Double Buffered

A Programmer’s View of Game Design, Development, and Culture

Why Subscription-Based MMOs Make Sense

Posted by Ben Zeigler on August 24, 2008

For the year or so, there’s always been discussion about how the charge-per-month scheme for MMOs is “broken” or “on the way out” or “dead“. For some reason, the consensus is that free-to-play or microtransaction-based schemes are far superior to subscription-based models (despite the success of WoW, City of Heroes, and many other games). There are two basic rationales for this position: The failure of subscription-based MMOs, and the success of alternative funding models in certain markets. Both of these need to be discussed before being used as “proof”.

So, why do high-budget western-focused subscription-based MMOs fail? People in the industry pretend this is mysterious, but it basically breaks down into two causes: mismatch of development cost to market target, and bad execution. For an example of the first one, you should look no farther than Vanguard. It was always a mystery to me why ANYONE thought that a game targeted at “people who thought Everquest was too easy” could ever be profitable. A similar mistake right now is to go for the market of “people who play World of Warcraft” with no other specifier. If you just go after the generic players of WoW, without having an idea of who those people are, you’re going to fail because of WoW’s market position. The other way to fail is clearly illustrated by Age of Conan. Age of Conan is focused on a valid market (based on the initial success), but the lack of depth and technical inadequacy is probably going to eventually hurt it. Even so, it will probably be a profitable game. It’s not really that hard to make money with a subscription game, but it IS hard to make money with a crappy subscription game.

Now, if the subscription model is so great, why doesn’t it work well in South Korea or other markets? I think it comes down to culture and different ideas of community. I’ve always felt that paying a subscription to an MMO is very much like paying dues to be a member of a club. The concept of country clubs, school clubs, and other private clubs are very common in the United States (and other UK-derived cultures), and MMOs feel the same to me. When you pay a montly fee, you feel more like you’re part of a community. The message boards of any active (or heck, inactive) mmo will illustrate this perfectly. These people feel very strongly they are part of a community, and that’s a huge part of why they come back every month and play. Also, the number of people who stop playing an MMO and don’t unsubscribe probably has something to do with the fact that they don’t want to leave the community, even though they don’t actively play. When it comes to free-to-play games, I feel a much weaker sense of community and commitment, and it’s more of just a “thing you do” instead of part of “who you are”. In general, Americans (and more often men) like to belong to explicitly defined social communities with strong rules (like fraternities or fraternal orders), and MMOs with a subscription fee are a natural extension of that.

My theory is that this is different in South Korea or other cultures. This is complete conjecture, but my general understanding of Korean MMO playing is that it’s more of an extension of existing communities, then a tool for creating a new community. Most players play together in the more-social PC Bangs, as opposed to alone and at home. Also, they may not be as used to paying monthly fees for club membership (no idea here, anyone have first hand experience?), so paying a monthly fee would have no social meaning, and would just be viewed as an expensive business transaction, and free-to-play or pay-for-use make a lot more sense than pay-for-month.

So, when does using a subscription model make sense for an MMO? It makes sense when you’re targeting a market segment that prefers discrete communities that are gated by a fee (ie, most Americans). Other business models make sense when targeting other players (more casual players, extensions of existing communities, non-western cultures), but when targeting what would be called the “western MMO audience”, you’re not going to find a model that works as well as subscription. Dungeon Runners is a good example of why free-to-play doesn’t work, because it appears that western players of Diablo games have no interest in microtransactions, but instead prefer to play Diablo 2 for free.

If you want a very clear comparison between subscription and other models for MMOs in the western market, look no farther than the NCSoft Quarterly Report. What do you think made NCSoft more money? 137,000 subscribers for City of Heroes/Villains, or 5.4 million users for Guild Wars? It turns out CoH made them $5.5 million this quarter, while Guild Wars made them $4.9 million. To make as much money with the Guild Wars model as with the City of Heroes model, you have to have more than 50x as many users, which means 50x the marketing, 50x the distribution costs, and 50x the support. This is not the way to make money in the Western market.

