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The Rejuvenation of Subscriptions

Richard Aihoshi Posted:
Columns The Free Zone 0

Recently, the hearts of those who decry the concept of free to play have been set to beating faster by the news about not one, not two, but three highly anticipated MMOGs opting to employ versions of the monthly subscription model. None of these announcements came as much of a surprise. Both Final Fantasy XIV: A Realm Reborn and The Elder Scrolls Online always seemed like pretty safe bets to take this approach, and while I felt some doubt about WildStar from time to time, I'd still have guessed correctly all along.

I hope all three succeed enough so that two or three years from now, we'll see them all operating with solid player populations and with little or no change to their respective revenue models at launch. However, what are the chances of such a parlay? Unfortunately, when I ask myself this question, my head tells me that my heart is quite likely to be disappointed.

The main reason I feel this way is pretty straightforward. When a company has pumped big bucks into the creation of a major MMOG, it has also set itself a high threshold for financial success. Let's build a simplified example to look at the impact. We can start out by arbitrarily choosing a total cost of $300 million including development, marketing, the physical goods, etc. Next, let's assume sales of two million units - not a monstrous number, but certainly not bad - with the publisher receiving $30 each as the wholesale share. Obviously, this comes to $60 million, a tidy sum, but still a full $240 million short of recovering the sunk costs.

Let's set retention at 50 percent and say that the subscriber base holds steady at one million for the first two years at $15 each per month. That's $15 million in monthly revenue, but since there are ongoing costs such as the live team, marketing, shows et al, this doesn't all go toward payback. If half does, which seems somewhat high, the game will take 33 months (32 plus the first free one) just to reach break-even.

I don't know if any of the aforementioned games cost $300 million. On the other hand, I also think it's optimistic to think any of them will have a million subscribers two years in. So, while we can fiddle with any of these numbers, the key point here isn't likely to change. Developing a major MMOG and bringing it to market doesn't constitute a license to print money. Not even close. When you've spent hundreds of millions of dollars, it's a risky proposition that, if it manages to turn a profit at all, will probably take some time to do so. 

This isn't intended as a knock on the monthly subscription model. I'm not saying or even suggesting it's outmoded and no longer viable in today's market. However, it's also not the best fit for every segment of the overall MMOG audience. The same is also true of every other option. What's vital is to put together a combination of gameplay and monetization that is most suitable for the core type of player a given title is looking to attract while also considering that its long-term viability requires attaining an acceptable level of profitability within a reasonable amount of time.

If achieving this requires a game to acquire and retain hundreds of thousands of subscribers, it's not easy. From a marketing perspective, the potential audience isn't as large as some might think. Quite a few people in the largest segment, WoW subscribers, aren't particularly likely to switch. Unlike many of this site's readers, they're not very concerned with a better MMOG. They play one and are sufficiently content with the one they've been in for years to have little interest in seeing what any others are like. They didn't try any of the the other bright and shiny releases that came along, so why expect droves of them to do so now?

During the past few years, how many have done so? Accordingly, what are the odds that all three upcoming ones will? While I don't consider myself pessimistic by nature, I don't see this happening unless I don my deeply rose-tinted glasses.

For what it's worth, I'll venture that WildStar is the most likely of the trio to change its revenue model, with FFXIV least and TESO in between. What's more, I'll set the over-under for the first shift at two years, and if forced to bet, I'd put my money on the under.

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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.