Tobold's Blog
Thursday, August 19, 2010
MMORPG business models and fundamental player decisions

I first found David Edery’s interesting post on aggressive Free2Play monetization via an entry from spinks on Buzz, but then Ravious from Kill Ten Rats also discussed it. And I couldn’t help but think that both posts were full of common misconceptions, which people tend to repeat whenever Free2Play is mentioned, without ever making a reality check on whether these are likely to be true.

The most profound misconception is that Free2Play are deliberately designed to be not fun, so as to force players to pay for items in the item shop. I pity the developers who would believe in that balderdash, because their games will mercilessly flounder. *All* MMORPGs have to be fun to start with, and that is independent from their business model. In fact there is very little difference between the developers of a monthly subscription game having to persuade you to keep playing to make their game profitable, and the requirements for developers of a Free2Play game. If players don’t like your game in the first place, you will not make money with it, regardless of your business model.

Another misconception is to believe that Free2Play games will automatically attract more players than paid-for games. This assumes mythical players who have a lot of time on their hands, very little money, and no alternatives what to do with their time. It is obvious that this isn’t the case in the real world. If you include Free2Play games, there are now hundreds of different MMORPGs around. And each of them requires a serious time commitment. Thus regardless of how their finances look, time constraints affect all players. They can’t play all games at once, and thus must at one point make a conscious decision to play a specific game.

Thus I believe the matter of business models for MMORPGs is best approached by looking at the fundamental decisions a player has to make for him to become a “customer” and generate profit for the MMORPG company: The player has to decide to try out a game, the player has to decide to stick with the game for a certain duration, and the player has to decide to pay for the game. These three decisions are universal for every type of MMORPG and business model, but the business model affects how these decisions are linked.

Consider for example a major MMORPG release of a game with a monthly subscription, e.g. Final Fantasy XIV releasing next month. Unless a player got into the beta, he will have to make the three decisions at the same point in time: By deciding to buy the game he automatically also decides to pay for the game, and the decision for how long to stick with the game already is partially answered by having automatically already paid for the first month. Thus in this case buying Final Fantasy XIV requires a certain commitment of time and money from the player, which is a leap of faith if that player hasn’t had the opportunity to test the game before. An open beta, or later in the life-cycle of a game a free trial, separates the decision of trying the game from the decisions to pay for it, and to stick with it.

Note that the decision to try a game usually has to be taken only once. The decisions to keep playing and to pay or keep paying recur regularly. If I buy Final Fantasy XIV and play it for two weeks, and find out I hate it, I will make a conscious decision not to keep playing, and not to keep paying, and will cancel my subscription. In a monthly subscription MMORPG I might make the decision whether to play every day, but the decision whether to pay only pops up once a month. Multi-month subscriptions are priced cheaper, because the company is interested in you *not* having to take the decision on whether to keep paying. If you paid for 6 months and stop playing after one, it is your loss and the game companies gain. Nevertheless the company of course would prefer if you continued to make the decision to keep playing every time you think about it, and in consequence would decide to keep playing not just for one subscription period, but for years to come.

In a Free2Play game the decisions are even more separated. First a player decides to try the game, but the barrier to entry is low, his required commitment is low, he just needs to download the game and create a free account, and play. Then he must like the game enough to make the decision to keep playing. And once he is thoroughly into the game, he must make the decision that it would be even more fun if he only had this or that item from the item shop. While the decisions to keep playing or to buy something from the item shop recur, the payment decision is not a regular as in the monthly subscription model. But the decision to pay *depends* upon the decision to keep playing, as nobody planning to stop with a game would still want to buy virtual stuff in it. If the free part of the game is not fun at all, the decision to stop playing will be done long before the player considers giving any money to the game company. Thus the idea that you just need to make a horrible Free2Play game in which all the fun can only be had by paying enormous amounts of money and you’d make lots of profit is rather ridiculous. Players pay only for what they like, and the Free2Play game company needs to design a game with the idea to keep the players in the game for a very long time exactly like the monthly subscription game company does.

