What should World of Warcraft and David Copperfield both fear?

...someone giving away what they charge for, and tanking their business in the process.

Wha-wha-wha-what?!

I'll explain. But first a commercial interlude. Please watch this very short video. It's brief, and it's entertaining.



OK, so this is one of a series of clever little commercials (series of them can be seen here - thanks to boingboing for the link) for a company doing technical support. Very catchy. "See how simple it is when we explain how it's done?".

Now, if that series of commercials takes off, it could be a real thorn in the side of a busking street magician that makes his living doing these exact tricks. Of course, that's not going to bother Belgacom. After all, whats a couple street magicians compared to a successful ad campaign of a large corporation. Casualties of War. Can't make a cake without breaking a few eggs and all of that.

OK, so where am I going with this?

There've been few posts as of late (Techcrunch, Raph Koster, etc) about the new Barbie Virtual World. Some see it as a response to Webkinz, which in one way is true, but it's not the most interesting way to look at it.

Barbie and Webkinz are loss leaders. They are giving it away to sell dolls or plushies or whatever. MyCoke (FKA Cokeworld) is giving it away to build brand affinity only. You don't even need to buy a can of diet/vanilla/lemon/zero coke to play this version of Habbo, you just need to not mind hangin' with the red'n'white.

Developing games costs money. Developing virtual worlds/mmos costs even more money. Building the next Wow is going to be a 50-100M affair. Building a small high-quality 2.5d casual mmo is, what, maybe $1M-$2M (of course, some are hoping to lower that, but that's another story). Blowing a couple million on development of a game title means you are going to have to do a fair number of subs/item-sales to get into the black.

But if you are selling plastic dolls nationwide at Toys-R-Us, and trying to differentiate yourself in a crowded market, then 1-2M is an efficient spend on a differentiating feature.

And if you made $26B last year selling sugar water at a healthy profit, then a couple million bucks is, my guess, a blip on the screen of the marketing budget.

At Casual Connect this year, there was a lot of talk about the big media companies (e.g. MTV/Viacom) coming into the space. What I don't think people grokked though, is that not only will they come in and compete for the same customers, but they may completely upset the apple cart in an effort to get those gamers interested in their IP (and thus watching the shows, buying the dolls, eating up all the hollywood soup and washing it down with a sugary, fizzy dose of free-to-play branded mmo.

"Free" as a business model will certainly mix things up a bit.

Now, back to my analogy.

David Copperfield isn't worried about those videos. They aren't showing us how to make a buick disappear or anything like that. Same goes for WoW. No one's giving away THAT level of experience, so Blizzard doesn't have to worry.

Yet.

Thing is though, that this combination of Christensen effect ("not good enough" creeps up on you until you find that "good enough" is way cheaper than you and nipping at your heels) and big media money are going to make for a volatile and interesting mix in the MMO/VW space over the next couple years.

This is somewhat analogous to the America's Army game a few years back. Giving away a multi-million dollar FPS as a marketing tool, they didn't put Epic or Valve out of business, but there were a few less B-level FPS's sold as a result, I'd wager.

So the thought exercise for you (as I try to bring this in for a landing), is what do you do when your competitors business model suddenly is "free"?