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...

Thursday, May 31, 2012

Micro isn't so micro

As promised, let's talk more about where MMOs seem to be going in the next couple of years, this time focusing on the so-called micro-transaction.

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.


  1. "If SW:TOR couldn't do it, nobody can."

    Isn't that a bit like saying "If my retard double-half brother Cletus can't do it, then nobody can"?

    "Not only is that the point where you're unlikely to unsub, that's the point where they actually start making money off you."

    This is incoherent. Every player's dollar is worth the same as every other dollar. Saying that it takes X amount of time for Y subscribers to pay off some hypothetical Z amount of development fee has absolutely no relevance to EVE, which you may or may not be surprised to learn is already much older than X.

    "With the cost of game development these days, the subscription model just doesn't work any more."

    The subscription model works well for games that are successfully designed to be played for a very long time, such as EVE. The recent spate of poorly made WoW-clones with broken endgames don't work as subscription games very well, but that doesn't prove anything close to what you think it does. Are you really meaning something like "No extremely successful subscription MMO will be released in the next 10 years?" That's a bold statement, although I doubt you'd bet your house on it.

    1. "Isn't that a bit like saying "If my retard double-half brother Cletus can't do it, then nobody can"? "


      So far only Bioware had the sheer amount of marketing, manpower and funding to produce something that could possibly pull players from WoW and the rest of the semi-casual market. I'm talking about sub numbers, not quality, as your example implies.

      And as you said, the subscription model "works well for games that are successfully designed to be played for a very long time, such as EVE". Sadly, this means niche MMOs. The majority of players now consume games, don't immerse themselves into game worlds.

      That by itself implies that sub-based games will eventually become the minority, if they're not even there

    2. "Isn't that a bit like saying "If my retard double-half brother Cletus can't do it, then nobody can"? "

      Your personal opinions about the actual game and game content means nothing. You can't ignore the monetary investment on Bioware's part trying to repeat the WoW fluke.

      "The subscription model works well for games that are successfully designed to be played for a very long time"

      Who are you to decide if and what model works well for a game company? Do you have the insiders knowledge and marketing teams books to prove such a claim? If EvE is barley surviving on its subscription based game trying to change its model to a micro-transaction game (as we saw last summer) then doesn't it suggest that what makes the most money will prevail in the future?

      "Are you really meaning something like "No extremely successful subscription MMO will be released in the next 10 years?" "

      I think the meaning is there is less incentive now to try and produce a really extremely successful subscription based MMO when a F2P game is a more profitable model.

  2. You might want to check out MMOData.net (http://mmodata.blogspot.com) That 400,000 number isn't subs, its active accounts. And CCP has been giving that site regular updates (like once a month) on both sub and active account numbers. CCP maxed out at 370,000 subs last summer, fell to 340,000 in December and is back up to 361,000 now. And I went back to the last QEN and confirmed that Dr. E's charts referred to accounts and not subs.

  3. Jester, wake up!

    About that gamesintustry.biz article you linked, the guy who wrote it has his head so deep into his arse that it is almost coming out of his mouth. The figures he predicts are so out-of-reality that it even resembles CCP's we-gonna-dominate-the-world announcements.

    Does he think it is by chance that the current ideal scenario for standalone games are 20m sales at $60? Does he really think 200m people will consistently download an AAA SP game for free and once it is working pay $60 to acquire some premium advantage instead of using some cheap h4x or trainer? I gonna place this among the most stupid ideas I have ever heard.

    About the MMOs subject, on a scenario where there is a constant release of AAA F2P designed to snatch $60 from 200m people, this involves such a large share of the market that you cannot expect linear projections to hold anymore.

    That post not only ignore ingame attrition, which is higher the stronger the P2W is, but also the market-wide attrition that the above scenario will generate.

    I know this sounds crazy, but most people learn from previous mistakes.

    So, there are emergent countries increasing the gaming market? Granted, all these gamers new to the F2P model will fall for the trick a few times, but after that they will be a lot less keen to open their wallets in future games, not because of the quality of those game, but simply because of previous experiences. I talk with personal experience on this.

    In summary, that whole article reeks of media attention whoring. That aside, I do agree that the F2P model achieves profitability faster and and can have an overall higher profit per project. It is just the idea that you can miraculously increase the gaming market value by an order of magnitude by simply changing pricing&offers that sounds absurd.