On the matter of how “aggressive” you should monetize your Free2Play game, which David Edery defines as how much items with an actual in-game use you sell to your players, as opposed to just selling fluff, we also need to look at the same player decisions on whether to keep playing, and whether to keep paying. The often quoted problem is that of Player A spending top dollars on items that give him an advantage in the game, and Player B stopping to play because he feels he can’t keep up. That sounds very much like a problem unique to the Free2Play business model, but in fact it isn’t. You can have *exactly* the same situation in a classic MMORPG with a monthly subscription: Player A has already subscribed for a year, thus paid the game company more money, while Player B just started, sees how far ahead of him Player A is, and decides to quit, because he can’t catch up with him. The solution is the same for monthly subscription and Free2Play games, namely to have diminishing returns, so that the latecomer B always has the impression of catching up with Player A who spent more time or money. And to shield Player B from Player A in as far there is a direct competition between them. Allowing Player A with either more time or more money to mercilessly one-shot and corpse camp Player B to the point where Player B can’t progress in the game anymore is a design mistake, regardless of business model.

Thus if handled right you can very well sell players items that give them some advantage in the game, without that having too much of a negative effect *on other players*. What you need to avoid, and where a Free2Play item shop can really err and destroy a game, is to sell items to players which negatively affect their decision to keep playing. My favorite example there was the sword I bought in Free Realms, which was significantly better than the best sword I could create after having leveled mining and blacksmithing to the maximum. The problem is not some other player having a mightier sword than me (I’m quite used to that from every other MMORPG I play), but the fact that buying the sword makes a part of the gameplay I enjoyed obsolete. Thus, selling players access to a new dungeon where they can earn a new treasure is a good idea. Having that dungeon in the game for free but selling the new treasure directly to them, so the players don’t need to do the dungeon any more, is a bad idea. If my decision to pay the game company for an item leads to that the next time I have to make the decision on whether I want to keep playing I decide not to, that is a bad item shop design. You can sell players items that accelerate their progress in the game, to enable players with more money and less time to catch up with the others. But you can’t sell them items that *replace* that progress completely, because then there is no game left to play, and the player leaves.

And again that basic concept, while looking like it was specific to Free2Play games, also applies in slightly modified form to monthly subscription games. Handing out easy to get epics from heroics and thus making several raid dungeons obsolete is exactly the same design error as selling those epics in an item shop and making raid dungeons obsolete. It touches the fundamental design problem of progress-based games: Any progress you make is likely to reduce the attractiveness of the content which is now too easy to contribute to your further progress. Whether that initial progress comes from spending time or from spending money doesn’t make that much of a difference. The question is in how far the progress made makes it likely that a player decides to stop playing, because “there is nothing fun left to do”.

In summary, when designing a game, the developers have to take into consideration the three basic player decisions and ask themselves: Why would players decide to try out my game? Why would players keep playing it for a long time? And why would they give me money? And as these questions are not independent from each other, developers also must consider how the answers to these questions affect each other. Will players want to play your game so much they won’t mind paying for it every month? Or will the forced regular payment discourage them from even trying out your game? Different business models have different answers to these questions.
Well written, I agree an almost anything, but some very basic issues.

I do not think that heavily character-progress based MMOs should be the future. I think the story, and that is the world, should be the focus of the game and the reason the players continue to play, after the exploration / learning phase is complete, should be that they want to know what happens next (by pre-defined story, by player interaction, ..).

In such a game I see little space for 'item shops' as these also often hurt immersion. Even 'leveling potions' appear useless in such a game.

If you want to sell content itself you run into the problem, that players become angry if they have to wait for other players, because time is money, or that they cannot help each other, as they haven't bought the content.

What might work is to sell players a day, like every day you want to play costs 1 €, flat. A day running from 6am - 6am.

But that wouldn't be free to play anymore :)
My favorite "free2play" game is Kingdom of Loathing - there have been times when I got burned out in WoW, but I've played KoL almost every day for the last 3 years. I consider it to be one of the best designed games I play, even though it's a browser game, that can hardly be called an mmo.

Their business model is based on donations. For every 10$ donated you get a "Mr. Accessory" item, which can be equipped - it's a pretty decent piece of gear, especially for new players.

It's main reason though is being currency in Mr.Store. Each month there's a special "Item of the month" available, which can be bought for 1 Mr.Accessory. There are also a few items sold at all times, mostly vanity stuff like unique character title or avatar.

Since all these items can be traded, you don't need to donate at all to get them - you can save up and buy them from other players. And this is in my opinion the most important thing that makes it balanced - there's no division between donators and normal players. Sure, if you donate you get the item instantly, but there are plenty of people who are good enough at playing the market that they can get every donation item without ever donating. On the other hand there are people who donate over 100$ at a time and sell the items to other players. This keeps the economy rolling.

The way the "iotm's" are designed is also important - they often allow acces to some additional content, or give some unique and powerful effects, but are not necessarily the most powerful items in the game - there are still a lot of strong items that can be gained from other activities.

