Tobold's Blog
Monday, August 26, 2013
The dangers of trying to kill a giant

One of the enduring ideas in the MMORPG blogosphere is the one about the "WoW Killer", the mythical new MMORPG which steals all of the players away from World of Warcraft. Apart from that not having happened yet, the next bunch of contestants for the title of WoW Killer just discovered that if you try to kill a giant, the giant might unexpectedly make a move and crush you underfoot.

Blizzard started publicly contemplating turning World of Warcraft into a Free2Play game. Presumably just about the time that Wildstar and The Elder Scrolls Online get released as subscription-only games. :)

If WoW does go F2P, then they definitely will have to do something that won't interrupt their cash flow.

Even 5 million subs at $15/month generates $75 million a month.* That's nothing to sneeze at, and money that Blizz would have to put back in their coffers from other methods.

Kotick has to have something up his sleeve, such as pay to win, if he wants to get that lost revenue back.

*I went with the easy numbers rather than trying to figure out what the cost would be per country.
WoW is great for people who like it, which isn't everyone. It's not even everyone who's played it.

It's not only bitter ex-players who don't rate it all that highly, either. I liked it well enough, but I'd seen as much of it as I wanted after three months. I've chatted to many people in other MMOs over the years about the ones they've played and the view that WoW is fun for a while but nothing particularly special has often been expressed.

People become very loyal to (or stuck in) specific MMOs and I'm sure that no matter what other MMOs come along there will be a large number of players who will stick with WoW regardless. I'm not so sure that the reverse applies, though.

If WoW goes F2P I would imagine it will fare much the same as every other MMO conversion, albeit at a larger scale. A huge number of ex-players will come back to see their old characters and see who else came back that they used to know. Some of those will stick around but most will soon drift away again.

I don't believe that WoW has lost its recent millions of players and the much greater number of ex-players lost to churn over the life of the game, because those players decided that although they'd like to go on playing they couldn't bear to pay the $15 a month any more. I'd also be surprised if, after all these years, there are millions of would-be WoW players who've never played at all because they were waiting until the game went F2P.

Personally I won't play WoW regularly if it goes F2P. I might log in now and again but even that's not really all that likely. It's a good MMO in its way but there are a lot of good MMOs. I'm not sure that going F2P would either turn WoW back into the giant it was, nor produce anything like the income stream even three million subs would.

Plenty of room for new entrants in the field. They just need to be good.

Blizzard said there is always a possibility for WoW going free, but they feel that converting would not actually benefit them, since usually the revenues spike down after the initial f2p buzz has passed.

This is hardly the endorsement for F2P you think it is.
But WoW's revenue is already strongly trending downwards. At some point the expected rise in revenue after a Free2Play conversion (typically double or triple the revenue) would be useful if only to break the current fall.
I can't imagine that Blizzard isn't looking at how other F2P ventures are faring. D&D Online is the grand-daddy of F2P conversions and last I heard it's massive uptick in revenue eventually trailed off dramatically once the base had exhausted their potential spending interests. I'm sure Blizzard if cognizant of the fact that sticking a F2P model into WoW will shorten the game's long tail lifespan.
Well Bhag, if WoW went F2P, you'd have millions of people come back. Most might drift away, but there's no reason to uninstall it at that point. Hell, I'd probably pop back in to play on my twink rogue for a bit. There's a lot of people who would play for a price somewhere in the middle of $0 and $15.

As far as the burst and tail off, I don't know how interested they are in years of a few hundred thousand subs versus millions of players now buying stuff. In any case, the fact that D&D online even exists 7 years after it flopped is a strong case for F2P. If they'd stuck with subs they'd be gone by now.

F2P conversion have, as far as I know, been successful. I would expect Blizz would be as well. Nor can I see it shortening a long tail - if you spend $15/month you expect much more new content than if coming back is free. But it is also a lot of work to convert. I'm sure Blizzard wishes WoW were f2p but it would (will?) be such an effort to convert.

But I expect Blizzard to do something next spring - mere coincidence with WS & TESO launching.

