Welcome to Jester's Trek.
I'm your host, Jester. I've been an EVE Online player for about six years. One of my four mains is Ripard Teg, pictured at left. Sadly, I've succumbed to "bittervet" disease, but I'm wandering the New Eden landscape (and from time to time, the MMO landscape) in search of a cure.
You can follow along, if you want...

Wednesday, April 25, 2012

Take it or leave it

I apologize in advance, but this post is pretty long.  It covers a lot of ground, but I think it's important ground.

Back in August, I wrote a post that was mostly unrelated to EVE called "Found money".  In it, I examined the case of the makers versus the publishers of the Extra Credits videos.  The people involved had suddenly and unexpectedly come into a windfall of some $100,000 U.S.  The money was donated by incredibly generous viewers of the video series that wanted to do some good for the people who made those videos.  What happened instead was the makers (on one side) and the publishers (on the other) started squabbling -- in public -- over the money.  At the time, I wrote:
Yeah, everyone involved in this looks really really bad.

In real life, I've seen this situation play out at least a dozen times.  Large amounts of found money never ever brings out the good in people.  Money can't buy happiness, they say, but I'll tell you what it can buy: acrimony, distrust, and until-that-moment repressed hurt feelings.
We're seeing this situation play out again with the drama regarding the EVE is Easy website(s).

Now, don't get me wrong.  I'm a firm supporter of capitalism.  In particular, I don't pirate software or other media.  I believe artists should be paid for their work.  And in general, I think the products and services potentially being sold by EVE is Easy are worth selling.  I've watched every one of the publicly available videos at this point.  Some of the videos are mediocre or just flat-out bad (I'm looking at you, Scouting video).  But the majority of them are good, and some are quite good, notably the various solo PvP videos.  Even more valuable is the one-on-one instruction that was offered to subscribers through the EIE forums and through roams and the like with the contributors.  Those present the opportunity to make those that subscribe to this service markedly better EVE players, and I'm all for that.

But speaking from a capitalist perspective, there were many mistakes made in how this service was launched and sold.  EVE News 24 published a fine article about the drama, calling the article "Greed is easy" and "Hostile take-over".  Both concepts are worth discussing.  I suggest you read the full article, including the chat logs, to get a solid perspective on this issue.  It's worth your time.

When you're going to sell a service, it's imperative that you price the service appropriately.  This is particularly true if you're going to sell a media subscription service.  EIE clearly failed here, rather spectacularly.  And they failed on two fronts.  First, they were not up front and honest from the very beginning that they intended the service to be a subscription service.  Ironically, this is no different from CCP's own late-stage experimentation with micro-transactions within EVE.  Second, they ridiculously laughably overpriced their service at $19 U.S. per month or $200 U.S. "lifetime".  This exceeds the price of the game itself!

It's pretty clear from the leaked conversations that the fault for the first lies with all of the EIE developers and the fault for the second lies with Abaddon21.  The EIE developers were looking to build a comparable website to Skill-Capped for World of Warcraft, and that's fine.  But I'll point out that that website costs members between $4.15 and $4.95 U.S. per month, not $19 U.S.  That's substantially less cost for substantially more content than EIE.

The EIE developers got greedy, and they're paying for it.  That's no different from pricing a monocle at 12000 AUR.

Let's talk about Abaddon21's "hard-earned business experience."  I've been in business for more than 20 years, and I can tell you flat-out his business skills are crap and his negotiating skills are worse.  Abaddon21's greed is ample proof of the first.  Avarice is a sin in business just as much or more than it is in real life.  The business-people among my readers know what I'm talking about so I won't belabor that point.  Even worse, the business plan for EIE was clearly built around numbers that were essentially pulled out of Abaddon21's nether regions with no basis in research or fact.  It would have been the simplest thing in the world to take the large farm of e-mail addresses that were gathered in the first phase of the launch, and use this (obviously interested) group as a research base to ask them questions like "How much would you pay for these kinds of services?"  From what I can see, this wasn't done.

Abaddon21 initially signed his closing statement at eveiseasy.com with his character name.  He's since removed it, obviously trying to distance himself from this disaster and I don't blame him.  He didn't do his initial homework, and he didn't put the continuing work into research and marketing, and it shows.

