Tag activision blizzard

Understanding The RMT Economy And Sparkly Ponies

AT-AT in SWG

It's pretty! I'll take it!

I am really glad for all the interesting comments I received on my last entry, and in case you’ve read them I’d direct you over to the Buzz-version of the thread where a couple of other MMO-bloggers (including Tobold, Spinks, Chris and Pete) chime in on the subject. Thanks to everyone! I have been giving this a lot of thought ever since the sparkle pony was released for World of Warcraft, and it’s great to take part of other views on RMT in subscription MMOs.

But I thought that I’d take an entry to explain why I believe this is happening. The reason for this is that I believe that partly the item shops are misunderstood, as I see the word “greed” thrown around a lot by critics. Ark pointed out, again, that there might be a difference of opinion depending on political standpoint of the viewer, and I am starting to agree with him. Because I don’t think it is about greed at all, except for the greed inherit in the capitalist system. It’s all about the money and how economics work.

Disclaimer: I am not an economist. I have never studied economic theory. This entry is based on my understanding of economics through the very limited reading I’ve done on the subject, including books like The Undercover Economist and various books by leftist economic and cultural theorists that would drive the more right-bent readers nuts if I mentioned them by name. If you are an economist, or have studies the subject, or just happen to know more than me – please comment and enlighten me. Economy is fascinating and I would love to learn more. Neither am I saying I am the only one, or the first one, to bring this up.

There are a couple of scenarios that I believe are bringing this change to MMOs. They have nothing to do with greed, at least not from a developer standpoint. Some have pointed out that they’d support the cash shops much more if they knew where the money goes – if it is invested back into the game or to the money-men at the top. The answer to that is complicated, as the money goes straight into the pockets of the company itself. But the company have to give money to a lot of people, including the ones on its payroll, investors, shareholders, etc.

Despite being highly critical of the highly overpriced mounts (subjective, I know), these reasons make sense to me. They are legitimate, even though I don’t condone them. But in an economic reality, we’ll probably have to accept them – especially when it comes to games like EQ2 and WoW.

Cataclysm goblins

Improved goblin graphics are not free, you know.

Reason 1: Development costs go up, while the subscription price stays the same. Stargrace (and someone else, I can’t remember who right now, sorry) names this as her reason to support this RMT over on Nomadic Gamer. It’s a perfectly fair point. Development costs do go up, a new MMO is much more expensive to develop now than it was 10 years ago (or even five, or two). Cataclysm is probably much more expensive to produce than The Burning Crusade was, for example. SOE is developing at least one new MMO (DC Universe Online), which is probably even more expensive than Cataclysm (since developing a game from scratch takes a larger team and more tech than a live team working on an expansion). And we know that Blizzard is working on a “next-gen MMO”.

At the same time, we can probably expect operation costs to go down – bandwidth gets cheaper and cheaper, and storage space gets cheaper by the minute. That’s not to say these costs evens out, even though most of the development investment is returned by box sales at launch. The live team, which then will keep the game updated (new content, squash bugs, QA, etc), is normally a lot smaller than the development team so the running costs become smaller again. These are all columns on a spreadsheet, but they do lead us on to the next point…

Reason 2: World of Warcraft and Everquest 2 are not making as much money now as they did. This is not to say that they are dying or anything of that nature. World of Warcraft is alive and kicking, and Cataclysm is bound to make Blizzard a crap-ton of money. Everquest 2 seems to be doing alright as well. But they are not as big as they used to be. People keep throwing around the 11 million subscriber number for World of Warcraft still, despite the fact that it’s been a long time since they published official sub numbers (which is enough proof for me to draw the conclusion that the game isn’t growing anymore). Also, there is all the trouble Blizzard has had in China – that’s a huge loss of revenue, and a lot of lost players. There’s also the simple fact that the games are aging.

New Halas housing

Fluff items cost a lot of money to develop. Housing included.