An argument by the "OMG no F2P" is subs provide more stability than F2P; considering how big the dip from peak to trough is during a WoW expansion cycle, I think it is a weak argument. But a bigger discount for a year would provide stability. My suggestion would be to offer an option, in addition to $39+15/mo, of $200 for box plus no subscription for the life of that expansion. (Perhaps with a way to pay over time)

As long as they count subs in millions and plan to keep delivering big-time expacs, they have no reason to go F2P.
I would be glad if WoW would go F2P, but I don't think they will do it. They already have fewer and fewer subscriptions. I like the game, but I haven't played it a while, but if it would be free it would be more tempting...
I think any conversion to F2P would be pretty far off in the future. It's just a question of scale. Your typical MMORPG assumes they would make less per player, but they can get 3-5 times as many players to make up the difference. This is fine for games with around 100k subscribers, but I'm not sure Blizzard can count on 20 million new players waiting in the wings.

The other thing is server capacity. A lot of these games launched with the capacity for 500k+ players. When they drop below 100k, it makes a lot of sense to go F2P at basically no additional server cost to cover the sudden influx of new players. WoW is not really in that situation, they don't have unused server capacity for 20 million players sitting around.

I think WoW will go F2P about a year after they have an expansion that sells fewer than 1 million copies. It just doesn't makes sense for them before then.
Samus: Well, they'd really need 9-15 million EU/NA clients, which I think is feasible. You are probably right and this is waiting in the wings, but what if, just what if, they kept it both ways.

You can pay your sub and you get all content for free, and $15 in play money a month, then if you want to spend more than that, super. Meanwhile, you get hordes of fresh faces running around spending $1-10, which is $1-10 more than you get by maintaining exclusivity.

Thing is that the decay will accelerate if left it its own devices. I've seen multiple MMOs crash, and it's kind of a silent thing. Suddenly your guild is half the size it used to be. It gets boring. So more people quit, and then you start guild hopping trying to find one that isn't collapsing. Eventually you quit too.

Getting fresh people in will in that respect help keep the full subscribers happy.

You are probably right though.
Well if it goes F2P then I might give it a looksee! :3
It will be a long time before WoW even drops to one million subscribers. Even then that would be 9 million GDP per month in subs.

Remember that posters in this very blog demand that nothing more important than hats be sold on the cash shop because those falsely believing that f2p games are "free" demand absolute parity with patrons whilst not being prepared to pay a penny themselves.

With that in mind it will be years before the f2p model would offset the subs loss. Either that or Blizzard would have to slash new content development down to the levels of other mmorpg's (once in a blue moon).

There would need to be a dramatic and catastrophic change to force them into that move because the second they use the "free" tag, large numbers of subscribers would refuse to pay another dime and would whine and cry for pretty much anything even remotely desirable to not be allowed in the cash shop.

F2p means large numbers of subscribers suddenly refusing to pay any more, and of the new players it brings in......well if they weren't prepared to pay 9gbp for a sub they sure as hell won't spend that much in the cash shop plus the extra needed to offset all those lost subs!

I just don't see it happening.
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Let's put it this way: Even though there is a million f2p games out there, the, by a very large margin, biggest MMO is a subscription MMO. If you spend 10+ hours a week on doing something you don't care whether it costs $15 a month or nothing at all. Exception are pupils.
Tobold Stoutfoot said...
"But WoW's revenue is already strongly trending downwards."

Activision financial statements generally state that WoW revenue is generally between stable and small growth.
What's ironic is the WoW killer was WoW itself.

WoW's market dominance interfered with innovation. The entire customer base got bored and moved on.

Now Blizz is doing card games and Titan (lol, what short-sighted arrogance) is prob a f2p moba.

Congrats Blizz on killing yourself. I hope the money you made will pay for a nice funeral for the "pet rock" of the 2000's.
Not sure a lack of innovation was a problem. If they had made Wrath 2 I doubt subs would have declined add much.

Subs declined after they made changes that alienated a large percentage of users and combined with the counter productive guild perk system destroyed much of the social fabric which had been acting as a glue to keep people playing.

I think Hearthstone will tie in nicely with WoW and maybe bring new players to the game who were drawn in by the card game.

Titan is no rival and has been kicked well into touch. If it was sci Fi based as rumoured, it was never a serious rival to WoW.
"Activision financial statements generally state that WoW revenue is generally between stable and small growth."

This is not 100% true.

First of all, they only report total Activision revenue, they don't divide it out by game. That has gone down slightly on a GAAP basis, and gone down drastically on a non-GAAP basis. It is highly debatable which is more useful. GAAP was created to ensure companies cannot hide anything from investors, however does not necessarily give the most accurate financial picture. Non-GAAP tends to be a more accurate picture, but doesn't have standardized reporting.

