Tobold's Blog
Monday, January 27, 2014
The downside of the network effect

Telephones, social networks, and MMORPGs profit from something called a "network effect": Any new user makes the service more useful for the existing users. If you have the choice between several rather similar games and all your friends play one specific one, it is better for you to play that one. What people tend to look at less often is that the same network effect also works in reverse: Any player quitting a game decreases the value of the game for the remaining players.

I think that there is very little doubt left that MMORPGs as a genre are in decline. Not just this or that game, but the genre as a whole. It is rather unlikely that they will die out completely. But as a result of the gold rush boom years of the genre we do have an oversupply of games, which doesn't mix well with the declining network effect. SOE shutting down four MMORPGs is just the beginning. Even the new releases of this year like TESO, Wildstar, or EQN are more likely to cause other games to die than they are to grow the market.

The survivors will be the biggest, more popular games, or those who somehow managed to keep costs down. People frequently discuss development costs in the hundreds of millions of dollars for MMORPGs, but forget that they are also rather expensive to just keep up and running. And under a certain number of players, the monthly revenue falls to below cost, and then the game is shut down. While that tends not to go down well with the generation of entitlement kids, it is just simple economics. No company has any sorts of obligation to keep a loss-making game up and running, although sometimes they do for PR reasons.

Of course the decline is not inevitable. MMORPGs could rise again if somebody invented a new secret sauce to make gameplay more interesting. But over the last decade evolution of the genre has been slow, and people are increasingly growing bored of playing through the same old, same old, with just a fresh coat of paint. Many other gaming trends have come and gone, that really isn't anything unusual. The only difference is that previous genres declined quietly, because their decline didn't involve somebody having to shut down a server.

Once you reach a set number of friends, the additional impact of adding new people is minimal. What large networks do however, is suck new people in because those new people want access to the large pre-group. That is the problem with WoW over the last 10 years. It grabs so many people that all the other mmos have trouble getting their networks large enough to be self-sustaining. With less successful alternatives, genre development has slowed and player interest waned.
With a shrinking WoW player-base I expect more light to shine onto alternate games, enabling their networks to grow sufficiently to provide some competition and kick-start a resurgence mmos. We can't have a healthy mmo scene without a diverse range of gaming options
So here's a question: Has WoW's success moved the genre forward or held it back?

On the one hand, these games are very expensive. I feel like many of these games would not have been funded if not for the "potential upside" that WoW showed was possible.

On the other hand, the most expensive games would seem to be the most generic flops, adding nothing to the genre. Worse yet, the vast majority of those games have been either WoW-clones or at least extremely similar in gameplay and game structure.
If the future for MMOs is a handful of popular giants with hundreds of thousands of players and a multitude of small independents with a few hundreds or thousands, that will be perfectly fine.

No-one needs a network of millions of strangers to enjoy MMO gameplay. One server with a few hundred players creates an identical personal experience.
So here's a question: Has WoW's success moved the genre forward or held it back?

I remember that shortly before the release of World of Warcraft a financial analyst made an estimate of the total European market size for MMORPGs. World of Warcraft sold more copies than that total market size on its first day.

I do believe that if somebody released a very original MMORPG, he could do likewise and open up new parts of the market. Only as long as people keep making WoW-clones are they condemned to cannibalize from each other and drive each other to extinction. So your question basically is whether WoW is to blame that other game companies clone it. I don't think so.

No-one needs a network of millions of strangers to enjoy MMO gameplay. One server with a few hundred players creates an identical personal experience.

Your experience as a player isn't relevant. The question is whether you can finance a MMO with one server with a few hundred players. As long as players demand a certain degree of graphics and a certain quantity of content, the answer is no.
I'm sorry to see Wizardry Online die so fast - closure announced just over a year after launch. Maybe they they mistook 'fan of old-school RPG' for 'wants hardcore PvP'. At least TESO cannot make *that* big a mistake.

I'd argue that for visibility, WoW was good for the genre. But for advancement and health of the genre, WoW has held it back.

When one company/game dominates a genre so thoroughly as WoW does, the genre's development is held back because of activity by the Big Dog to maintain dominance. It's easier for the Big Dog to crush the competition than to constantly innovate.

Imagine a world in which World of Warcraft had no competitor at all. We would still have expected regular patches, improvements, and expansions. Compared to that situation, what exactly did Blizzard do to "crush the competition"? I never heard of anything like Blizzard suing their competitors over the use of elves in their games. Tell me just ONE example of Blizzard doing anything anti-competitive that they wouldn't have done if there were no competitors around!

WoW did not crush its competitors. The competitors cloned WoW and because of that failed to create a sufficiently independent product with a new market.
I think we're looking at the New Thing on the horizon right now, and it's Destiny. The next sufficiently interesting MMO that manages to beat WoW is going to look nothing like it's forebear. The only way Destiny can fail will be if it's market penetration via consoles holds it back, but something tells me it's going to innovate both in terms of what we think a console game can do, and also change our perceptions of how an MMO can succeed on consoles. I predict a flood of dozens of Destiny clones from 2015 through 2020 or so.

Also: my pet MMO conspiracy theory is that Blizzard rebooted project Titan in direct response to the new wave MMOs (starting with Defiance and culminating in Destiny) trumping their card before they ever got a product in an announceable state. Blizzard is smart; I am certain they realized that they needed to revamp according to the trend....they know their monster WoW has sucked up all the energy of the old MMO era, and wrung it dry.

