As I've said a couple of times lately, free-to-play games are not free at all. Sooner or later, the developers that build the game have to be paid. "If you're not paying for it, you're not the customer," says the famous little graphic before adding "You're the product being sold." While the graphic references Facebook, it's a truth that applies to any so-called F2P game. If you're not paying to play real money to play EVE yourself, you are the content that CCP is selling to those of us who are.
The term micro-transaction was originally coined in the late 1990s and was intended to reference very small transactions of money, potentially as low as one penny, on-line. It wasn't long before "one penny" became "one dollar" or "one pound" or "one euro" or the like. And for quite a while, game developers were content with small amounts of money per player as long as the volume of players was large enough. Development costs for games were cheaper then, after all. But since hitting the mainstream in 2009, micro-transactions are becoming significantly less "micro" every year.
A couple of months ago, speaking at the Free-2-Play Summit, Ngmoco's Ben Cousins talked about what he saw as the past, present and future business models for free-to-play games. He designated them into versions: 1.0, 2.0, and 3.0. In the 1.0 model, in-game transactions were limited to cosmetic items and customization. Game developers working under this model contented themselves with $5 or less per player.
Cousins defines a version 2.0 transaction as a transaction that encourages a player to reduce or eliminate game "unpleasantness." The idea is to make parts of one's game less enjoyable and more onerous with an eye toward deliberately giving the player incentive to avoid or remove that aspect of the game. Of course we see this all the time in ad-driven games: you can buy the ad-free version of the game and thereby avoid the "unpleasantness" of the advertising. That's a relatively minor thing. If you and I both play Angry Birds and you own the ad-free version and I content myself with the free, ad-supported version, you and I will probably still advance at about the same rate and probably have about the same amount of fun. My gaming experience will just be slightly more annoying than yours.
What we're seeing in a lot of games, though, is developers pushing the "unpleasantness" into the game itself. As I've noted recently, the independent EVE player's ability to make ISK is being directly reduced in almost every way. Nerfs have hit sanctums and havens, drone region true sec, incursion-running, missions, the value of meta4 mods, and the ability to blitz through PvE content of all kinds, whether that's the blocks put on the ability to blitz low-level incursion sites or Titan gun signature radius nerfs to slow down Titan ratting. I've heard many people in the last few months say some variant of "I'm going to have to go back to buying PLEXes" because EVE PvE is becoming so much less rewarding.
Is it much of a stretch to think that this is a deliberate strategy?
Whether or not you believe that, there's no question that this is the tack that the gaming industry is taking. The entire concept of "grinding" PvE content is under slow and deliberate attack by game developers, including CCP, encouraging players to skip the grind by paying a few more dollars here and there to avoid unpleasantness. Under Cousins's 2.0 model, he believes the average player's outlay increases from $5 to $20.
Under version 3.0, unpleasantness is compounded by more positive player incentives like additional features and excitement... more or less straight-forward P2W. Under this model, Cousins believes the average player's outlay increases from $20 to $60.
As someone sarcastically put it to me a couple of weeks ago, "Free to play doesn't mean free to win."
Now of course, these amounts per player are insignificant for EVE players. I myself pay subscriptions for three accounts, which means that I'm paying more than $50 per month to play EVE. But the volume of players that EVE is drawing are also correspondingly low. EVE has been stuck at the "400,000 or so" subscriber mark for quite a while. These days, CCP politely declines to state their exact number of subscribers when asked. Trion Worlds, the maker of what may be the last successful subscription MMO to be launched, RIFT, similarly declines to state their number of subscribers. It's probably safe to say that they're getting a similar number of subscribers, though. It's increasingly clear that WoW's subscriber numbers were a fluke that isn't going to be matched any time soon. If SW:TOR couldn't do it, nobody can.
But game development still costs money. Big money. $1 here, $1 there isn't gonna do it any more.
It's accepted that to produce a modern MMO requires $100 million U.S. At least double that (and possibly as much as triple) was spent on SW:TOR. But let's stick with $100 million. A half-million subscribers paying $15 per month over the course of a year will bring in $90 million U.S. Taking into account support and marketing costs, that means that to build a successful subscription MMO, you need to hold on to those half-million subscribers for two years. Right around the start of year three, you start to make a profit. This is why CCP is so keen to get new players to that three year mark. Not only is that the point where you're unlikely to unsub, that's the point where they actually start making money off you.
Meanwhile six months ago, Riot Games announced that League of Legends passed 11.5 million active players. Two months ago, Wargaming.net announced that World of Tanks has 20 million registered players. Further, they state that they have what they believe is one of the highest payment ratios in the industry, "around 25 to 30 percent." Let's say it's 25%. And let's say that they're only getting Cousins's $20 per player. Coincidentally, that's their $100 million U.S. right there... for a game with far less content than EVE.
And I think we all know that they're getting $50 from most of those paying players, not $20.
The industry is also full of stories of subscription games converting to F2P to take advantage of the micro-transactions model. As Eurogamer put it...
The unavoidable statistic, however, is that games do better once they turn free-to-play. Or so we've been led to believe. DDO doubled its activity; LOTRO tripled its revenue; AOC doubled its revenue; a million new people played DCUO; and Champions Online helped Atari profits rise...Even if you build a game around a subscription model, that's no guarantee that you'll succeed, or even launch. 38 Studios pumped at least $100 million into Copernicus and were reportedly burning an additional $4 million U.S. per month on development, with another 12 months of development needed before they could launch. That's $100 million spent out of a $150 million budget and Copernicus will probably never see the light of day. And even if it had, the increased development cost means that it would have needed at least double EVE's subscriber numbers or four years instead of three to recoup its costs.
Going straight to the F2P model for DUST was a risky play on CCP's part. But trying to launch it as a subscription title would have been more risky. With the cost of game development these days, the subscription model just doesn't work any more. Likewise, charging a fee to download the product would have limited the game's audience. With a zero cost of admission, this puts CCP in the position of inviting millions of PSN members to try DUST for a few hours. Inviting a broad beta-test audience is equally smart: it will provide the newborn game with a massive burst of "content" when it launches: hundreds of players who will have the experience to quickly vault to the top of DUST's brackets and provide competition, assistance, and goals for the new players at launch.
And if those new players throw CCP $20 or $50 each trying to catch up, CCP's investment will very rapidly pay off. And that's why Hilmar was dreamily speculating on the HARPA stage the last day of this year's Fanfest about needing two or even three venues for Fanfest next year.
Tomorrow, I'll wrap up this series of posts with a few random musings.