise given how the gaming community has treated both games like huge failures, examples of what NOT to do. But that is only in relation to expectations (crazy expectations set in comparison to WoW and not other games). Clearly there is a very profitable potential market for MMORPGs which sell 1 million+ copies, even if they only keep around 100k subscribers long term.
Interestingly, I have to wonder what it would be like if WoW never existed and WAR and AoC had both released with the same numbers.

In the absence of WoW, they would both be regarded as smash hits. We would currently be attributing their drop-off in subscribers to a lack of viability in the long term subscription model. "Nobody wants to stick around and play any game for more than 6 months," that's what people would say.

The issue is also how much they spent on development, both those games had HUGE development budgets, so you have to consider profit margins.
I think it's noteworthy to mention the game Vindictus that is being made by Nexon. After watching a few gameplay videos and reviews I think this game is definitely pushing the envelope as far as changing combat goes.
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