Tuesday, July 19, 2011

Making the monies

I would like for a moment for you to imagine an alternate universe.  In this universe malls have booths at the entrances where you must pay $30 to get into the mall.  Once there you are free to shop of course, but you must pay for everything in cash as the mall does not take credit cards.  Does this universe appeal?  If malls from this universe were planted beside real world malls which would consumers flock to?  The answer is obvious:  Everyone goes to the malls that are free to enter and they buy things with credit cards... and pay very handsomely for the privilege in fees and interest.

Compare this to the various payment models for MMOs and you see some interesting things.  I liken the classic subscription model used by most MMOs up to a scant few years ago and still used by the behemoth WOW to my fantasy malls.  You pay a bunch up front but then you don't get nickel and dimed at each transaction.  The way real world malls work is a lot more like a free to play type financial model - you can wander in for free and they make money from the convenience demanded by customers.  In a F2P mall you see all of the goods marked up by 4% on the expectation of you using a credit card and of course you use that credit card because it is easy and convenient and you get points!  Mmmm, shiny points.

Looking at it like this it is as plain as day that the F2P model is the stronger of the two.  People are willing to shell out enormous sums on a whim for things as long as you make it easy to do so and let them pay only when they are getting something.  As any good negotiator will tell you asking them to pay up front is economic suicide; always get them to make the first offer.  When you tell them they can have it for $30 you lose people who might have bought at $25 and you fail to claim the $100 the next guy was willing to spend.  Companies who have swapped to the F2P model have universally reported drastically higher incomes and greater player numbers than would be expected from their previous performance.  Although they have not all become giants there is a clear trend that any game that is otherwise doing well suddenly gets a lot more profitable and gets more bodies through the door when it goes F2P.

You have to do F2P right for that to work, of course.  If you just sell the most potent and powerful items in the game for cash then you end up losing a huge chunk of your playerbase as there is no shortage of people who hate their accomplishments being dwarfed by newcomers with deep pockets.  Selling convenience is the ticket.  Faster advancement, better return on time, ease of use, these things people are quite willing to tolerate in others because they are invisible and never allow the new guy to suddenly be the best guy.  It is fine to sell some sparkle and shine that looks unique as long as the guy playing the longest and best is the most *powerful*.

You will notice that VISA and Mastercard weren't filing for government protection when the economy went splat.  They quietly sit there taking their 3% of everything, losing some money over people going bankrupt of course, but not nearly enough to break them.  They don't sell goods, but rather just convenience.  They let people make foolish decisions and get away with it and take a cut every time - what more robust business model could there be?  As long as people want things and don't want to wait their product will always be in demand.  F2P is the same thing; let them in the door and then charge them for convenience.

1 comment:

  1. Excellent post - love it. Any MMO looking to charge a monthly fee today is going to face an uphill battle, not only for the reasons you've mentioned above, but because generally anyone who is already subbing to a game like WoW isn't going to want to shell out even more money on a regular basis for a different game.

    The best way, it seems, to have a working MMO business model today is to have a completely free game - free to purchase, free to play, which has the item mall or customization mall to cash in. Honestly there have been a number of games I've loved where I've gone on PSN to purchase extras, and those are largely single player games. From DLC to even better armor (ie: Dead Space), it can be quite compelling when you're playing something you love.

    The only thing MMO makers would want to do is allow for texture streaming from the server. WoW's download today is massive - gig's upon gigs of data you have to grab before you can even launch the game. By coding the engine in a way that the game can play when only the exact zone you're in has its textures downloaded will reduce the player's time-to-play and also reduce the bandwidth requirements on their server. Guild Wars, the original Guild Wars which is nearly 7 years old at this point, did this.