Achieving that balance is something most f2p games fail to do in my opinion.
Interesting read. However there is one aspect with sub vs f2p games that is affecting me the most, this is what i'd term:

The amount of time i have BEFORE i need to make a decision about whether i want to PAY and/or continue PLAYING.

This is a classic case, where i have WoW:Wotlk with a lvl 75 character, my sub is running out in 10 days . I do NOT have time to play in the next 30 days, but might have time here and there over weekends. I am now FORCED to make a call, suspend -completely- or renew and feel 'obligated' to play . If i suspend, chances are i won't "get back into WoW" for a much longer period, i will let it "lapse" until some really boring weekend. If i renew anyway, i might not actually play either, or if i DO play i will feel i'm playing "because i'm paying" NOT because i'm having fun.

In contrast in a F2P game, (and i must add this INCLUDES "box-price" models like GuildWars where you pay for the box initially ) , i NEVER had to make that decision EVER. If i don't have time, i don't play, i don't have to make a call in the lines of "DO I REALLY LIKE THIS GAME ENOUGH TO WARRANT THE TIME CONSTRAINT" ?

So an example is a game like Global Agenda and even GuildWars. I bought the game[s] ages ago , i played them, ran out of time or got distracted with other games and maybe a month or two later i return and playing it because it is FUN ...i don't have to manage my time or "cut corners" or feel guilty if i play or not play.

If you are a hardcore gamer with plenty of time, this scenario DOES NOT COME UP. You will play 100% and you will quit 100%. Subscription games do not allow for a grey area of "i like the game , but i want to play Mass Effect 2 for the next 2 weeks, what now? cancel or not? "
Frankly, I hate dealing with money, and its one of the reasons I dislike free to play games. The fact that I constantly need to be thinking about buying things, or spending money takes away the enjoyment of being able to just check out of the real world for a while, meanwhile, I just pay off my recurring monthly fee with the rest of my credit card bill, no fuss, no muss.
You ignore a massive difference between the two: a sub game collects equal amounts of money from all its customers, while a F2P game makes the vast majority of its profits from a select few, while the rest pay little if anything.

The design usually reflects this as well; which is why F2P MMOs are a horrible deal for 'serious' MMO players. The more you play, or the more you get into a game, the more you are going to pay if its F2P. The 'ideal' F2P game for a player is one you don't hate (so you still play it), but one you don't enjoy enough to really get into and start paying. Not exactly a great situation if you ask me.

The other difference has also been well covered on blogs; in a sub game the devs are interested in keeping you playing, in a F2P the devs are interested in keeping you paying. The two MIGHT be the same at times, but at times they are very far apart. I'd rather play a game where the devs are on my side (keeping me entertaining) rather than trying to figure out the best way to get more money out of me.
in a sub game the devs are interested in keeping you playing, in a F2P the devs are interested in keeping you paying. The two MIGHT be the same at times, but at times they are very far apart.

How could they possibly be very far apart? I could imagine Free2Play situations where you are kept playing but not paying. The reverse is impossible, nobody pays when he isn't playing.

The design usually reflects this as well; which is why F2P MMOs are a horrible deal for 'serious' MMO players. The more you play, or the more you get into a game, the more you are going to pay if its F2P.

Frankly, I find that Free2Play design a LOT more fair than the monthly sub design where the guy playing just one hour a week pays the same as the guy playing a hundred hours. In the monthly sub model the people who play the least effectively subsidize the people who play the most. I agree with your statement that this is great for the "serious" player, but it is rather unfair for the casual player.

The added advantage of the Free2Play model is that at times where you don't play at all, your cost is zero. In a monthly sub game you'd need to unsubscribe and resubscribe for breaks, and often keep paying for time you never used.
How could they possibly be very far apart? I could imagine Free2Play situations where you are kept playing but not paying. The reverse is impossible, nobody pays when he isn't playing.

Devs consider introducing either
1) a new region,
2) to polish some old region or
3) to add several new items for the item shop.

They ask the management. Management asks: What's more money?
Answer: The items.

There you go.

In the final end of all things you are correct here. Only playing player pay. But an item shops makes it much, much harder for the company to focus on the long term goal.
Tobold: Is it unfair that I get the newspaper every day and only read maybe 1 or 2 sections, and some other guy reads the entire thing, and we both pay the same?