  4. Where most MMO fail to monetize is in how and where to place that "unpleasantness" you are talking about.

    For example diablo 2/3 "unpleasantness" was item grinding (for most ppl, not me as far as diablo 2 goes);

    The item system of diablo 2 was of such magnificent design that it drove players to spend out of pocket to get items in game.
    Blizzard has seen that and turned it into an in house revenue stream for them with diablo 3.
    Where they've gone wrong is not delivering an item design of the caliber of diablo 2, that will fuel the same passion that drove players to spend the real money they did on that game

    If you apply the same example into EVE you will notice that CCP is trying to monetize their game selling PLEXes (ya rly).

    But there seems to be a problem here, for example and a hypothetical one: a player could buy 100u$s worth of plexes for a 2.8b isk and invest that isk's into a carrier. That carrier, at the eyes of the player, it will last indefinitely, but for this example lets say it will last 1 month before it dies in a fire of tears and rape. Within that month that average player will do enough isk to buy 2 to 4 carriers. So far so good, CCP gives you the choice to buy some plexes to boost your incoming and that will make you a more valuable asset for you corp & alliance. But nowadays CCP seems to systematically nerf every isk printing mechanic ingame (I'm not talking about incursions) it will reach a point (if it did't yet) that there will be no desire to drive that player for investing real money for that carrier. What for? to see it blow up after "that" month and then having only enough isk to buy and fit one and maybe buy plex at most? Surely that player could invest $100 more and hope that his carrier lives more that one month, but then again the player is investing his money into plexes for clearing out his tears not making his gameplay more enjoyable

    I know there are certain individuals that would disagree and that's perfect, You will probably have others means of making money (moons?) but that will probably be nerfed to.

    1. The ISK to trade for PLEX has to come from somewhere.

      Of course there's always the option of abandoning ISK altogether and allowing players to generate their own currencies. Goonbucks, anyone? AAA Rubles?

  5. I suspect that CCP hopes that Dust will raise the profile of both Dust and EVE in the hopes that Dust players will enjoy the setting and the conflict and eventually become EVE players.

    Dust will exist as an 'easier access' version of EVE; the game play is FPS and much easier to 'consume' than EVE and appeals to a wider audience. From what I've seen there is a 'fitting' type menu for Dust which is similar enough to EVE that if a player was to migrate to EVE then they wouldn't have to relearn a completely different game.

    To be honest I can see the largest contributing factor is the use of alt characters. Most EVE players will use an alt for scouting or scanning etc for convienience or easier completion of a task. In dust that will be magnified many times as EVE players are almost perceived as the 'gods above' that can rain down hell onto the planets - what better way of ensuring victory for a Dust player than to be able to control both the solider on the ground AND the ships in space.

    In theory it would work both ways as EVE players can jump onto Dust and give them an extension of gameplay to continue their subscription; even if they don't actually play EVE that much they have the ability to have the orbial facilities on demand without having to rely on those pesky human emotions :P

    New players to the universe will probably quickly see the advantage of having an EVE alt to provide those orbital facilities and get a subscription simply so that their Dust carreer is significantly improved.

    Even financially I can see an incentive to have an EVE alt; based on the last video which showed costs of tanks, planes & body armor etc - most of it was costed UNDER 1mil ISK; which might be a real task to obtain in Dust but NOT that hard in EVE; assuming you can give ISK to a Dust player I can see a lot of Dust players making EVE alts to bank roll their adventures.

  6. So Jester - what are your thoughts surrounding the Pay for Gameplay Time models - such as the Korean subscription implementation in Aion?

    (For clarification - the system where you pay for X hours of playtime, as opposed to X days.)

    1. Pay per hour is used a lot in that part of the world only because of the popularity of Internet cafes.

    2. This model makes Jester very, very sad. Particularly since I feel it's inevitable. The next generation of MMOs will probably work this way because running those servers costs money. The people who play more probably should be paying more.

  7. So Jester.

    You are implying that we made an error when raging over the microtransactions that got half-introduced with the Incarna expansion?

    Because that is what I am reading between the lines there...
    On a sidenote I do hope that DUST will succeed if only to save EVE from dying.

    By the way: how are the active player numbers in may? You should make some quasi-live flowchart on that. I'd love to browse through that and look at the numbers and have some educated guesses from that. ;-)

    1. I don't know about Jester, but I was laughing all month long as people raged over "micro transactions" not being "micro" in EVE's Virtual Items store. CCP never made any comment about "micro transactions" in relation to the Noble Exchange, yet everyone made the assumption that "hey, this item store sells things for real money equivalent, therefore all the items should be cheap."

