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SOE and The State Of The MMOG Genre

Richard Aihoshi Posted:
Columns The Free Zone 0

Due to this column's biweekly schedule, I've had a couple of weeks to think about the news that SOE was purchased by venture capitalist / technology investment firm Columbus Nova. During this fairly short span, we've already seen that the new owner isn't hesitant to make significant personnel cuts at the newly renamed Daybreak Games. As is my wont, I can't help wondering how this situation fits within and reflects the overall state of the MMOG genre.

Last time, I stated my fear that the demise of Massively is a symptom suggesting the MMO category is less healthy and profitable than some observers seem or want to think it is. Basically, if it's so lucrative, shouldn't the publishers have enough advertising and promotional funds for the site to have been financially viable? I'd have to guess it was losing money, and also that it wasn't a good turnaround prospect, in which case it might have been sold off instead of shut down.

The sale of SOE brings up similar questions. It's no secret that former parent Sony hasn't done well over the past few years. As discussed in a recent opinion piece on this site, it's not particularly surprising that the corporation decided to sell the studio, which it seems safe to say was not a core holding. However, there are different ways of divesting. For instance, it's not uncommon for a company to spin off a non-core arm via an IPO, albeit this usually requires it to be of sufficient size and either profitable or likely to become so.

So, here too, my first inclination is to suspect SOE was not making money. The almost immediate timing of the staff cuts seems to support such a scenario. In addition, if it was indeed in the red, the question arises as to how soon said situation is likely to be reversed. In this regard, although H1Z1, EverQuest Next and Landmark all have potential, it isn't cheap operating a studio in Southern California, especially with multiple teams. As a result, it seems likely that each of these projects must recoup substantial sunk costs before becoming profitable. What's more, they'll all have to do so without the initial burst of revenue from box sales that a B2P title receives when it launches.

Note that I'm not predicting these games won't make money. What I'm pointing out is that an F2P release typically has a business plan wherein the expected revenue inflow pattern is quite different, with less spiking than a B2P title experiences at launch and when its expansions go live. Consequently, in order to become equally profitable overall, it must bring in more in between. This is likely to mean a smoother but longer road to reach the same net result.

So, it's easy enough to come up with a seemingly credible scenario in which (a) SOE was operating at a loss, (b) it had the potential to become profitable, but (c) not soon enough to suit Sony, which isn't doing well enough overall to continue carrying the studio until it does turn around. We can also imagine how a venture capitalist might see this as an investment opportunity. This would also be in line with what predictably happened, an immediate reduction of staff to reduce the short-term red ink.

Does the downsizing at Daybreak portend fewer projects? Smaller ones? A partial or even complete shift away from MMOGs? Furthermore, I wonder what this situation might indicate within the larger context of the overall MMOG landscape. In this respect, various thoughts spring to mind. One is the state of other notable western studios. Within EA, Origin and Mythic are defunct, Maxis left the genre, and what lies ahead for BioWare is questionable. The same can be said of Carbine and CCP. I suspect Zenimax has yet to recoup the money it spent to create TESO, and unless it does, how likely is another sizable project? Turbine is far less visible than it once was... and it's certainly not hard to extend this top of mind list.

Blizzard remains front and center, but let's not forget it spent several years working on Titan without bringing it to a stage where it could even be announced. What's more, as much as I'd like it to develop a new MMORPG, there's no real indication that one is even in the planning pipeline. This leaves us without an obvious, highly probable studio / publisher to create the next “big one” with a nine-digit budget.

Factor in the trends we've seen as the MMOG space has grown. It has definitely become less hardcore. Over the past few years in particular, this has helped contribute to a sharp rise in prominence for quasi- or partly MMOs, MOBAs being the most obvious example. I'm not prepared to predict we'll never see another big-budget, fully featured, “traditional” MMORPG. That said, the sale of SOE seems like only the latest indication that the landscape will never be like it was, no matter how much I might wish it so.

Closing queries

  • How and to what degree do you think SOE becoming Daybreak will impact EQN, Landmark and H1Z1?
  • How about the company's portfolio of titles that are currently in service?
  • How likely is it that Daybreak will retain the level of prominence that SOE had in the MMOG space?
  • How (un)realistic is it to think the sale will turn out to be a good thing?


Richard Aihoshi

Richard Aihoshi / Richard Aihoshi has been writing about the MMOG industry since the mid-1990s, always with a global perspective. He has observed the emergence and growth of the free to play business model from its early days in both hemispheres.