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17 Responses to “Why Subscription-Based MMOs Make Sense”

  1. Vargen said

    The wrinkle here is a significant chunk of Guild Wars’ market is people who refuse to pay a monthly fee for a computer game. That $4.9 million that they made wouldn’t have gone towards subscriptions to another MMOG. By having both CoH *and* GW they can reach both kinds of gaming audiences and make that much more money.

  2. Noah said

    Another factor (in my opinion) is differing views on digital property. When paying real money for an item it seems like western markets expect a lot more, they want more of a feeling of ownership. Asian players seem to not mind paying for virtual items since that is just like any other kind of ownership. Not sure if that exactly articulates what I mean, but its close.

  3. JZig said

    Noah, what you said definitely makes sense. Yeah, virtual item ownership isn’t something I’m really behind psychologically.

    Vargen, that’s also a good point. When viewed as a companion instead of an opponent of MMOs, it makes sense as a business plan. Guild Wars has made NCSoft money, just not as much as CoH (and it cost more to develop I believe).

  4. Sulka Haro said

    I think it’s possible to come up with something that’s between the virtual property sales model and subscriptions, especially since people are already working around the limitations of the subscriptions by doing RMT. Your post combined with Bruce Everiss blogging about the new Manchester University research on Chinese gold farming just forced mepropose a new model that’d maybe combine the best of both worlds.

  5. I’m stuck using my iPhone right now so I can’t hope to reply in depth, but I’m curious why you think Dungeon Runners – a game with an optional subscription fee, but no microtransactions – indicates a success for subscription models and a failure for microtransactions.

    I would argue the opposite: part of DR’s goal was to be more of the public bar you visited when you needed a few minutes away from the politics and familiarity of your private club. That’s a huge oversimplification, but I don’t think I’m stretching the metaphor too far.

  6. (the iPhone sucks at these text boxes, I got to a point where I couldn’t edit it anymore)

    What I was tryig to say is that Dungeon Runners probably would have benefitted from a microtransaction model. Not to say subscriptions are dead, just that – like the Guild Wars model, like the microtransaction model – it only serves a segment of the market. And, thanks to existing games, I would argue that that segment is fairly well saturated at re moment… So from a business perspective, it makes sense to target the *un*saturated segments. That’s a lot different from being ‘dead.’

  7. Tesh said

    Indeed, Matthew. The sub model will always be a part of the market. My concern, as I posted over on my blog, is that it unnecessarily constrains design to support the “best designed treadmill”. The leveling grind that so many people complain about is deeply tied to the sub model. Guild Wars doesn’t have a huge grind, and the PvP can be played with an instant high-level character.

    Players of leveling games like WoW feel that attachment that comes with a subscription, yes, but it cuts both ways. The company can take their money each month, but those customers feel a sense of entitlement; that they are owed something for their time and effort. They get very uppity when Blizzard makes changes that they don’t agree with. In the meantime, while Blizzard caters to the hardcore addicts, the “old world” languishes, and there isn’t much new blood coming into the game.

    A quick peek at server censuses puts a vast majority of players sitting at the level cap, waiting for the Wrath expansion. To be healthy in the long run, a game has to have players of all levels, keeping the in-game economy running, and keeping sub numbers up because of continued interest. For every burned out raider, there needs to be someone exploring the world to take their place in the great circle of subscription revenue.

  8. [...] Blizzard makes money hand over fist. And rather more importantly, as Ben Zeigler points out in a well-written piece, NCsoft makes money hand over fist – and more last year from City of Heroes than Guild Wars. [...]