Of course, all of this is moot because their revenue shifts so dramatically based on game release cycles. It would be more appropriate for a game company to compare sales of Black Op 2 to sales of Black Ops 1, rather than compare quarterly revenues which may or may not contain major releases.

One interesting thing they do state is:

"As of June 30, 2013, Blizzard Entertainment’s World of Warcraft® remains the #1 subscription-based MMORPG, with approximately 7.7 million subscribers."

This is later clarified as:

"World of Warcraft subscribers include individuals who have paid a subscription fee or have an active prepaid card to play World of Warcraft, as well as those who have purchased the game and are within their free month of access. Internet Game Room players who have accessed the game over the last thirty days are also counted as subscribers."

So we still don't know how many of those are actual subscriptions. However, one useful clue may be found in expenses:

Cost of sales - online subscriptions
Three Months Ended June 30, 2012: 71 million
Three Months Ended June 30, 2013: 54 million

This has gone down, but not dramatically. Certainly not enough to go F2P and balloon that $54 million cost into $200+ million.
IMO, while there is much validity, Nils commonly held point overlooks competition, whales and second.

E.g., even though I would happily spend $10 on a hamburger, I won't if there are places that will sell me an equivalent one for $1. I may even order from a pizza shop that is not quite as desirable when they are running 2-for-1 promotions. Economics' "consumer surplus" says that lots of customers are buying a product for less than they value it because the seller lowers the price to get more sales.

Whales: many people who are indifferent to spending $15 a month on a game are also indifferent to spending $30 or $45. $600/year is a lot for MMOs but not a lot of golf or skiing or scuba diving.

Not that many people have both the time and money for two MMOs. If you have RL demands spike or you have a primary MMO and you want a secondary/casual MMO, then you are much more likely to rejoin Rift or GW2 than a sub.

Interesting point.

I guess if WoW could get the re-subscription button in-game using that new store UI and perhaps add periods shorter than 30 days, they could capture more of those floating players.

I've always felt they would do well if they allowed those without a subscription to log-in but with heavy restrictions. At least let them log, walk/fly around and chat in guild chat rather than blocking them at the log-in screen.

If you can get them in the game world, interacting socially and make it very quick and convenient to re-sub for a short period, then I think you would see a lot more people dipping in and out who would otherwise pick up a F2P title for their fix.
wow goes f2p, people who prefer sub games(for a reason) move on to a game with a sub. MMO tourists join wow and lot of new sub games rise and have a pool of 5+ million people who like subs

wow goes f2p, people who prefer sub games(for a reason) move on to a game with a sub

I have serious doubts that this ever happens. Most f2p models have a pseudo-subscription option, for example you can still be a subscriber for SWTOR. So I doubt anybody left SWTOR because "it is not a subscription game any more".
I don't think there is a danger of sub fans moving to another sub game.

As I said before, the attitude of those posting on your blog seems to be that they will keep playing the game but refuse to take up the pseudo subscription option because "it is free, so I shouldn't have to pay".

Although granted that is almost as bad as not playing the game at all.

Would love to see the percentage of Rift or TERA subscribers that moved to the pseudo sub after it went f2p.

In my experience a lot of cash shop items tend to favour the new player - xp boosts etc. In an old game like WoW with such a large number of end game players, the cash shop items and pseudo sub bonuses would have to include valor point and rep boosters.

The entitlement that comes when you add the "free" tag and the mass of freeloaders demanding parity with patrons will lead to a massive row about pay to win.

Will take a lot of diplomacy to make that work.
Revenue is not entirely subscription driven. The item store has been very sucessful at offsetting reduced subs.

Also consider that July 2012 revenues would of been supressed due to the impact of the annual pass (statements indicate it was treated as pro-rata revenue reduction), thus it would act as a favourable year-over-year variance.

I'm still searching for the quote on stable revenue from earlier this year. Hopefully I can find and post it.
All mmorpgs come out as subscription, then go to free to play. It's a way of scooping up revenue from the early adopter "Hey, look at me I'm playing the latest game!" demographic. Of course they leave to go to another game so they can be so cutting edge in playing that first, so that revenue stream runs out and they drop to free to play.

This is just business as usual.
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