Monday, February 7, 2011
Just over a decade ago Western gamers paid for their subscriptions to massively multi-player online games one month at a time and they were perfectly content to do so. Any gamer who dared to grumble about subscription fees was treated to fellow gamers reciting a litany of ways in which a MMOG subscription represented a true value. “You’d pay as much to go to a movie and buy some popcorn and a soda,” they’d say. “For about the same price, you’re getting hours of entertainment all month long.” They would talk about the expense involved in keeping servers lit and maintained, providing support and quality assurance, and moving the development process forward with content updates and expansions.
But revenue models have experienced an evolution in recent years and monthly subscriptions are no longer the only way that MMOG developers earn money to cover their expenses. Free-to-play games, once scoffed at by Western gamers with “you get what you pay for” attitudes, have achieved enough mass market appeal in North America and Europe that several once prominent MMOGs recently converted to some sort of free-to-play or “freemium” model to bolster their profits.
Where revenue models are headed is the subject of some debate, and two recent editorials took a look at both sides of the coin—the move to free-to-play versus the longevity (at least in the West) of the subscription-based MMOG. We can only speculate as to where MMOG subscriptions (or the lack thereof) are headed, but we can show you where they’ve been and how they’ve evolved to meet the demands of an ever-changing market.
Monthly Subscriptions Set the Standard for Early MMOGs
In the beginning there was the subscription-based MMOG. Most gamers agree that Meridian 59, launched by the 3DO Company in fall 1996, was the first true 3-D MMOG or graphical MUD. It set a standard that other games would, and still do, follow--a monthly subscription model. Meridian 59 launched with a box price of $39.95 and a monthly subscription fee of $9.95 per month for unlimited play. (For what it’s worth, it also delivered up the Internet by providing a free copy of Netscape Navigator 2.0 Personal Edition.) By the close of the third quarter 3DO announced record profits and, even though those profits weren’t directly attributed to the launch of Meridian 59, the idea of a subscription-based MMOG gained significant momentum.
About one year later, Electronic Arts served up Ultima Online, calling it “the most ambitious and widely anticipated online game ever developed.” Bringing people to the Internet was a necessary part of online game development in 1997, and EA bundled the Internet with UO much like 3DO did with Meridian 59, including a free trial of the ISP AT&T WorldNet as well as a copy of Netscape Navigator. And, just like its predecessor, UO’s monthly fee was a flat $9.95 per month. UO introduced the idea of the free trial, making its monthly subscription kick in after and “introductory period.”
"We chose flat-rate pricing because we wanted to provide an immersive game experience that didn't require players to keep one eye on the computer monitor and the other on the clock," said Chris Yates, then the vice president and chief technology officer of UO’s developer and subsidiary, ORIGIN Systems, in the company’s press release. "Internet gaming of this magnitude is new to most players. We wanted to offer a compelling price point to encourage players to get online and into the game."
Websites, news articles and press releases for older MMOGs have faded into Internet obscurity, but as best we can tell Sony Online Entertainment was the first, and perhaps the only, MMOG publisher to increase its subscription price well after its launch date. The most commercially successful MMOG to launch in the 1990s, EverQuest delivered the virtual world of Norrath to gamers in March, 1999 with a very Walmart-esque monthly subscription price of $9.89. By early 2002 EQ was facing competition from newcomers Asheron’s Call, Anarchy Online and Dark Age of Camelot. In April, 2002, one year after releasing a $10 special classic edition box designed to make EverQuest accessible to casual gamers, EQ raised its monthly subscription to $12.95, although SOE offered a reduced price for players buying subscriptions in multi-month blocks.
By the time EverQuest II and World of Warcraft launched, $14.95 had become the standard monthly subscription price for pay-to-play titles, and remains so today, with some strategic variations and package pricing thrown into the mix.
