Tobold's Blog
Wednesday, October 07, 2009
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.
Also if you look at it closer, the actual cost to you is even less. That cost isn't just for playing WoW, but also includes the computer and internet access for everything else you do on a computer, from checking e-mail, writing this blog, homework, research, whatever. So some of your costs is stuff you would probably do anyways. So you can't really factor that into the total cost to play the game. When you go to a movie, you don't really come away with anything except the entertainment time.
EQ did try the $100 dollars a month thing once. I've no way of knowing how successful it was, but Sony's premium servers ran for some time and by all accounts did have a population large enough to field a Time capable guild.
I disagree on your "Rolls Royce Theory": Companies can't just produce excellent MMOGs and charge a $100 monthly fee. While it is ok for a car manufacturer that only very few people drive a very expensive car, it is not ok for an MMOG company to have very few people playing the game.

The reason behind this is that a lot of the value of an MMOG comes from the people playing the game, especially your RL friends. Nobody wants to play an MMOG with deserted zones and no players to group with. Thus a game like that would eventually fail.

However, quite a few people want to show off their wealth by driving an expensive car. To let players do such a thing in an MMOG you can provide an in-game Rolls Royce, i.e. an expensive mount/tabard/fluff you have to pay for with real money. So we will probably see rather cheap monthly fees and premium services on top of that.
I think F2P is breaking that up.

Currently I have a sub to SWG (old-fashioned model), 2 subs to Eve (one paid in money, one paid in ISK, in time both will be paid in ISK), and a free account with DDO.

Of the three games Eve and DDO which will cost me less than $15 per month will be the games I go forward with.

Not only is it nice to save money but it's actually a mini-game in itself to finesse the system so that you get paid benefits for free.

Having said that I'm very much looking forward to SWTOR which I think will be $15 per month plus microtransactions and am expecting to pay $25-$30 a month to play that.
don't underestimate the psychological factor of the price.

I'm sure people will think in advance if the fee is 10 the game is crap. on the other hand, if the fee is 25 then they will think it's too expensive.
Umm so if you didn't play wow you wouldn't have PC ,nor internet connection? Really?

I maintain a very adequate gaming machine , I rebuild it completely (motherboard/cpu/memory/gfx/ at least one new hdd/new case sometimes) every 3 years or so, and replace gfx card every 1-2 years.

Complete rebuild runs me usually $700-$900. GFX card runs $150 -to $200 (and I sell old ones) .

I use my PC for many other things besides gaming , and really the cost of other components would be almost the same if I didnt game at all .So my only real cost for gaming is $100/year. Cost of graphics card over 2 years.And if I played wow my 4 year old graphics card would do.

I in fact spend more money on storage ( I download lots of movies and music) than I spend on maintaining adequate performance for games
"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."

I don't believe this at all. Everything I know of companies says that if they could get 30$ per player AND make the game as appealing as they can to the brainless masses, they would.

Personally, I'd pay 30$ a month for an MMO that was more tailored to my needs though. I've often advocated 'premium' servers in WoW. Ones where swearing in trade and griefing others gets you a permanent ban.
Actually... come to think of it, I'd even pay 30$ a month for a more difficult WoW server, where mobs had the same damage and HP as before the great dumbing down at the end of BC.
Actually... come to think of it, I'd even pay $30 a month for a more difficult WoW server, where mobs had the same damage and HP as before the great dumbing down at the end of BC.

I'd pay $30 for a premium WoW server in a heartbeat. Give me a guarantee that a GM would be available at all times, that griefers and other such types would be insta banned permanently. Give me more difficult content; from dungeons to raid boss encouters. Give the raid bosses an extra Tier of gear above what is offered on the carebear or normal servers along with more Legendary types of weapons or gear possibly.

This is how RMT should be incorporated in my opinion. Let the player decide how they want to play, and custom tailor the content around a "normal" and "hard" difficulty level. Then set up a few dedicated servers and charge players accordingly for being able to access the more difficult content and higher level gear/items.

Yes, I would pay extra for this type of service with no problem whatsoever.
So if it cost Bliz 200m from 2004 to whenever that figure was released, and they just collected 500m last year in profit, that's not a huge reinvestment into their game now is it? Less Ferarris and more content patches and I don't think its out of the question how other games can remain viable for MMO fans while WoW continues to collect casual gamers. Remember that WoW is a cash cow, not a competing MMO at this point.

