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Daily Reaction: The Death of Big Budget MMOs

Daily Reaction is a PSLS exclusive feature where Sebastian Moss & Dan Oravasaari discuss today’s most hard-hitting topics every single weekday.

With the news that City of Heroes is set to shut down, The Secret World’s developer Funcom has had to fire half its staff, WoW subscriptions are declining and Star Wars: The Old Republic has been forced to go free-to-play, Daily Reaction discusses whether we are seeing the end of big budget MMOs in the West.

Seb: If you’re an AAA MMO fan, this really isn’t a great time for you, there has been a never ending stream of bad news followed by bad news for the entirety of 2012 (outside of a few articles that claim “This game is a WoW killer, honest!” 2 weeks before having to write “This game underperformed and the developer is set to shut down”). The problem is MMOs are ludicrously expensive to develop, maintain and support, as it is, let alone all the marketing and security that they need to heavily invest in. So you have these massively expensive games, but that’s fine right? ‘Because people pay the equivalent of a cheap game every month, so they can rake in a huge profit.’ – But the problem is we’re facing a huge rise in the availability of Free-to-Play. People don’t want to pay for an MMO any more, they can get a similar game for nothing, and once the trend starts, it’s hard to reverse – just like when a burger becomes cheaper, people no longer expect to pay that price at other burger stores.

Sadly, F2P has its limitations – there’s no way they can get the same $15 a month from the average user simply with microtransactions or ads, so they have to have a much greater number of users to support the development costs of such a large title. Which obviously means more advertising, more servers, more problems, not to mention the fact that F2P can often severely hamper a game playing experience (you just got beaten by some 12yr old kid because he spent $400 on magic armor after playing the game for 5 mins, when you’ve been playing it for 5 months).

Then there’s the issue of consumer loyalty to F2P games – it’s far less. If someone’s already paid 60 bucks for a year’s gaming, they’re much more likely to give it a few second chances when it inevitably has a buggy and poorly balanced first month. But if they haven’t? Well, they might just try their hand at another totally free MMO, because they have nothing to lose.

Dan: Strangely, you are absolutely correct, the issue that the MMO world is now facing, is that the amount games available is now exponentially higher than it has ever been. What this means for a product with such a high commitment factor is that a consumer must choose this one product over all others, or end up paying for something they do not use. With the F2P market limiting the commitment needed, and forgoing the buy-in, they are able to hook users by constantly adding new things for them to check out. So if gamers have the option to try something before having to buy into the product, there is a higher likelihood that they will find something to cling too before moving onto the next F2P product; completely bypassing the need to ever enter a subscription plan.

So what happens to the big MMO’s out there like WoW and EVE Online? Eventually markets move past a product, no matter how popular it is, this is all the more true for games that require a community to play. So they will inevitably need to generate a sequel, but will they be forced to adhere to the new dominating market standards of a F2P? Or are the names big enough to force consumers into an old practice? I think they can force a good number of members into a subscription plan, but they will never see the numbers they once saw. The best bet would be to actually drop the subscription price to something relative to an iPhone app $1-5, this would put them in the market for a casual product, but would hopefully decrease the pressure on consumers – allowing them to see the subscription as a trivial cost.

Seb: Well I wouldn’t say EVE was massive, they had 400k subscribers as of March, which is decent but know where near WoW. And they’re experimenting with F2P with the PS3 exclusive DUST 514, which I think will be massive flop – poor beta reception, terrible visuals, there are almost as many shooters out there than warts on Dan’s face. So yeah, pretty much all of the MMO developers and publishers are going to go F2P, like SOE’s PlanetSide 2 which will launch as F2P. The only game that I see coming out with a subscription model at the same price point is the WoW successor/new Blizzard IP as Activision won’t want to give up that solid revenue stream. And it’ll be successful, but not as successful as WoW. It’ll be the last major western subscription based MMO.

And, like I said, the big F2P ones are going to die too. Hell Star Wars: The Old Republic is made by BiofuckingWare with a budget rumored to be around $200 million, tied to the strongest IP in nerdom history, and still the developer themselves have admitted that they don’t expect F2P to massively turn things around, something that is reflected at in EA’s share price.

Plus, with all the failures going on in the MMO world at the moment, can you really see any publisher spending a couple hundred million on a risky punt in this economy? No, they’re going to invest in F2P MMO-ish Facebook games that all end in some variation of Ville.

Dan: I couldn’t disagree more, those aren’t warts – those are hickeys your mom left on my neck (call me, Mrs. Moss ;-)). But back to MMOs, we haven’t seen the death of the western subscription, we just have seen the death of the current business model. As gaming takes a turn toward cloud gaming, we are going to see the development of subscriptions implemented much like cable services. These additions to your bill will just become something like a sports package or HBO, just an added fee you are paying for you to be able to play the next big MMO. Yet, smaller or new IPs just will not be able to enter this market, as we have already stated. It will take something like an MMO version of GTA, to really breach this market as it’s name is big enough to pull in the general audience. Smaller MMO’s would have be able to utilize the F2P plan, as they could potentially reach a wider audience with simpler titles and generate a decent income.

As you gave the example of F2P not even being able to support products, the issue there is that the games are niche more than broad. WoW has the ability to become more widely accepted as interesting to people unfamiliar to the franchise, than someone who wasn’t familiar with Star Wars. Not to say that Star Wars doesn’t have a significant following, but for most that care little past the story of Vader and Luke, it is a harder sell to make people care about being a bounty hunter or Twi’lek. Barbarians, Swordsman, and Elves have always been just basic lore for most people, as they can act out fantasies from almost any normal fantasy setting. So Star Wars Online has always been a doomed project, especially when they set out to make such an expensive venture.

This is not to say that F2P as it exists works, as the model itself gives little to no guarantee on an upfront return for a project – something that just is just not a wise business decision for projects costing millions of dollars. So, maybe a mixture of the two concepts could actually be a viable market plan to keep the MMO industry alive. Doing something similar to Guild Wars 2’s initial purchase, with no subscription, and add in pay as you go supplements. This would generate a small initial return, while negating the long term commitment of gamers, and give room for extended returns on a project through small transactions. But again, this is something that would only work, if the IP was big enough to bring in an audience in the first place. So as it stands, the MMO market is pretty much dying until we can move to a cloud based industry that can reach past our current console/PC market.

So where do you stand on the matter? Are we witnessing the final years of the big budget Western MMO? Share your thoughts below and be sure to pay $5.99 a month to subscribe to Seb and Dan.