Thursday, July 26, 2007

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"?

20 comments:

Patrick said...

"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)."

I'm trying to do it for less than 200k, but I'm using some magic tricks, like basing the development in Buenos Aires. Actually, thats pretty much it, the rest is just good old fashioned ingenuity, design and hard work.

Mark said...

Oh man doing it in Buenos Aires - that'll shave 2/3 off your development cost right there, Patrick! :)

That's a good point about America's Army, Kim... I bet Counter-strike did an even bigger job of keeping people away from buying big FPS games, for quite a long time. I guess the real question there is, when people grew bored of CS, was there a big bounce in FPS sales because so many people were brought to the genre?

Anonymous said...

BTW, the next book from Chris "Long Tail" Anderson is called "Free" and seemingly will cover this exact topic... FYI:

http://www.longtail.com/the_long_tail/2007/05/my_next_book_fr.html


Interesting stuff indeed!

Jason Della Rocca

Nabeel said...

This is a very common theme in the web world. It used to be "what if Microsoft does it" and it's now "what if Google does it."

For instance the traffic patterns for 37boxes and Kiko (two early web calendering darlings) immediately plummeted when Google Calendar came out. All Google cared about was getting massive numbers to drive ad revenue, not any specific product.

Welcome to the wild world of constantly worrying that your interesting idea will become a loss-leading differentiator for someone 1,000 times your size.

Darniaq said...

Some web-based MMOs, like Virtual Magic Kingdom, Webkinz, Nicktropolis, etc.

But there are others that have done quite well, like Gaia, Club Penguin, and of course the biggest of all: Habbo Hotel.

Patrick has the right of it. These games are cheap. They are at once a low-risk investment and a potentially high ROI if you're looking for profit. Heck, building one of these games is less costly than the average amount of money spent on even a non-serious TV advertising campaign.

To clarify: there is no "Free". There's either marketing spend, or there's hidden charges. Club Penguin charges a light monthly fee for anyone who wants a house. The only way to extend your Webkinz account is to buy more pets at retails, part of the cost collected going back to funding the thing (which is less MMO than most anyway). You can unlock some foozles with the Barbie MP3 player, but that's not required (though a harbringer of future opportunities).

So we're not in a land of "fee vs free". It's just a question of where the money comes from.

Anonymous said...

For World of Warcraft Cheats wow gold and World of Warcraft Hacks click here.

kim said...

:Patrick (200k): That's cheaper than I thought (good for you!), but hte point still holds. You require turning a profit. Someone doing this as a loss-leader doesn't have the same concerns.

:Nabeel (google calendar): Good analogy!

:Darniaq (no such thing as free): Yeah, I get it. The point was "free from the perspective of the end-user". Couple that with some very large players in the market, and you have a volatile combination, which is kind of the point of my post.

MrTact said...

Honestly? Everyone I've talked to in the industry has been aware of this trend for 18 months now. You don't even mention RuneQuest, which is arguably the biggest contender in the "free" world.

Yes, it seems plausible that all MMOs will be free. They'll be monetized by premium subscriptions, RMT and other ancillary services. Welcome to MMO 3.0.

Anonymous said...

The game world is long overdue for a rules change. The free + microtransaction model is here to provide just that. It doesn't mean the death of the non-free however. It does however mean that you'd better provide value for the dollar. If your FPS was crap when America's Army came out, guess what, you lost your audience because you had a crap me too product and deserved to. The same will happen with free games.

nic said...

This was a great article.

Anonymous said...

出逢い 無料 出逢い 掲示板 出合い系サイト 出会い 掲示板 出会い ランキング 出会い系サイト 無料 出会 人妻 出会い系 出会い系 不倫 出会 無料 無料 出会 無料 出会 出会 無料 出会 無料 出会 無料 無料 出会 無料 出会 完全無料 出会 赤坂 バー 風俗 風俗 風俗 風俗 風俗 風俗 風俗 風俗 風俗 風俗 風俗 風俗 風俗 渋谷 風俗 風俗 渋谷 新宿 デリヘル 風俗 池袋 キャバ嬢 0930 風俗

Anonymous said...

デリヘル デリヘル デリヘル デリヘル デリヘル デリヘル デリヘル デリヘル セフレ デリヘル デリヘル デリヘル デリヘル デリヘル デリヘル デリヘル デリヘル デリヘル デリヘル デリヘル デリヘル デリヘル デリヘル デリヘル デリヘル デリヘル デリヘル デリヘル デリヘル デリヘル デリヘル デリヘル デリヘル デリヘル デリヘル 渋谷 デリヘル デリヘル デリヘル デリヘル デリヘル 出会い 出会い 出会い 出会い 出会い 完全無料 出会い 完全無料 出会い 無料 出会い系

Anonymous said...