      The rage about moving EVE to an item store model was well founded (assuming the Fearless newsletter wasn't making fun of MT and F2P models elsewhere), as was the rage about lack of development in the game (Incarna itself being the focus of so much effort, with so little to deliver).

      The rage about monocles costing $70 was daft.

  8. I have a question jester.

    PLEX isn't the same as buying gold in a F2P game. You don't get a set amount of ISK for a PLEX, the market dictates how much you are paid.

    Now if we're seeing a flood of people selling PLEX, won't we see the prices fall pretty dramatically? One of best things about buying PLEX at the moment is that it gives a good amount of ISK, wont this change? ALSO if all PvE content is being nerfed, a lot of these people you think will be selling PLEX won't have as many people wanting to buy PLEX, PvE content nerf means maybe they cant afford the extra money per month.

    So really, could this PvE nerf really encourage that many more people to buy PLEX from CCP as the profits from doing do decrease

    1. I don't want to comment on PLEX prices any more than is absolutely necessary because I've come to learn there are too many people manipulating PLEX prices.

  9. 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."

    This is not working, as the relation of any internet business is a bi-directional one. Any online game will always need its players as content, but any player will need always to be viewed as customer as well, because they can always vote with their feet. You have to make sure to keep the balance, which is the whole reason p2w is such a touchy subject, if you fail to entertain "everyone", your content wil run away from you.

    Oh and btw plex prices are player driven, decreasing raw isk income on all fronts will just reduce inflation, which is good.

  10. Pay for gametime won't work in EVE, as SP accrue over time, whether in game or not.

    If EVE moves beyond Cousin's mode 1.0 (it is fair to say that current Nex store is 1.0) it could be construed that the PLEX market potentially removes some of the grind of EVE (for ISK)but it doesn't remove standings grinding or training time, so I don't believe it is full 2.0).

    If EVE went 3.0 or even a 2.0 where paying leads to winning, I'm done.

    I really enjoy EVE, but go past Cousin's 1.0 and I'll drop it in a flash. If I can buy SP by the bucket full, or items for cash. P2W will end EVE.

  11. Do you think CCP is slow boating toward a F2P model where the current Plexes become Isk packages, equipment, or something similar? This would seem the natural end point if CCP keeps making PvE grinding harder, removing the unpleasantness of grinding by paying for Isk. It would be more or less like it is now, but the number of players would increase to a point to make it more profitable even without subscription. To those saying this would make EVE "Pay To Win", buying Plexes on the web site and selling them to buy great equipment isn't much different.

  12. "It's increasingly clear that WoW's subscriber numbers were a fluke that isn't going to be matched any time soon"

    Doesn’t this directly contradict your comment from yesterday, saying you believe the 10m+ WoW players are indeed MMO players rather than WoW-and-done tourists?

    1. Nope. I think WoW is going to be the Star Trek: The Next Generation of MMOs. ST:TNG effectively launched the successful syndicated TV series. No syndicated TV series has ever matched its ratings. But those viewers are still out there. They're just spread out among MANY other TV shows.

      Thus will it be with WoW: those players will still be out there, just spread out among a lot more games.

      Great question, though!

  13. WoW's numbers aren't a fluke.

    Those numbers come from being first.

    ToR can't beat is because, as an MMO, toR just isn't as good. It lacks the end game content required to create retention.

    1. From being first? Ever hear of everquest?

  14. I think it's funny that people doubt the amount of money people are willing to spend to win. I'm honestly not ZOMG ftp with micro transactions will ruin the game!!1!!, but neither do I look forward to it. IMO, it seems like a very shady business practice, albeit one that is used IRL all of the time, but I still don't like it.

    That said, I think ptw would screw up EVE very badly.

    I'm assuming that the CCP is not planning on having an ingame economy similar to EVEs in Dust 514. In that case, selling items for RL ISK isn't going to effect the game as much. It will just turn into a contest between people who had lots of money to burn, and people who have lots of time to burn. Nothing wrong with that. All you need is a little attitude adjustment.

    1. It would screw up EVE as we know it. Make no mistake, if that is the price of gaining a million new customers, they will throw the existing playerbase under the bus in a heartbeat. It'll be easier to do if the company doing the throwing is Sony, because Sony isn't carrying 9 years' worth of player/dev baggage around.