  9. Ross Smith said

    To Tesh’s point about the sense of entitlement paying subscribers feel: there’s no obvious reason why developers couldn’t pay better attention to what the subscribers in general want instead of just a small hardcore. (Yes, I know you can’t please everybody, but you can make a creditable attempt.) It’s at least arguable that catering to the hardcore while the old world languishes is a specific mistake made by Blizzard (among others), not a problem intrinsic to the subscription business model.

  10. Tesh said

    Ross,
    You’re right, that may be Blizzard specific. My point is that the leveling treadmill design is heavily influenced by (and integral to) the subscription model, and it’s that design choice that leads to dismissing the “old world” once it’s leveled through. It’s just a natural consequence of the leveling rush, especially given Blizzard’s apparent focus on the “endgame”.

  11. Ravious said

    Let’s set the record straight, mister. CoX did indeed gross a tad more than Guild Wars. That is about the only fact you put forward.

    Guild Wars does not have 5.4 million users. They sold 5.4 million units, that’s what accounts activated means. I own 6 units for myself. A common Guild Wars players owns on average, IMHO, 3-4 units. Also, let’s assume that liberally there are 2 million Guild Wars account holders… I bet less than 5% actively play now.

    In Q1, Guild Wars has put out one $10 mission pack (which many had already got for free), which they made Q4 2007. They only had minor updates and some pre-made events in Q2. CoX on the other hand put out a new major content update (Issue 12) in Q2, which was probably made Q1-Q2.

    So let’s compare now. Guild Wars made $4.9 million by doing relatively nothing, and CoX made $5.5 million and provided a major content update. Who do you think net more?

  12. JZig said

    Matthew, I apparently totally forgot the actual business plan of Dungeon Runners. I remembered it as being microtransaction based, I and I should have checked on it, sorry about that. “Optional subscription” is another business plan that isn’t really well understood yet. It seems to work well for things like Runescape, but not as well for things like Dungeon Runners and Hellgate. I think it may have something to do with the “heaviness” of the client, optional subscription seems to work really well with java/light client stuff and not as well for things that feel like “real games”. No one has really figured out the right way to correctly monetize the Diablo-fan audience, especially because you have to fight against, well, Diablo.

  13. JZig said

    Tesh, I absolutely don’t feel that the leveling treadmill has anything to do with the subscription model (in fact CoH was kind of explicitly designed against that, to not as great success as we would have liked). It’s not really in the best interest of subscription-based games to encourage their players to play a lot of hours per month. They grind through the content faster, and quit earlier. We would LOVE it if our players played the game less, but bored college students don’t seem amenable to that suggestion :)

  14. JZig said

    Ravious, ah, good point on box sales. For some reason I thought that was unique accounts and not total purchased boxes. The NC quarterly statement doesn’t give user numbers for Guild Wars (and no one else has any), so I don’t have an accurate number of active users. Your estimation of Guild Wars users puts the active number at 100k, which feels low to me, but I have absolutely nothing to back that up. From my searching, there have NEVER been any concurrent or active user numbers released for Guild Wars, so I guess I can’t say anything definitive.

    What I AM familiar with, however, is the size of the live dev team for CoH issue 12 content, since much of it happened while they were still employed at Cryptic. The size of the live dev team has been VERY small since the release of CoV, and does not make a dent in the net profits of CoH. A team smaller than the CoH team would not be able to release ANYTHING. So, since dev costs are not a relevant part of the CoH profit equation, what’s left is costs such as support (which should scale linearly with users) and distribution (which should be lower for subscriptions vs. physical boxed expansions). Even assuming a similar number of active concurrent users (which unless I see numbers I don’t actually believe), the higher distribution costs and negligible dev costs of CoH means that CoH should net more than Guild Wars.

  15. [...] Comments (RSS) « Why Subscription-Based MMOs Make Sense [...]

  16. ravious said

    Thanks for the reply, JZig. More good information all around.

  17. [...] Korea and China have proven that other business models work, the subscription model encourages a strong community, is very attractive to piracy-fearing developers, and is what funds the massive development costs [...]

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