Thursday, May 28, 2009

Niche Games & Subscription Price

Today I will be focusing on subscription prices of “A” list Massives, such as EverQuest®, Dark Age of Camelot®, World of Warcraft® (WoW), Lord of the Rings Online®, Warhammer Online®, etc. In particular I will be discussing the benefits of charging an above average subscription price for a niche Massive.

The biggest issue I see today with “A” list Massives is that they all have different skins (artwork) and different feature lists, but at the core their gameplay is very similar to WoW. To my mind competing head up with WoW is a crapshoot. You may get a success like Warhammer Online®, but you may also get a poor performer such as Vanguard® or an outright failure like Tabula Rasa®. My next discussion will go into the similarity of the current crop of Massives called “All Massives are the same, sorta.”

Today I will be discussing Massive monthly subscription prices. As no one has yet supported an “A” list game solely with micro-transactions in the U.S. or Europe I will not discuss it. Additionally no one has supported an “A” list game with in-game advertising. I will discuss both, and other money models in the future, but for now I consider them in the same class as t-shirt sales, nice to have, but not necessary.
RuneScape is a noticeable exception in our list of “A” list Massives. It has a subscription price of US$6.00/month compared to the US$15.00/month of most of the others. It also took over three years from release to generate decent subscriber numbers. RuneScape is a browser-based game and its gameplay and graphics are simpler than the others. For now, let’s treat RuneScape and Dofus (a similar game aimed at the French market) as exceptions and discuss them further in the future.

My conclusions about subscription prices are that:

1. “niche” Massives with subscribers in the 100,000 range can be very profitable, and
2. subscribers are willing to pay greater than standard subscription prices for “niche” games, and,
3. a relatively small increase in subscription price has a large impact on profitability.

I am definitely not saying that World of Warcraft (WoW) can raise their subscription prices and retain their numbers. Nor am I saying that a game that is substantially similar to WoW can charge a premium price. I am saying that a Massive that is not directly competing with WoW can charge a premium price and be profitable. A “niche” game with a premium price does not need as many subscribers to be profitable, therefore making it a much safer investment than yet another WoW clone.

Two Board Games: Risk® and Streets of Stalingrad

The board game Risk® is very popular, probably insanely profitable, and a very easy beginner’s game. The wargame I produced, Streets of Stalingrad, (a “niche” game) is vastly more complicated that Risk, has not come close to selling Risk’s numbers, yet Streets was also profitable. So why didn’t I try to produce another Risk, or a Risk clone? Risk versus reward. I knew that in the niche market of hard-core wargames, a decent game would sell at least “x” copies. I knew I could produce a decent game, I knew I could make a profit on “x” sales. I hoped that my sales would exceed “x”, but I also knew I had a decent return on investment with sales of just “x”.

Let’s say my company Phoenix Games did have a Risk-clone ready to roll out. To bring it to market and go head to head with Parker Brothers I would need an enormous bankroll. So much money that I would now have to sell 100 times “x” to make a profit. And, if I failed with my Risk-clone, which is the most likely outcome of going against an industry leader head-up in any field, my company would fold and I would be living in a van down by the river.

One final note: Streets of Stalingrad went for about ten times the retail price of Risk, which made it the most expensive war-game to be produced at that time. My customers judged its value not comparing it to Risk, but comparing it to other hard-core wargames.

There are plenty of gamers who want something different to support “niche” Massives. By different I don’t mean a different feature set. Any level and grind (diku) game will be marginalized by the king of level and grind games, WoW. Looking around a specialized game store you will find shelves full of board games, but not one of them competes directly with Risk. So the challenge is to find a niche that is under-served by current Massives.

So say you have identified a niche market game, can you make money with it?

100,000 Monthly Subscribers From these charts it seems that something magic happens when a game crosses the 100,000 subscriber line for six months, in that it retains those subscribers for over two years. Add in an expansion at the two-year mark and it is easy to have a three-year plus run. So our goal in bringing a niche game to market is 100k subscribers.