World of Warcraft is still making Activision Blizzard millions of dollars each month – the large Western player base is enough to secure the game’s future for many years to come. But that doesn’t matter, especially since the two companies merged (Vivendi culture was a lot different, trust me). What does matter is that it isn’t making as much money as last year. If we put last year’s earnings, and this years earnings, next to each other it will produce a red number. And God forbid we compare it to two years ago! In this economic system, what matters is growth. Not subscriber number growth, the shareholders don’t care about that. Economic growth. You might have made us a billion dollars, but last year that number was 1.2 billion! Disaster!

While Activision Blizzard expect to make up for the investment for Cataclysm this year, we have to remember that they are working on their next MMO which probably has a long way to go before it is released. That’s a pure expense, it is making them no money at all right now. And as development ramps up, the cost will do nothing except increase. Saying that it will make the company even more billions in 2012/2013 doesn’t really cut it today.

SOE is developing DC Universe Online, which is another cost on the already pressured games company. The last game they released was Free Realms, and despite all the news we hear about registered accounts, we know nothing about how much money they are making from it. Insider sources, and with that I mean people in the actual MMO industry, have told me that Free Realms has been a disaster for SOE. Take that with a grain of salt, as with any unnamed source, but personally I have no real reason to doubt this person. More red numbers, more money that must be gained elsewhere.

I think that’s the whole reason why Blizzard introduced the pet shop, the reason why SOE started to dabble in pretty small scale RMT (not sure we can call the virtual card game small scale, though). With that success came the sparkle pony and with its success followed the prowler (I subscribe to the theory that SOE’s price point is not a coincidence). Not because they necessarily wanted to. Not that a developer thought it’d be a cool service. Not because they are greedy, or because they believe it gives the player more choice (the amount of mounts in both games are quite enough to give the player a lot of choices, with more or less grinds involved). But because they simply had to.

Free Realms dog

If you're lucky, you might be able to pick this up in Vanguard soon!

The price point – $25 – was with great certainty not picked out of a hat at a Activision board meeting. There’s probably a lot of science behind it, just like the 1200 point price for the Stimulus Package for Call of Duty: Modern Warfare 2. It’s all about perceived value, and similar economic buzz words. That’s what they figured people would pay, and that’s what they needed to sell it for. And they were right, with the sparkle pony being a huge success (we still don’t have numbers for the prowler, do we?).

The other alternative would be to raise sub-prices, as Tobold mentions in the Buzz-thread linked at the beginning of this entry. And just like the $25 for mounts, I believe that only Blizzard can set that precedent. Expect a higher subscription fee when their next-gen MMO is released, or at least a pricing model that will be radically different from what we have now that will make them more money every month. Then the rest of the genre can follow suit. Otherwise, you risk having potential customers stay in whatever game they are playing now.

You know what? I can kind of buy it, if this theory is right. It doesn’t mean I condone this form of economic system, it causes a lot of problems, but I’ll accept is as a sad part of modern life right now. If this is what it takes to keep old games rolling (let’s face it, WoW and EQ2 are old), then it might be worth seeing 200 000 people rushing to buy a sparkly, flying pony the second it is released. It will sting in my eyes, but if the prowler keeps EQ2 out of trouble for a bit…well, I’ll accept it. I guess that’s where the choice comes in – more MMOs on the market is a good thing.

For now, this might be the price we have to either pay (and get a mount) or simply accept to keep our favorite games alive as they grow older. Let’s face it, a lot of us have rosy colored glasses on when it comes to what MMOs used to be back in the “good old days”. Many of us play games that were released 6 – 7 years ago (which includes World of Warcraft). If we don’t want the shareholders, or CEOs, or board of directors, give the developers we love trouble we might as well just pay the $25 when a sweet mount is put on sale. I know my gnome would look awesome on a proto-drake (preferably without the sparkles, please).

I can’t be bothered to be upset anymore. I’m just gonna go “meh” and move on. If they truly try to screw us completely in the future and the slippery slope we’re worried about becomes a landslide, I’ll be back. For now, I think I’ll just stop caring. Buy a prowler, support your lovely developers, and be happy.

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Virtual worlds, massive multiplayer games and assorted ramblings

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