  15. Just a quick point: it's my understanding that Dust 514 will not have "a zero cost of admission" - last I heard, CCP would force a new player to buy a small sum of Aurum before they play.

    Presumably, the idea is that this will get people used to spending real cash, and also to give you an odd, non-redeemable balance you'll be tempted to try and clear in future, like with MS points.

    1. They've backed away from that. DUST will be completely free-to-play (free to download, actually).

  16. Another way CCP is pushing PLEX is simply by having this BIG button on the Eve launcher for PLEX services.
    And are there any other MMO, where the largest bundle costs over 490 yoyos (the price of the 28 PLEX bundle - which saves you around €70) ?

  17. "If you're not paying for it, you're not the customer. You're the product being sold."

    By this logic, a lot of veteran players are not customers anymore, but content. Quite a lot of older players have ways to make more money than is needed to fuel their game time by market-bought plexes.

    And so they provide two things to the real paying customer: ISK to buy their plexes. Content, since those players are pretty often higher-ups in alliances and corps, provide content and so on.

    Let's take a look at some outstanding examples who probably don't pay for their game time, cause they are filthy rich in game terms:
    Chribba - provides stuff like EVE files, EVE agents, his 3rd party service etc.
    Somerset - Blink anyone?!?
    The Mittani - Douchebag? Yes! Provider of content? YES!

    1. Your kinda dumb. Either way your account is being paid for. It doesn't matter if you pay with real money or isk. In the end, your account for that month is being paid in real cash to CCP. The only difference is some other player payed for your accounts monthly fee. Since CCP is gaining cash for your subscription in some way, the comic above does not apply.

      You are the content when your account in the game isn't directly putting money in CCP's pockets. This could only happen in a true F2P model and not the current model of EVE.

    2. "Your kinda dumb."

      Thank you, the same to you! Just a thought experiment. But I won't blame you for your inability to follow it.

      "The only difference is some other player payed for your accounts monthly fee."

      That is a pretty important difference. A paying customer is a customer who... well... pays. If other people pay more - and they do it when they buy plexes - you don't become a paying customer, if you did not pay. Easy as that. But as a holder of great ingame assets, you provide ISK for these other players.

      It's pretty much the inversion of the p2w system. Now pretty much "won" the game, so you start to provide content to play the game for free.

  18. concerning dust economy, i think the small cost of items is here to be sure it won't affect too much eve if lots of people are on dust.
    if things cost 100-1000x less in dust than eve, then the economy won't suffer much if they fail it

  19. Interesting articles.

    You blew my mind a bit about all these income nerfs. I actually bought the inflation-is-bad-mmkay partyline from the DEVs on this and filed it under yet another "facepalm-ccp" moment.

    It all makes sense now and yet it´s again "facepalm-ccp".
    So they want us to pay for isk AND for subscribing to use up that isk, quasi burning that candle from both sides?
    THAT won´t hold out for much longer either, at least not at these sub. prices IMHO.

  20. You mentioned World of Tanks. I played WoT soon after it came out because it was F2P. It is impossible to get to the top tier tanks as a F2P player. There is a ton of built in issues to try and force people to pay money. Personally, that just made me leave their game and delete it off of my hard drive. I refuse to be forced into micro transactions.

    1. I stopped playing WoT for the same reason. The balance is pushed too far to P2W.

  21. EVE has got all three grades of 'microtransactions' already.

    1.0: NEX
    2.0: Buy PLEX or buy an alt account to reduce unpleasantness. (Cyno-alts, PVE-alts, scout-alts, market-alts)
    3.0: Buy an alt account for additional features. (FW-alts, capital-alts, market alts, alts for spying)

    Heck, paying for an alt (as well as paying for plex) can also be seen as a type of 'paying to win' as soon as PVP is concerned.

  22. I may (ab)use these words of wisedom to try to describe one off the fundamental dilemmas around Eve atm.

    First Step:

    If you're not paying real money to play EVE yourself, you are the content that CCP is selling to those of us who are.

    Next Step:

    If you are paying with real money to play EVE, you are content that CCP is selling to the GOONS.

    How can paying customer enjoy being used as entertainement for goon player mentality ? Ruling rom empire (Goon alliance) with "Bread and Games" has proven to be effective in "Strugggle of Power" .... but it does it function with modern concepts of "FreeToPlay Games"

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