But as bad as his greed was, his negotiating is worse.  This is where the "hostile take over" part comes in.  Two examples will serve here.   While arguing that he should be paid now now now, Abaddon21 said this:
[17/04/2012 17:12:44] Abbadon21: you wil never know what ccp can do
[17/04/2012 17:13:07] Abbadon21: most likely if they do anything it will be in about 2 to 3 months after they have had lawyers mess with it
[17/04/2012 17:13:29] Abbadon21: then should they want to spend the money to do it, it will only be a cease and desist order
[17/04/2012 17:13:42] Abbadon21: a scary piece of paper that means nothing
[17/04/2012 17:14:31] Abbadon21: then should try to take it to court they will have to do take a year or more to get through that and the end result would be a take down order
This is so ridiculous that I'm having a hard time expressing how ridiculous it is.  Let's handle it the easy way: EIE was and still is under existential threat.  CCP can end EIE at any time and all it would take to do it is a twitch of their collective wrist: they can just ban everyone involved from EVE for violations of the EULA!  How many EIE videos will be made after that?  How many EIE roams will happen after that?  How successful is EIE going to be if every time a new video is made, the account creating a kill-mail in the video is banned?  The EULA is pretty clear that cases involving it -- if applicable -- get tried in Icelandic courts under Icelandic law.  "You hereby expressly waive and agree not to raise any and all objections based on personal jurisdiction, venue and/or inconvenience of such forum and agree to the jurisdiction of the District Court of Reykjavík, Iceland."  So sayeth the EULA.

EIE seems to have made just about enough money to fly one person to Iceland once.

And that assumes that every single customer of EIE(1) doesn't instantly demand a refund the moment everyone involved in the production of the website finds themselves banned from the game.  EIE is providing a service, access to EVE is a critical component of that service, and they cannot negotiate with CCP on any basis that allows a threat to that access.  They simply cannot take a hard line with CCP.  If they do so and lose access to the game, their business ends.  That's what "existential threat" means.  Abaddon21 says later in the log that they should only have enough liquid capital on hand to provide two to three refunds.  I think you can see now that that's laughable.  Businesses live or die on their liquid capital.  If you don't have it, your business dies.

But as a demonstration of really bad negotiating, that position of Abaddon21 pales next to this one:
[00:19:41] Abbadon21: Last chance is to buy me out, beyone that I don’t want any part of this
[00:20:59] Abbadon21: I'm done thinking... creating new mail and shut down page now
Ultimatums have exactly one place in negotiations: when you have all the power in a relationship.  When the U.S. and its allies demanded the immediate withdrawal of Iraqi troops from Kuwait in 1990, that was an appropriate ultimatum.  If your spouse finds proof you're having an affair and demands you end it under threat of divorce, that's an appropriate ultimatum.  If a business finds its trademarks are being violated and demand that it stop, that's an appropriate ultimatum.

If you do not have all the power in a relationship, an ultimatum has one of two alternate definitions: "extortion" or "failure".  I'll leave for you to judge under which category Abaddon21's ultimatum falls.

If you say "take it or leave it", you can be pretty sure that 80% of the time, the other party is going to "leave it".  The other 20% of the time, you can rest assured they're going to take it only because forced, they're going to be extremely resentful, and they're going to spend a lot of time looking for a way to get back at you.

Enough about Abaddon21.  Let's talk Garmon and the other EIE principals.

Garmon, Duncan Tanner, and the others involved in EIE come out of this looking better than Abaddon21.  But that doesn't mean they come out looking good.  The logs paint a picture of a group that was manipulated by and let themselves be swayed by Abaddon21's avarice and unrealistic predictions.  That's no way to start a business.  The subscribe page at the "re-launch" EIE site is down and it seems pretty clear they're going to rethink their whole strategy, particularly since they're still under existential threat from CCP.

What they're not doing, though, is they're not being openly communicative about their goals and plans.  They're also not being open and honest about what's happened to this point.  Let's be clear: this is a mistake.  Instead of fighting the story, Garmon and company should be guiding it.  In particular, I'm sure that Lost in EVE, EVE Radio, or some other podcast would love to talk to them about this.  That's something that they should do, right away.  At the very least, there should be some kind of statement on the front page of their website giving their position on all of this.  There isn't.  That's also a mistake.  They need to get in front of this and try to take control of the narrative.  Because right now, the narrative has control of them.  End of speech.