A number of games have crossed this 100k barrier, and hopefully are profitable. In very general terms the ones that did not hit 100k is because they were:
1. Over-hyped. Vanguard defined itself as a “Hardcore” game. It enticed 120k to try it out, but the in-game experience did not come close to the hype.
2. Not Fun. Tabula Rasa was certainly over-hyped. But in my opinion it failed because it simply was not fun.
3. Not niche-y enough. Pirates of the Burning Sea is not pirate-y enough, Auto Assault was not Mad Max-y enough, D&D Online was not D&D-y enough, well you get the idea.

These are problems that can be solved early on in the design process, and fixed with a long Beta test. More on open beta in “Beta as a Marketing Tool.”

I feel the charts support my conclusion that: designing for a niche market, producing a decent fun game that is niche-y enough will bring the 100k subscribers we are looking for. More on niche games in “Defining a Niche.”

Premium Subscription Prices

Monthly subscription fees are US$15/month for most “A” list games. The question is how much higher can you go before meeting customer resistance. That is, how high can you go before a customer makes a subscribe not-subscribe decision based solely on the fee.

A number of years ago, paperback prices were inching up and approaching the $1.00 mark. I attended the American Bookseller Association Convention at the time when paperback books were at $.95. All the talk at the convention both from publishers and retailers was the fear that when books went over $.95 consumers would revolt. Prices rose, and book buyers didn’t notice.

The average computer game player is a 35 year old. Anecdotal evidence suggests that the average massive player is somewhat younger and skews male. My guess is that the average massive player is a 28-year-old male. (As females make up forty percent of all computer game players, there is room for a lot of growth in Massives that are able to attract females.) Now what does a typical 28 year old male spend discretionary money on.

$35 average monthly cost of a Health Club
$30 average monthly cost of a porn site
$55 average cost of a concert ticket, 6 tickets a year $27/month
$15 average cost of movie w/snacks, twice a month $30/month
$50 average cost of a console game, 6 games a year, $25/month

Personally I think it would be safe to go up to a monthly subscription fee of $25. Anecdotal evidence suggests that even casual Massive players, play about 5 hours per week, or 20 hours a month. That comes to a cost of $1.25/hour for the most casual players. As you are going out to capture a niche market, you should have some feel for your market, their age, gender, profession, etc. and that should help you determine your monthly subscription fee. Just keep in mind there is nothing magical about the current $15/month fee.

To Sum Up

Gross Revenue = Subscribers times Monthly Fee over Time

So as we have discussed above we are aiming for 100,00 subscribers. Personally, next time I go out to pitch a new game I’m going with US$25/month as my monthly fee. Finally the charts I linked above showed clearly that we can expect a run of three years if we have a successful launch, so:

Gross Revenue = 100,000 times US$25 times 36 (months) therefore

Gross Revenue = US$90,000,000

90 million United States Dollars, that’s a lot of money.

A niche-market game is safer to bring to market than yet another WoW-clone.

1. Game Design Day One
2. Niche Games & Subscription Price
3. Massives Are All the Same, Sorta
4. Defining a Niche


Box sales. I have not talked about box sales in the above discussion because it is my understanding that very little of the box sales actually gets back to the game company. Furthermore, the business method of selling boxes for Massives is on the way out and cannot be counted as a revenue stream for much longer.

Exceptions. I am speaking in generalities and there are always exceptions. For instance some games, like Eve Online, took years to cross over the 100k-subscriber number. That does not make any of the money people I talk to happy, your mileage may differ. Planetside is another exception. It had a run of close to three years at or above 50k subscribers. I suspect that 1. it cost less to produce than many other Massives and 2. it was not supported subsequent to release with the same commitment of resources that other Massives had.

1. Game Design Day One
2. Niche Games & Subscription Price
3. Massives Are All the Same, Sorta
4. Defining a Niche

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