Its fair because you aren't paying for what you read, you are paying for what you get. In a subscription game people are paying for the same access, how much they use it shouldn't be the determining factor in what is "fair." The same could be said of any subscription based service, monthly gym memberships, magazines, and so forth.
They ask the management. Management asks: What's more money?
Answer: The items.

You just got fired, because you gave the wrong answer, causing your manager to make a wrong decision. Unless the management asks "what's more money before the end of the financial quarter", the answer is probably NOT the items. That is extremely easy to prove by using the method from Kant: Just extrapolate your decision and imagine what would happen if in all future cases the company decides to only add items to the item shop, and never add any other content to the game. Obviously they'd be out of players in a year and bankrupt. Therefore your answer was wrong, and only based on your inherent dislike of Free2Play causing you to argue irrationally.

Is it unfair that I get the newspaper every day and only read maybe 1 or 2 sections, and some other guy reads the entire thing, and we both pay the same?

It is unsustainable. Come the next recession the other guy reading only 1 or 2 sections will notice that this isn't an effective use of his money, and unsubscribe.

Which is exactly why Blizzard changed tactics, and starting with WotLK and increased in Cataclysm is designing World of Warcraft *more* for the casual players and *less* for the hardcore players. The hardcore players are Blizzard's worst customers, being most vocal, being the fewest, using the most resources, and not contributing their fair share to Blizzard's revenue from World of Warcraft. Fortunately it turns out a game can easily ditch them without it having any negative effect on the bottom line. Just watch how many people will buy Cataclysm.
Ok, I'll tell the management the complete story:
I don't know whether or when polishing the old zone will increase sub numbers, but my guess is that it is good for the game.

Now, to get you (boss) some good bonus this year, I suggest to create more items for the shop.

Now, a perfect company doesn't fall for such mistakes. But those companies aren't perfect and humans aren't either.

I also think that there isn't really a problem here that you cannot solve with a modified sub system and better game design. I wrote about it.
"How could they possibly be very far apart? I could imagine Free2Play situations where you are kept playing but not paying. The reverse is impossible, nobody pays when he isn't playing."

Exactly. If a F2P has too many of it's players playing but not paying, guess what happens? 'Optional' XP pots, boosts, items, etc are not nearly as optional anymore. What happens when too many sub players stop paying? More content gets added to get them to return.

The reason I said at times its the same is because a F2P game can add and sell new content as well, but we all know how long creating a new instance takes vs creating a new XP pot or pony skin for the item shop takes. And none of this is theoretical either; there exist countless examples of such practices all throughout F2P history.

But you are correct, it's far easier to cater to the casual market than it is the hardcore, so it makes sense for Blizzard to sell ponies to farmville players than to try and design instances for veteran EQ players.

Usually the hard part is attracting a crowd to begin with, but thanks to the Blizzard name that has been built up over the years (on the strength of catering to the hardcore, who bring in and create buzz to attract the casuals), Blizzard is in a good position to pull it off.

At least once anyway.
I guess I'm old-school because if I deem an MMO worth my time, I don't mind paying $15/month. What I like about that is I've made one decision to pay, and now I don't need to keep making decisions about paying.

With F2P I am constantly asked to decide to pay for something -- new content, XP potions, a mount, character slots, unlockable class types, etc. So I am actually more averse to F2P than I am to subscription models.

Sadly, I think the future is a mix of the two if not out-and-out F2P. Even the market leader, Blizzard, keeps adding more extras to pay for.
I can't believe I'm saying this, but I agree with syncaine.

At the very least, a subscription model spends all their design meetings talking about making the game better, so you will stay longer. A free to play model spend a large portion of those meetings talking about the item shop, and what they can and can't pay for.

And I also have to agree that the free 2 play model is very susceptible to the flaws of humans. You can point out that allowing certain purchases is a mistake, but that doesn't mean they won't make that mistake. We are talking about hundreds of items at that shop, not one of them will be a mistake?

Both of these models are getting pressure from above, executives who aren't even gamers. They will insist that the game needs to be making more money, followed by either "get more subscribers" or "pull in more revenue from the item shop."

You said yourself that the free to play revenues come from the very few who spend a lot. Financially, the game is better off milking every last dime from those very few, even if it scares off half of the players who don't pay anyway.
I have a faint suspicion that many of you never even tried a Free2Play game. Your ideas of how a Free2Play game is designed does not resemble the least the design of the Free2Play games I tried.