And games like WoW or Aion only cater to one group (albeit the largest) in the MMO space. For anyone looking for skill-based PvP, or a working economy, or gameplay that goes beyond quest/ding/cap/endgame, the price or polish of those games is not going to matter. Polished skill-less PvP is still skill-less PvP, and whether WoW is $5 or $50 it's not going to draw people looking for something else.

Set the right budget and deliver a product those groups will enjoy, and you don't have to become a clone to stay in the business.
Gemstone IV (which has been around since the dawn of time) offers three levels of experience at different price points. Besides the fact that their game has no graphics (and thus, isn't REALLY a WoW competitor), their pricing strategy still reflects the magic number ($15). Taken from their FAQ:

The math is: Basic Subscription ($14.95) + Premium Subscription ($25.00) + Platinum Subscription ($10.00) = $49.95.
$2000 every two years is a lot for PC hardware now, and if WoW is the game you mostly play, you don't even need to upgrade every two years.

I think the $15/month price is fixed and we won't see that go any higher, so it will have to be RMTs on top of that to push revenue up.

To me the obvious way for Blizzard to increase WoW revenue is to push out expansions faster. I really think they could push out an expansion every year if they staffed up for that. Or maybe they do a big expansion every two years and in the off year do a mini, downloadable only expansion for half the price.
While your theory holds for paying $30 if I have one account to play WoW, it doesn't in the overarching "What I pay Blizzard every month" category of my monthly budget.

I have 5 accounts, between me, my wife, and my family (not counting an inactive one for my oldest son who is too busy to play). So an increase from $15 to $30 would be a substantial increase in cost for me, from $75 to $150 a month. Add in the expansion costs of $50 each and this is quite a bit. I would have to do without some bank alts and other such conveniences and cut two of my accounts. In my case, Blizzard would effectively break even from raising the monthly charge, as they would get less from me every month and less every 2 years for the expansion.

I've read somewhere that the average WoW player has closer to 2 accounts than 1, so I expect that there would be a number of others in the same boat as me.

While the cost is very low and easy to justify, it gets to be less of a no-brainer as the cost increases, and to what real benefit to the company?
What about profit margins though? Didn't you just blog that WoW brought in $1B and made $500M profit (50% profit margin)?

Increasing the fees only increases your profit margin (all things being equal of course) and in a time when so many people are in financial dire straights I think it would be pretty darn silly to show off such greed.

Even if the economy picks up again, unless you're actually going to give me more than what I've gotten for $15/m in the past, I see no way to justify it.

Heck, if games like AoC, WAR, EQ1, UO, DAOC, etc. are all still profitable, it makes even less sense to charge more. :p
I use to use this as justification on why I played MMO. More bang for your buck.

My work requires me to have high speed internet. I play other games besides MMO's so each one of those shares the total cost I spent on my PC.

So amount of $$ spent per hour is really low. You could also argue the money saved by playing a MMO rather than purchasing a new single player game every month.
I think your post is spot on - MMO designers have always realized that they are designing a game for a very varied audience; why would the players' spending power, or their desire to spend different amounts of money, vary any less?

Coming from a trading card game background, microtransactions and free to play games seem like an attempt to endow the consumer with purchasing freedom; players can spend as little or as much on the game as they want. In TCGs, the traditional philosophy in 'getting stuff' is you can either be good or rich; if MMOs, the new philosophy may be more "You can be good, rich, or have a lot of time".
Except my "computer" and "internet" purchases are not solely for the benefit of playing MMOs.

Those are sunk costs that I would make irregardless of my MMO usage.

In other words, quitting WoW won't save you those expenditures. They are fixed and while they ENABLE you to play WoW, they are not dependent upon it.

That makes them a sunk cost and as such, not relevant in my decision about how much I spend (or don't spend) on MMO gaming.

It's a mistake for MMO devs to think I'll willingly spend more based on how much I already spend on my other computing needs.
You know who already pays $30 a month for an MMO? EVE Online players with two accounts, or more. Which it seems like there are a lot of.

The ISK for monthly fees thing might skew the actual expenditure, but I'd want to know the actual numbers on that. Are the top players just playing for free because they have so much ISK? Or do they instead buy the monthly passes and exchange them for ISK to feed their empires?
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