MMO Weekly: The MMO Business Model

28 Oct 2010 at 01:21:53 by Jeff Hollis

Hello there, my virtual friends, and welcome to this financial edition of MMO Weekly.  In this edition, we'll talk about the business of running an MMO, and why that business is changing.  Whether or not this change is for the better, you'll have to decide for yourself. 

As I've discussed before, there are several prominent business models within the MMO industry.  They are:

• The subscription model.  In this model, the player inputs his or her credit card, and is billed regularly.  Most commonly, this is $14.95 a month, though there is some variety.  The playing field is completely even, as all content is open to everyone, and everyone levels at the same rate. 

• The free-to-play (FTP) model #1.  In this model, players must buy the actual game, but time in the game's virtual universe is free of charge.  Generally, a number of artificial impediments stand in players' way.  In many cases, players can't access all the content (i.e., the best content) in the game, and they level quite slowly.  However, if players are willing to buy some virtual unlocks/upgrades (again, inputting that credit card number) in the virtual store, these impediments are lifted.  All game content opens up to players, who level faster, and gain a number of additional benefits.  Note that there are a lot of variants to this idea.  Many game companies allow “VIP” players to permanently unlock/upgrade their accounts (essentially becoming subscription players).  Others force players to repeatedly buy more game time (though this method is rapidly falling out of vogue).

• The free-to-play (FTP) model #2.  In this model, players get both the game itself for free, and they get to log in and play for free also.  In every other way, however, it's identical to FTP model #1, above.  Basically, you have to shop in that virtual store to enjoy the best the game has to offer. 

• The free-to-play (FTP) model #3.  In the most common form of this model, players get both the game for free, and get to log in and play for free, much like FTP model #2.  However, the player can't unlock content or level faster buy purchasing some kind of virtual buff or upgrade.  Instead, the player is constantly tempted with limited edition upgrades, enhancements, and cool or cute pets, accessories, or other doodads.  (Would you like a new dragon-headed lamp for your house?  How about this new poodle purse?  It barks!  How about this red and yellow top hat? It's a limited edition, and won't ever be available again after the first of the month.)  This model is generally seen in kid-oriented virtual worlds, though there is some crossover into adult games.  

• The ArenaNet Model is the most innovative of the bunch.  ArenaNet, the makers of Guild Wars, charge players $49 for the box, and they can play for free forever.  Every six months or so, ArenaNet releases an expansion, again charging $49 dollars.  (They accomplish this by having two expansion teams working simultaneously.  In this way, each time they release one expansion, they also have another, completely different one halfway through its development.)   If you'd like some new, upgraded content, you need to buy that expansion.  Over the course of a couple of years, ArenaNet basically gets you to buy box after box.

Why am I telling you all this?  Because the FTP models are beginning to dominate the others, and the industry is changing right under our virtual feet. 

If you live in the west, you are probably most accustomed to the subscription model.  All the first, second, and now third generation of MMOs all worked on the subscription model.  However, an increasing number of third-gen MMOs are now switching over, away from the subscription model, and instead they are opting for FTP model #1 or #2. 

Why?  First, it started with near-dead games.  Anarchy Online, a troubled second gen sci-fi MMO, went free to play.  The game was near death, but didn't cost a lot to run.  Pretty soon, however, players returned in limited numbers to play the game.  It turned a profit.  Everyone in the industry noticed. 

Dungeons and Dragons Online, a game with a great pedigree and sloppy execution, improved after release.  Unfortunately, an MMO only launches once, and if it goes wrong, no one will ever really give the game a second look.  DDO was near death, then went completely free to play.  Players could download and install it for free, play it for free, and enjoy all the content. 

Much to everyone's surprise, this actually worked.  People began to play DDO.  The game avoided death, and apparently put up some decent player numbers.  More importantly to the development company, Turbine, players began to spend money buying virtual goods.  DDO began to make money. 

The trend appeared to be growing.  Lord of the Rings Online just recently went FTP.  The developer, Turbine, claims that LOTRO is second only to WoW in subscription numbers, but won't be specific.  If we take that at face value, it means that LOTRO was very likely quite profitable.  However, Turbine is the company that owns DDO, and they liked that experience so much, they took their flagship game, one they claim is the second most popular game in the world, and switched up the way players pay for it.   Obviously, Turbine thinks they'l make more money with a FTP business model than with  the traditional subscription model.

Part of my inspiration in writing this column is because I received an email, just this morning, indicating that Champions Online, the relatively new superhero MMO, is also going to switch to the FTP model.  Quite frankly, I expect many more games to start switching to some variant of FTP.  This is definitely a growing trend.

What does this mean for you?  I'll tell you how I think all this will shake out in the next couple of years. 

• I think you'll still have to “buy the box”, i.e., pay $49, for a new grade-A MMO. 
• That game will offer a VIP style account, in which you pay the subscription, and get access to everything.
• The game will also offer a FTP model that repeatedly entices you to pay a nominal fee for faster leveling and unlocking some super cool dungeons overflowing with loot.
• The game will tempt both VIP and FTP players with limited edition ornamental items.
• The game will also tempt players with a regular parade of new mounts, pets, and other convenience items.  While not tactical, they are more than just ornamental, and do give players some advantages. 
• If you are an FTP player, you'll sometime realize that you spent $40 on mounts, hats, quick travel gems, and invisibility potions in the past month.  VIP players will mock you.
• If you are a VIP player, you'll sometimes realize that you also spent $40 dollars, above and beyond your $15 subscription, on teleport rings, buffs to your gathering skills, and unique plans that let you build epic flying mechanical dragons.   Yep, you dropped $55 this month on an MMO. 

Of course, the above is only my opinion, and speculative in nature.  What do you think?  How will this evolving MMO business model finally shake out?  I'd love to hear your thoughts in the comments below. 

And that's all we have for this week, friends.  If you enjoyed this little ditty, feel free to visit us over at Coolorama.com, where we engage is this kind of unfounded speculation every day.  For now, ciao!

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