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...

Tuesday, May 29, 2012

A smaller piece of a bigger pie

This week on Jester's Trek, I'm going to go back to the style of some of my more old school posts when I was running for CSM early in 2011.  Instead of picking something specific and getting really focused on it, I'm going to paint more of a big picture.  I'm not going to worry too much about specifics... though some of you may recognize the specifics that prompted this series of posts.  If you don't, and you have specifics that you like, feel free to read them into what I write.  Those specifics may or may not even be EVE-related.  But I am going to talk more about the generalities of the MMO market and where I see things going in the next 18 months or so.

Ready?  Here we go.

One of the fundamental rules of starting a large successful business is the idea of owning "a smaller piece of a bigger pie".  I'm going to explain this idea in some detail because it's going to be an important pillar of a lot of the posts this week.  If you're already familiar with the idea, you can skip ahead a couple of paragraphs.

Greed has killed far more companies than it has saved.  When you have a really good idea for a product or a service, it's quite tempting to say "this is my idea, I own it, and I want to be paid millions of dollars for it."  Paradoxically though, if you try to hold on to the idea too firmly and try to make money on it too forcefully, you will end up making no money at all.  When you start a new business with a big new idea, that's all you have: the idea.  That's what you have to go out and sell to potential investors and co-founders of your business.  Invariably, those investors and co-founders are going to want to own a piece of your dream.  The question that will eventually come up: how much of your dream do you give away so that your dream will become a profitable reality?

When you own the initial idea, you own 100% of a coin-sized pie.  You want to grow that pie to the size of a dinner table.  Greed will drive you to want to continue to own 100% of that table-sized pie.  But if you try, you're going to have a hard time growing that pie beyond its original size.  You may well end up at the end of the process continuing to own 100%... of a coin-sized pie.  Hard as it may be to grasp, owning 10% of a table-sized pie is far preferable to that.  You own a smaller piece of a bigger pie.

Arguably, no entrepreneur implemented this idea better than Bob Metcalfe, founder of 3Com Corporation.  When Bob Metcalfe founded 3Com in 1979, he owned 100% of an idea: manufacture Ethernet cards.  The idea in and of itself was worthless: Bob owned 100% of nothing.  He and a partner recruited two co-workers from his previous company.  Then he started seeking financing for his idea.  Then he recruited a professional manager to run his company.  By 1981, he owned 21% of a million dollar company.  He continued to recruit smart people, parsing out small pieces of his dream to each new addition as his company grew.  He got other people invested in his dream.

By 1990, Bob Metcalfe owned a few percent of a company worth hundreds of millions of dollars.  He went from owning all of something worth nothing, to owning a tiny fraction of something worth a fortune.

When founding a business, it pays not to be too greedy.  Since then, a lot of smart people have followed this model straight to enormous fame and riches.  I'm sure you can think of a few examples.

What does all of this have to do with EVE?  Maybe, not much.  Maybe, everything.  As I'm going to be talking about this week, with the slow collapse of World of Warcraft and with SW:TOR pretty much officially a fizzle, the MMO market is likely to become a lot more crowded in the next year or two with a lot more niche games.  There's going to be a lot more room for success.  There's going to be a lot more room for failure.

A month or so ago, the Forbes gaming industry writer published an interview that he conducted with Hilmar P√©tursson.  The interview has been passed around quite a bit.  But there's a really intriguing part of it that seems to have been missed.  We all know that that DUST 514 and EVE will be "connected" somehow, though we don't know exactly how.  But that wasn't always the plan.  In the interview, Hilmar says...
Initially we were not going to connect them. We were actually thinking about time shifting it so that DUST 514 would take place during a different time period in the EVE Universe. Yet that didn’t sound cool enough, so eventually we came to the idea of having EVE and DUST be two games in the same universe.
And isn't that interesting.

Because just making another Team Fortress 2, or Global Agenda, or FireFall, or Tribes, strikes me as going for a pretty tiny piece of a fairly small pie.  So for all of you out there that think CCP is going to be content with a DUST 514 isolated from EVE?  Ain't gonna happen.  CCP has already considered that, and rejected it.  And it's a good thing they have because if they accepted that, then DUST 514 would have been a failure before it even came out.  There's far too much competition in that space.  By the end of 2012, "free-to-play" FPSMMOs are going to be a dime a dozen, and all of them are going to be looking to capitalize on micro-transactions.  In that field, DUST will quickly get lost, particularly since it's launching as a console-only game.

