Wednesday, February 02, 2005

Revenue Models and Online Gaming

Nearly two months ago, DQ reader Jeremy Fischer sent me a link to a story about a virtual island in an online game being purchased for $26,500. I intended to write about this immediately, but all I could come up with was this:
I'm of two minds on this. On one hand, it's crap. On the other hand, though, it's crap.

I said I was of two minds. I didn't say they disagreed.

Today, though, an epiphany.

Eh. It wasn't exactly an epiphany. It sounded much more thoughtful and exotic than "nudge," though, which is really what I got.

Nudge. Sexy.

So here's the nudge: this is the future. Not in Project Entropia or whatever they call it, but in mainstream, online games.

Here's why. The revenue model for online games is going to evolve. Right now it's very basic: pay a fee monthly and play a game. Sony gives you access to multiple games for one fee. The problem with this revenue model is that it's entirely dependent on subscriber base. It can't scale disproportionately with subscribers unless the monthly fee is raised.

That's not the way to do it. Not if you want to make money, anyway.

The far more profitable model combines monthly subscription fees with incremental purchasing opportunities. Somebody wants a Level 40 Knight Cleric who reads Necronomicon Monthly and dances like Sammy Davis, but doesn't have 500 hours to play the game? Sell it to them. A +25 Joseph's Amazing Technicolor Dreamcoat of Armor? Sell it to them? A +30 Bow That Causes Slight but Clearly Noticeable Anxiety to Dwarves? Sell it to them.

Don't send your outraged e-mail just yet. Keep going.

Unbalance the game? Hell, no. I'm not talking about putting these goobers on the main servers. Give them a special server and let them buy absolutely anything they want. Their characters can't be transferred off the server, so they can't destroy the game balance or economy of the "real" game world. It will be full of Level 60 characters who don't know how to draw their weapon, but who cares? Let them develop their characters from any starting point and with any equipment that they wish to buy.

This is no different than setting up a PvP server. It's just catering to a smaller set of gamers, and in this case, highly profitable ones. The more revenue the game generates, the more likely it is to survive.

Now, I'm not saying I like this. I'm just saying that's the logical place to go with the business model.

Companies see characters being auctioned off online and I'm sure they're livid--not about the auction, but because they're not getting a piece of the action. This would probably seriously dent the resale market for high-level characters, and for the companies, that's just an added bonus.

The second stage is to attach small monthly fees to certain items. That's coming, too. Let's say that your character reaches the level where its allowed to have a horse or a dragon or possibly just a bus. In addition to character level qualification, that bad boy's going to cost you $1.99 a month. Yes, people are going to absolutely scream about this at first. If the items that have a fee are wondrous and unbelievably fun, though, the outrage won't last long. Come on, are you seriously not going to ride The Fabulous +20 Steed Known as My Little Pony because it costs as much as three Cokes from a vending machine? Well, maybe you won't, but there are a TON of people who will. And once that model gets introduced, it's permanent.

We'll never get rid of it. Which is something to discuss another time.

Oh, that was a horrible ending line. That's like a news anchor saying "Only time will tell."

Site Meter