Enter the Free-to-play MMOG
The browser-based Java MMOG RuneScape stands as one of the early pioneers of free-to-play online gaming and its popularity is undeniable. The game was recognized twice by The Guinness Book of World Records as the “Most Popular Free-to-play MMOG” in the world. RuneScape pioneered what’s known as a freemium payment model--base gameplay is free but members can opt to pay a monthly subscription to unlock additional content. RuneScape’s developer, Jagex, made its premium services available in early 2002 and within a week after launch over 5000 players subscribed making RuneScape one of the largest pay-to-play Java games in the world at the time.
Another free-to-play title that struck a chord with a North American audience came from Nexon, a company headquartered in Seoul, South Korea. Its first contender, the 2D side-scroller, MapleStory, opened its virtual doors in Korea in April of 2003. It took over two years to make it to North America, but the game boasted 3 million registered North American users (87 million worldwide) by late 2006. MapleStory is probably the game responsible for introducing many Western gamers to the idea of microtransactions. It features a Cash Shop where players use real money to purchase virtual goods such as character appearance items and enhancements. MapleStory’s popularity with its demographic remains strong. In late 2010 Nexon America announced that more than one million players had made microtransactions in the game.
MMOGs for young gamers, a growing market, have traditionally offered either a freemium or microtransaction-based model. The success of free-to-play titles such as SOE’s Free Realms, launched in April 2009, proved that parents don’t necessarily have the same reservations about microtransactions that old school gamers do. Just seven weeks after launch, SOE announced that Free Realms had passed the 3 million player mark. While 3 million players don’t necessarily equate to microtransaction sales…they don’t hurt.
Are free-to-play games the raging financial success they seem to be? With few exceptions, MMOG developers are notoriously tight with their numbers. In the free-to-play sector, some developers report their “average revenue per paying user” (ARPPU) when tossing around earnings figures. Those numbers can sound impressive when compared to the “average revenue per user,” which includes all logged in users, both of the paying and non-paying variety.
Western gamers accustomed to subscription-based payments have balked at free-to-play games and the concept of hybrid payment setups. They also complain that free-to-plays lack the quality and substance of their big budget pay-to-play contemporaries. Still, the genre is undoubtedly gaining more and more ground as better quality free-to-plays hit the Western market. So much ground, in fact, that in the past year or so the industry has seen a number of aging (and not-so-aging) formerly subscription-based titles convert to a free-to-play model.
The Pay-to-play Turned Free-to-play Revolution
While Shadowbane’s switch to ad-supported freeware marked a milestone, it was more of an attempt by its developers to keep a game that had become something of a cult classic alive for its fans when subscription revenue could no longer support it than an attempt to revitalize the game. Arguably, the first developer to recognize the potential of a free-to-play model to breathe new life into a struggling game was Turbine’s Dungeons & Dragons Online. In June, 2009, Turbine announced that DDO would go free-to-play as Dungeons & Dragons Online: Eberron Unlimited. DDO went big and included a major content upgrade and a raised level cap with its free-to-play launch. After downloading the free client, DDO’s hybrid payment model offered players the ability to purchase adventure packs, items and account services a la carte from the DDO Store or to subscribe and get unlimited access to all of the game’s content. The free-to-play move caused a tremendous resurgence in popularity for DDO and set the stage for more free-to-play conversions to come.
The free-to-play conversions have come rolling in steadily. Other notable titles to convert to some sort of free-to-play model include The Lord of the Rings Online, Pirates of the Burning Sea, and Champions Online.
What Lies Ahead
We’ve likely only scratched the surface with regard to what lies ahead for the free-to-play sector, but are subscription-based MMOGs on their way out?
“Faced with fierce competition from social games and console video games, MMORPGs in the Western market have already shown signs of a slowdown,” said Martin Olausson, Director of Strategy Analytics Digital Media. “The traditional subscription model that most Western MMORPGs adopt has lost traction and growth momentum.” Strategy Analytics offers a report which supposedly details the decline of subscription-based Western MMOGs and a tremendous boom in the Asian marketplace, where MMOGs are primarily free-to-play.
It’s certain that we’ll see more creative revenue strategies from MMOG developers in the months and years ahead. There’s no doubt that MMOG payment models as we’ve know them are constantly evolving and that monthly subscriptions are no longer the only way for Western developers to roll.