But let's talk more about that tomorrow.

For now, the only choice DUST 514 has is to differentiate itself, and this is done partially through the EVE connection.  But more importantly, by making the impact of the instant-on PvP also have a persistent impact on the game-world itself, CCP can make DUST 514 more meaningful and go for a larger piece of the MMO pie.  It's the meta-game that makes EVE so popular, after all.  As I've said before, CCP will be looking to catch lightning in a bottle twice by replicating that aspect into DUST.  The more the fights have lasting meaning, the more likely that is to be successful.

The major thing CCP has on its side is time and patience.  Those of you that are hoping for DUST 514 to fail often forget that EVE Online itself survived its first three years with only 100,000 paid subscriptions.  It seems likely that DUST's business model will allow for the same slow, steady growth that EVE had.  When David Reid was interviewed by Digital Spy earlier in the year, he said:
There's a risk of getting the economy wrong. The EVE Online economy has been built for years, and people have a pretty good sense of what it takes to earn an ISK, how much time you need to spend mining or trading in the game to make money.

What could happen is somehow in Dust we do something wrong, and you can earn ISK at a faster pace and there's something unintended there and we accidentally have some hyperinflation in our economy.
And that isn't the only danger.  The space CCP is going for is not exactly devoid of competition either...

Yeah, I'm getting too specific.  I'll stop.  Tomorrow, let's talk micro-transactions and how they're going to play into this new batch of MMOs.  And how greed might kill them.

21 comments:

  1. When you talk about microtransactions, are you going to be talking "really small payments" (a la "micropayments") or are you going to be talking about "in game items sold for small amounts of money" (i.e. "cheap virtual goods")?

    My thoughts on "micro transactions".

    My thoughts on "virtual goods" and the NeX as a luxury items store.

    Hope that provides some useful input to your future article.

    ReplyDelete
    Replies
    1. "Hope that provides some useful input to your future article."


      aka "Please everyone click on my blog links!"


      Riding coattails all the way to the top.

      Delete
  2. You missed Planetside & Planetside 2, which are the closest match to DUST 514 in terms of gameplay, persistent world FPS MMO, etc.

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  3. While I look forward the the new dimension on gameplay that Dust will bring to EVE I can't help but wonder how long it will last in the FPS market. With all the great FPS's out there on the console market, along with all the big ones in development I wonder if CCP can rely on a steady customer base at all or if Dusk will slowly die off as console players move on the the next latest and greatest. There will always be some Eve players signing up but will that be enough if the rest of the console market moves on to something new? I'm curiouser what your thoughts are on this.

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  4. I would bet on Planetside for better gameplay, since they nailed that for the original. For staying power the meta game may skew towards Dust, unless PS2 changes the boring flip flop mechanic the original had.

    The problem for CCP is that PS2 will support battles with hundreds, while Dust sports small encounters with less room for emergence. I plan to try both!

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  5. I don't know how you got through this post without mentioning Copernicus/38 Studios. It almost seems deliberate.

    ReplyDelete
    Replies
    1. Commenting on Jester's Trek, day 153: in which I skip the first paragraph and come out looking like an ass

      Delete
    2. Is this 'answer a question with another question' day?

      Delete
  6. One thing I have never been able to grasp is CCP's inability to grow Eve. I understand that there is a dream in concept here. We have all seen the stubbornness of CCP to change their product. You have blogged about the numbers and how they are not anywhere near expectations of even CCP. I have to wonder how long they will hold out. When anyone suggest to add more theme park they are told to play another game. The games they usually refer to have massive numbers when compared to EVE. Maybe for some reason they like the small numbers. Even if Dust succeeds and becomes what no other console game has ever been, I still wonder will CCP alienate that customer base?
    To me it comes down to the old bell curve. If you look at it this way perhaps 15% are always going to have no trouble screwing the other guy over. While at the other end that 15% would always act saintly. The in between or most of the people are going to have mixed amounts of problems philosophically and morally with their actions in the game. Although EVE is not real the players are. The Mitani comes to mind. Although some players get into the thrill of the gank easily, I don't think most do. If so the entire game would be a constant gank fest with tens of thousands of kills a day.
    When it comes down to it more players should be what everyone wants. No matter what they are doing. Then for every new hundred, 15 will join Goons :0 and the others will carve out their place.
    One last thing. I want to apologize to the programmers at CCP. When something like the latest inventory tab comes out and there are problems with it. With the layoffs and lack of communication in the company. I sometimes forget who you are working for and that there is a symbolic gun to your head to PRODUCE!