Maybe non-Asians just don't understand item shops, the only game I played with a really bad item shop was from American developers.
My decision still hinges on whether I'm buying time or content. I will not pay for time, but I happily buy content. That is why Wizard 101, Guild Wars and DDO have money from me that no subscription or item shop game ever will. I don't buy fluff, I don't buy things that accelerate leveling, I don't buy loot, I don't buy time. I buy content, the same way I buy other games.
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Just a note on that newspaper sub analogy. Don't forget you can actually "return" to the newspaper at a later stage and read the rest (it does not expire). I do it all the time with Magazines, yes you sub to it, no i don't read everything in a given month, but over a 12 month period i eventually do. In contrast a Gym membership "expires", but that's why they lock you into CONTRACTS ..precisely because it's not sustainable past 3 months for the average "want to lose weight for summer" person.

So a subscription in an mmo subconsciously tells you "you must play NOW for as much as possible otherwise you might as well not play at all" .

That's quite a negative message to send for something that's considered a hobby or "entertainment". Even if you subscribe to say Cable TV , the moment you realise you don't use it you will cancel...right?

So even for the marketing dept it must be a huge waste to lure people in , and they might even like the service, but they drop the service as soon as they determined they are using it "less optimal" than the monthly sub "suggests" [and this is all subjective though].

THe point being here, i do believe a sub can detract and influence someone's long term "sense of fun" of the game.
"I have a faint suspicion that many of you never even tried a Free2Play game. Your ideas of how a Free2Play game is designed does not resemble the least the design of the Free2Play games I tried."

Which games would those be? Because Atlantica Online, Allods, RuneScape, DDO, among a few, all fall into the pay/play scenario I described above, and those are some of the biggest and 'best' F2P games out, and those don't include the ultra-competitive Asian F2P games that are blatant 'pay for power' style games.
Okay, well, tell us what the good examples of free 2 play are. I can think of plenty of bad examples, like Allods or FreeRealms. There's a whole group of other free 2 play games whose only design decision was "copy WoW." DDO doesn't count because it was originally designed as a subscription model game.

There are dozens of free 2 play games. If it's a viable model, surely at least one of them got it right.
Best article you've written in a while Tobold. I think a fine example of what you're describing can be found in Runes of Magic, which by all accounts has been quite successful.

The game is fun without ever spending a dime. You aren't penalized for not paying. But paying will get you access to things that enhance gameplay, either cosmetically or functionally.

If someone were to argue that Runes of Magic is not fun without spending money I'd really have to laugh.

I think a lot of the negative attitude towards "fun" in F2P mmos stems from the asian grinders, and Allods.

Allods pulled a real bait and switch, where the game was fun without ever spending money, until they started patching out the fun unless you paid money. The result, of course, was a huge outcry and a relative lack of success in North America, but it really tainted the view of a lot of people towards F2P titles and business practices.
Tobold, you seem to be imagining a game where you pay by the hour.

But in an item shop type game, you pay over and over for whatever items you want. If you then choose to play very little then you are still not getting as much use out of them as a more frequent player would do.

There is a concept of crippleware, where the F2P player has to pay the equivalent of several months worth of sub to unlock similar content to that which a subscriber would pay. Is that still a good deal for you?
Was paying $15 monthly subscription for Alganon a good deal to you? Was paying a lifetime subscription for a game that then went bust a good deal to you?

My point is that you can't judge the whole of the Free2Play business model by citing the worst examples and showing what bad deals they are. Not if you then compare them only to the good deals of the monthly subscription business model. There are a *lot* of monthly subscription games where you are basically being cheated and robbed already the moment you buy the box.

Look at Runes of Magic, Wizard101, and DDO as three examples of how different Free2Play business models can work.
I good post. I was discussing the commercialization options for my in-development MMORPG with my community recently.

I was originally set on a subscription fee to unlock part of the world, much like RuneScape. However, having played some cash shop based MMO's recently, I was inspired to choose this as my business model.

I realize cash shops are immediately frowned upon by most users, so the fact that one even exists will be hidden from players until they are a few levels in, and hooked on the game.

One comment mentioned offering monthly items; I am planning to do this too. I remember seeing it in Gaia Online, I think it was, and was surprised that my friends would happily fork out $20 for a single item, when a $15 subscription fee was often lamented. I feel as if since the player feels like they are getting something, well, "physical" for their money that they are more willing to put more money into a game.

A combination of selling items, gold and some minor game functionality (custom guild capes, etc.), as well as the monthly item is the model we settled on in the end.

Of course, game play comes before all of that, and is certainly my main focus. Without that, like you said, an MMO won't make any money.

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