Finally, why is this worth writing about at this length?  My typical blog post runs 900 words.  Why does this topic get double that?

This is an extremely important topic for EVE's future.  Sure, EVE has a lot of fan and hobbyist sites.  You're reading this on one of them.  But to this point, none of them have been commercial.  A few succeed in earning ISK for their efforts, but to date, nobody's tried to make RL money.  The first true attempt at a commercial EVE application or website was -- as far as I know, anyway -- the Capsuleer application for the iPhone.  It failed primarily on the fact that CCP didn't want to negotiate commercial licenses for EVE supporting products and websites.

This isn't a position that CCP has the luxury of taking forever.

If DUST 514 succeeds, they're going to be introduced to the larger gaming industry.  Skill-Capped works because Blizzard really doesn't have any way of stopping it.  They can't introduce an existential threat because there are so many WoW accounts and so many ways to hide from the ban hammer.  They have little choice but to accept that commercial support products are going to appear and try to channel the direction that they go.  One way was to jump in front of such commercial applications by trying to subvert the market themselves with their Mobile Armory application.

CCP is clearly going in this direction with their Dust 514: Neocom application.  So this problem is definitely on their collective minds.

So, whether EIE succeeds or fails, this sort of thing is in EVE's future.  EIE might succeed.  It might fail.  But it's only the first attempt.  CCP doesn't have the option to take it or leave it.  ;-)


(1) From the leaked conversation, this seems to be 30 or so "lifetime" subscribers and 80 or so monthly subscribers.

12 comments:

  1. "It failed primarily on the fact that CCP didn't want to negotiate commercial licenses for EVE supporting products and websites."

    About a year ago CCP intended to put such licenses in place ... by charging $99/year from every 3rd party dev out there. Yes, even the ones not looking for profit.

    Needless to say, all of them jumped on the subject to say how ungrateful that was on CCP's part after all the unpaid help they provided (and let's be honest here, I don't think Eve would be half as successful as it is today without Evemon, EFT, battleclinic &co for all these years).

    Still, I think CCP should protect their IP, so I will suggest an alternative:
    - The contract value to create a legal biding to any 3rd party with CCP will be exactly the price of one GTC.
    - As a sign of good business partnership, upon completion of the contract CCP will allow one plex to be redeemed in-game to one character or player account chosen by the 3rd party.

    This is based on an assumption that any 3rd party entity is related to at least one active account, which will be able to put that plex into good use.

    ReplyDelete
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    1. CCP failed with that because it included all of the "not for profit" ones. No one who planned on actually trying to monetize an Eve App would have cared about a $99 a year fee to CCP. In software development a $99 yearly licensing fee is so low as to be laughably non existent.

      Charging 99 bucks a year for a completely free service in which the owner and creator makes no money? That is a completely different ballgame. And anger from the community is correctly aimed at CCP for trying it.

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    2. "CCP failed with that because it included all of the "not for profit" ones."

      I agree, but I can see why CCP tried to put it that way: it is much easier to have the same rule for everyone than to put a process in place to determine who needs to pay and who can use the IP for free.

      Let's take EN24 as a simple example. Riverini already said that the site has always been an expensive hobby for him. And you know what? I quite believe him on that.

      But should it pay that $99 fee? Well, the site has ads, so it has some income. In theory it can generate some profit. It turns out that the $ from the ads is used to buy plexes to pay for the writers, in isk.

      You may say "Well, of course, entities looking for profit are the ones whose owners end up earning real money from it", but seriously, can you imagine the bureaucracy to check that? And that's assuming all 3rd party devs submit accurate financial reports...

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    3. Agree with Halycon. Someone at CCP got overly greedy and effed up. Hopefully, that clown was one of the ones who got laid off.

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    4. Maybe it was instead meant to encourage developers to monetize their applications, and I don't mean subscription services or commercial versions. If the developers of EveMon, EFT, EveHQ or Pyfa would add a Paypal Button to their pages (not sure if they haven't already) they'd earn way more then 99$ per year.