/consirpacy rant off!
While I see that a company is not required to keep unpopular games, I sometimes have the feeling that they would rather close it forever than sell the IP to someone.
And while I can't speak for all MMOs, the ones I could look into the infrastructure didn't take that much technical resources to run ... it was quite often the software development/support and CR/PR that was the pricy component. Also some investors vastly overestimated the expected returns ... which I blame on WoW ;)
Tobold - I agree with this article but would like to offer some dates of Blizzard PR campaigns and patch drops that are quite coincidentally around competitor's dates to support the premise that Blizzard has been competitive.

I certainly agree with small, niche MMOs not having near enough income to make a MMO that people will accept. Once you add in the "OMG you need that at launch" features like pvE, pvp, quests, lfg, arena, bgs, public quests, crafting, ah, mail, forums, ... that IMO people expect, you can no longer pay for it with a niche audience.


While there are diminishing returns, I disagree with the "additional people not valuable arguments. A new co-worker, friend-of-friend etc is twenty times more likely to play the game with ten million subscribers rather than half a mil.


I think there are different but similar issues to network effect.

1) Economies of scale and scope. It does not cost twice as much to have twice as much server capacity.

2) Fixed costs - If twice as many people see Star Wars 7, there cost go up little but revenue doubles. Similarly, it costs the same to produce the MMO/expansion whether the costs are divided amongst a thousand or ten million players. A million dollar advertising campaign is ten cents per player if you have ten million and a hundred dollars per player if you have ten thousand.

So if an MMO doubles their number of customers, then their revenue doubles, their expenses go up by perhaps 41% (square root 2) and their development costs are unchanged. This also means an MMO with twice as much revenue can afford to spend far more than twice as much on development resources.

I.e. businesses with high fixed costs and high profitability are going to be very, very sensitive to sales volumes. Which will push the market towards a small number of large companies - "winner takes all."

Thing is that if you released that very original MMO people like Keen would deny it's MMOness on the basis it's not like the old games.

I don't think it's an originality thing. I think most people have 1 MMO they will ever play. After that they are immunized from getting hooked again even when they want to get hooked (see all the WoW fugees who get psyched for a game and then bail in two months.

WoW broke the damn and had access to all the MMO players who couldn't play an MMO because they didn't exist before. They had this vast virgin forest, and then they harvested the hell out it. All these clones thought they were harvesting the same forest, but when they got there it was just stumps and scrub brush.

The genre is heading back to niche status. And that's good for everyone. For people who love the genre they get to have games designed for them again, and casuals can move on to genres that aren't inherently manipulative and grinding.
WoW today is not the same as WoW of launch. It has incorperated into itself the best features of its own add-on scene and rival games.

WoW made massive strides at driving mmos forward but it was so good that it removed all competition and that means no competative pressures to drive development. Fortunately I think that conditions are now approaching a tipping point (enough mmo-players with WoW-burnout and kickstarter driving homebrew devs and ideas) and we are about due for a new explosion of mmo gaming where where new ideas games force themselves to the surface causing the scene to massively diversify.
No company has any sorts of obligation to keep a loss-making game up and running

Perhaps they do, if they sold you a lifetime pass.
I think you will find that in the legal small print "lifetime" is defined as the life of the game or the player, whichever ends up being shorter.

I agree with this article but would like to offer some dates of Blizzard PR campaigns and patch drops that are quite coincidentally around competitor's dates to support the premise that Blizzard has been competitive.

Blizzard's releases and Blizzcons have followed a rather predictable calendar. But even if Blizzard moved some announcement a month ahead to stay ahead in the news cycle, what does that say about the game of the competitor if a Blizzard patch announcement ends up being more interesting than their game?
@Tobold, the crushing of competition in the manipulation of release dates, patches, and whatnot for maximum effect. Blizzard never shows their hand until any potential competitor shows theirs first.

It is no accident that Blizz hasn't given any hints about when their next WoW expac is going to release until after all of their major competitors will have done so first. They say they release when the software is ready, but anyone watching the industry knows that Blizz wants to know when to drop WoD so that it has maximum impact on the release of Wildstar and TESO.

As for stifling innovation, the sheer volume of money that Blizzard makes from WoW has attracted more than its share of people who want to "out-WoW" WoW, making MMOs that are largely WoW clones. Dominating the industry also means that players and/or financial pundits expect an entry into the field to operate similar enough to WoW to entice subscribers away from the Big Dog.

In this respect, Blizz is in the Microsoft zone here. Love or hate Microsoft, their OS design dominates the x86 platform to such a degree that any OS with designs on wide acceptance by the populace expect the OS to operate just like Windows. Hell, even Microsoft isn't immune to this, judging by the reactions to Windows 8.

Again, like Microsoft in the 90's, Blizzard is able to cherry pick a few items they like from competitors/third parties and incorporate them into WoW. The biggest single innovation that WoW did do the past 5-6 years was the (cross-server) LFG, which changed the MMO industry almost overnight.

In spite of their dominance, WoW's innovations and/or additions haven't grown the industry. More than anything else, WoW created an artificial ceiling by defining the MMO industry to be "essentially like World of Warcraft" to the broader world at large.
Post a Comment

<< Home
Newer›  ‹Older

  Powered by Blogger   Free Page Rank Tool