    ReplyDelete
    Replies
    1. The thing is, EVE has one massive sell-point in that its player drive. We are the story. When important world changing events happen its a player, that is some knob behind a computer screen IRL, that made it happen. This is actually WTFOMGawesome. This would attract a lot of people but for problems with EVE. Oh the problems.

      And the stinking big problem with EVE, is that in order to get the WTFOMGawesome I mention above, you need to a commit a stack of time to EVE(for most people at least).

      TL;DR:
      EVE is pretty awesome....for those who play it for more than 8 hours a week.

      Delete
  7. I have serious doubts about DUST. It will be an FPS connencted to a very different game. It's like trying to implement Simcity into the PI system.

    Three things can go wrong:
    * you can't play successfully DUSt without playing EVE, FPS players upset and leave
    * you can't play successfully EVE without playing DUST, EVE players upset and leave
    * the connection is too weak to be meaningful and DUST will be a random FPS where the lore text that everyone skips is about New Eden

    I don't want to sound like the bittervets who say "work on MY game, not on that FPS", I'd just ask CCP managers "if you have a relatively successful car manufacturing company, are you sure that building a diary farm is a great idea"

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    Replies
    1. I don't think your making the right analogy here Gevlon.

      Think of it is like this... You have a relatively successful car manufacturing company, famed for making great engines.

      Now you seek to use that knowledge of machinery and your well known branding to create motor bikes.

      Delete
    2. Ask a passenger car company (Chrysler) if it was profitable to have started the mini-van line.

      Or Apple Computers to start making a mobile phone.

      Or hell, ask Porsche if it was profitable to make an SUV.

      Ask RIM if it meant long term business sense to become the dominant player out of the gate and then relay on your position and one service to maintain that position.

      Single product companies are horribly vulnerable. While I will agree that I don't see DUST becoming the EVE of fps games, I do stipulate that CCP MUST have other, different, products in order to ensure its survival.

      Delete
    3. I agree with Knug and have said as much a couple of times.

      Delete
  8. Unable to grow EVE? Eve subscriptions FLAT? Let's talk about air supply.

    How about disposable cash disappearing as the US and other nations are in the grip of a deflationary depression. Yes I said depression. That's the reality. The media won't tell you that. But your friends will.

    The new method is to manage contraction back to a new norm. I'm looking for a reset to occur. Perhaps a big event or several big events to crack open resistance toward contraction. Then once we reach the new norm younger folks will have extra money for MMOs like EVE and Dust.

    But until then it's manage contraction baby, manage contraction. And maybe for several years.

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  9. You could have added some graphs of these pies, I'm sure Rixx Javix would have enjoyed them ;-)
    http://eveoganda.blogspot.com/2012/05/posting-as-jesters-trek.html

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  10. One quick thought as someone who has experience swimming with VC sharks through numerous past clients, and who also grew a pie from nothing (as in a flavor of pie no one had even heard of) to a multi-million dollar business in a handful of years without losing any ownership...

    The "smaller slice of bigger pie" model is definitely true in some circumstances, but it is not as universal as some MBA professors will have one believe. Some business models work best when no control whatsoever is given up, or at least where control is given up only very slowly. This is especially the case when the pie you are growing is so weird and innovative that just about anyone you give a slice of it to will completely misunderstand how it works (how pies work? metaphor overload alert...) and screw the whole thing up. Many good ideas have been mercilessly slaughtered by seeking too many of the wrong type of investors too soon.

    That said, overall it's a valid aphorism.

    Looking forward to where you're going on this.

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  11. Based on my experience in the industry, I cannot agree more with the Reverend Mak. VCs don't understand gaming well, even mainstream gaming, let alone innovative gaming.

    ReplyDelete
  12. Which pie did the iPhone form a small piece of, when it was first launched?

    ReplyDelete

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