出会い系 出会い系 出会い系 出会い系 出会い系 出会い系 出会い系 出会い系 出会い系 出会い系 出会い系 出会い系 出会い系 出会い系 出会い系 出会い系 出会い系 出会い系 出会い系 出会い系 出会い系 出会い系 出会い系 出会い系 出会い系 出会い系 出会い系 出会い系 出会い系 出会い系 出会い系 出会い系 出会い系 出会い系 セフレ セフレ セフレ セックスフレンド セックスフレンド セックスフレンド 人妻 人妻 人妻 出会い系 無料 出会い系 無料 出会い系サイト メル友 競馬予想 競馬予想 競馬予想 競馬予想 競馬予想 競馬予想 競馬予想 競馬予想 競馬予想 競馬予想 競馬予想 競馬予想 競馬予想 競馬予想 競馬予想 競馬予想 競馬予想 競馬予想 競馬予想 競馬予想

QUYET said...

無料投資セミナー
結婚相談 東京
合宿免許 夏休み
ボイトレ
ケータリング
シンガポール航空
クリーニング 保管
ワイシャツ セット
お見合いパーティー 名古屋
J-Payment
店舗リフォーム
ゴルフレッスン名古屋
渋谷区 不動産
ナイスクラップ
保育士 新卒
改修工事
エステ 新宿
バイク駐車場
貸しコンテナ
パーティー会場 東京
サイト買う
インド ビジネス
事業承継 支援
医療法人 監査
債務整理 茅ヶ崎
出会いパーティー
ブライダルエステ
港区 土地
内部通報
調布 不動産
結婚式 髪型
チラシ作成
排水溝つまり
越谷 一戸建て
和光 賃貸

QUYET said...

和光 賃貸
オメガ オーバーホール
バラ
あきる野市 一戸建て
苗木
ビンゴ 景品
レーザー脱毛
用賀 マンション
カウンセリングルーム 新宿
船橋 賃貸マンション
ラリマー
RMT
屋根塗装
イルミネーション 激安
婚活 東京
ダイエット食品
麻布十番 マンション
パーソナルトレーニング
日野 不動産
イルミネーション 激安
多摩市 賃貸
アトピー
フランチャイズ
決済 手数料
膵臓がん
ビジネス英語 メール
toeic対策
ウェディングドレス 人気
風船
加圧トレーニング 吉祥寺
メディカルダイエット
日本整形医院
ウエディングシューズ
医院開業 支援
パーティー会場 東京

sandy said...

大阪 デリヘル

中古コピー機

大阪 デリヘル

大阪 デリヘル

大阪 デリヘル

日本語ラップ

日本語ラップ

MIX CD 通販

中古コピー機

中古コピー機

漫画 おすすめ マンガ

ちゃく said...

大阪 デリヘル

大阪 高収入求人

中古コピー機

大阪 デリヘル

大阪 デリヘル

大阪 デリヘル

日本語ラップ

日本語ラップ

MIX CD 通販

中古コピー機

中古コピー機

漫画 おすすめ マンガ

Anonymous said...

結婚したい
婚活
結婚相談所
誠心 結婚
ピュアアイ 結婚
関西ブライダル
岩手 結婚
長野 結婚
京都 結婚
鳥取 結婚
宮崎 結婚
婚活パーティー
ラウンジメンバーズ 婚活
セゾンウエディング 婚活
Luxury 婚活
福島 婚活
富山 婚活
京都 婚活
徳島 婚活
鹿児島 婚活
無料婚活
婚活サイト安心感
アイキューピット 婚活
婚活 視野
結婚相談所 再婚
結婚相談所 誠心
結婚相談所?
婚活 ブライダルネット
婚活 キューピッドクラブ
脚やせ
メンズTBC体験コース
メンズTBC体験

Anonymous said...

ビジネスホテル
品川について語る
gooブログはじめました!
品川のブログ
東京デリヘル
青森県について語る
新宿で暮らしている独り言のつぶやき
新宿での日記
出勤表
求人案内
メルマガ
リンク
新宿での日記
douteidesuyo_idea_causeのブログ
激安デリヘル
新宿デリヘル
品川デリヘル
ももこの日記!
東京での生活日記
新宿ぐらしのブログ
新宿で一人暮らし
品川駅前で同棲
業界最安値のブログ
ゆみのぶろぐ
あみのブログ
りあだよ!

櫻井 said...

ディズニーコスプレ
セクシーランジェリー