      On the other hand CCP probably wants to get a better grip on the API usage and have a good way to shut "shady" services down.

      Delete
  2. Jester, I am left wondering how many times a survey of users has asked "how much would you be prepared to pay for this service" and subsequent to that, the people indicating that they would pay $X have actually subscribed for that much.

    As for subscription pricing, I would much prefer to have 10 customers paying $20 than 20 customers paying $10. Sure, each customer presents a higher risk to my business, but that customer base represents a much lower service demand, leaving me with more time to do interesting stuff.

    The same goes with $70 monocles. I am sad for you that you are still harping on about luxury virtual goods being expensive, like the Macdonalds burger flipper wandering into Yves Saint Laurent and complaining that the handbag is far too expensive, and telling the sales staff that they should price it at $10 otherwise you won't buy it.

    EIE made some sales, but failed for the same reasons that many small businesses fail: the principals encountered a situation they hadn't planned for and were unable to manage the contingency.

    I agree with you on the assessment that CCP really needs to sort out commercial licensing of its IP. Doing so is going to be far cheaper and easier for all involved than attempting to wage war with a ban hammer and an army of copyright lawyers.

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    Replies
    1. I couldn't disagree with you more on your top three paras. I'd ALWAYS rather have 20 people paying $10. That's 20 customers that I can try to sell a $1 add-on. You only have 10 customers.

      And that assumes that this sort of thing scales linearly, which it never ever does. More likely, you'll have 10 customers paying $20 and I'll have 30 or 35 paying $10. Or I'll have 60 paying $5.

      Know how we know I'm right? Angry Birds. Doodle Jump. Farmville. Bejeweled. Fruit Ninja. Etc.

      Granted, Call of Duty and Diablo III make more money, but for every Call of Duty and Diablo III, there are 20 failures. Whereas even the most crap $2 product these days makes a profit.

      Oh my yes, give me a smaller piece of a bigger pie every single time. This very blog is proof of it. I'd rather have half of ten thousand people agree with me and the other half think I'm nuts than 100% of a thousand people agree with me. I'm funny that way. ;-)

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    2. "EIE made some sales, but failed for the same reasons that many small businesses fail: the principals encountered a situation they hadn't planned for and were unable to manage the contingency."

      No, they failed because they were stupid, cannot read the EULA, and have no clue about the legalities of IP infringement.

      There is no ambiguity in this matter. They attempted to sell a service, using IP which belongs to CCP, without permission to do so. The end.

      Delete
  3. CCP is a business. They are open to reasonable business proposals.

    I'm fairly certain that the folks who authored the Eve-derived sci fi books made a deal with CCP. The difference is that they were honest and smart enough to make the deal *before* trying to sell the books.

    However, in this case, Abaddon21's statements and actions prove that EIE's intention was to use CCP's IP without paying for it, and skim as much money from the Eve players as they could, before being shutdown. That's why they went with the ridiculously high fees and the "lifetime" subscription offer.

    Totally reprehensible, and illegal as all hell, to boot.

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    Replies
    1. The folks that wrote the EVE books were CCP employees at the time...

      Delete
  4. About pricing: remember that what they sell is PvP-related. PvP-ers want the edge over the opponent. They are ready to pay for something exclusive. The same video worth more if less people have seen it. The trick that everyone knows worth exactly zero.

    About this whole EIE: I'm shocked by their total ignorance about business. They wanted to run a real small business with the attitude of a community fansite.
    - Did they even registered a corporation?
    - Did they have tax number? (they can get jail for taking thousands of dollars of profit without paying tax)
    - Did they signed contracts about intellectual property rights, profit shares?
    - DID THEY KNOW THE REAL NAME OF EACH OTHER?!! (because they keep referring themselves under gaming names)

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  5. I agree with your analysis, however I think there is at least 1 party that makes RL money with a eve related service. EON magazine, and maybe ISK the guide, although I'm unsure if any money transfered hands on that.

    I think while it may be too late, garmon & Co should probably try to get in contact with CCP and/or EON to see if any of them is willing to work with them on this service.

    The service as later described by garmon. A community with many videos made by multiple well known pilots from eve and garmon & Co basically facilitating the process and contributing as well has merit in my eyes.

    ReplyDelete

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