Saturday, January 19, 2013

Rethinking SWTOR, TSW Relaunches

I've been spending a fair chunk of my time on two of the more prominent MMO's that underperformed in 2012 - SWTOR and TSW - of late.  Both had to redo their business models within the first year of launch, and both revisions left me in some ways scratching my head.

Given more time, experience in the games after their relaunches, and the limited detail the respective games have released, I have new theories about both games... neither of which would be good news for me as a customer of both products.  I get the impression that SWTOR is heavily dependent on its cosmetic item gambling packs and that TSW appears to be running a fire sale to keep the lights on for a few more months before going under.

SWTOR - Funded by Gambling For Items?
As someone who prefers to pay for MMO's on a non-subscription basis, I've had a hard time wrapping my head around SWTOR's new approach.  Almost everything I would have been willing to pay for was either given away for free or else has not been offered for non-subscribers to purchase at all.  I get the desire to sell subscriptions, but how do you make more money by expanding the audience if you're seemingly so opposed to actually making money from the new non-subscription players?

I'm now increasingly thinking that the goal of Free to Play had remarkably little to do with expanding the player base.  Rather, it appears to have been about creating a justification for an aggressive cash shop aimed at the previous subscribers, with gambling for items as its centerpiece.

Bioware reps are currently on an offensive to defend the Cartel packs, telling both the TORWars fansite and the game's official forums that revenue from the packs is funding the rest of development.  They put their money where their mouths are, releasing a second random cartel pack with different random items within around a month after the F2P relaunch, with two more packs already finished and more in the pipeline.

We don't have the real numbers, but the claim makes some sense.  One of the last pieces of content before the incident at Darth Hater was a poll answered by 2,500 readers of the site - overwhelmingly subscribers - said that Cartel Packs and cosmetic armor were the two most popular purchases.  Players who read a third party news site are inherently going to be the most devoted players and not necessarily representative of the average player, but the numbers are intriguing.  From the survey, 24% claimed to have spent over $50 in real money on Cartel Coins, and 12% claimed to have bought 20+ Cartel Packs (which very likely cost over $50).

This is not a random sample, but it does show that there are at least hundreds of players willing to pay $50+ in a single month on top of their subscriptions, and half of this particular sample was spending that money on Cartel Packs.  There's certainly money to be made from the cosmetic stuff - which is priced aggressively - but the random packs have to be a bigger bang for Bioware's buck when it comes to revenue per item sold.  This is a model that would never be tolerated in a subscription game cash store, but F2P may be just the excuse Bioware needed to get both their subscription fees and the most aggressive monetization normally reserved for non-subscription titles.

(Aside: Curse has posted its side of the Darth Hater saga, stating that they took over the site with the new year, and that the entire founding staff departed voluntarily without saying goodbye.)

The Secret Fire Sale?
In the month since removing the TSW's subscription fee, Funcom has announced that they sold 70,000 copies of the game, representing a 30% increase.  They then held more layoffs.  When you look at the numbers in context, you can see why they celebrated the success in this fashion.

According to numbers Unsubject dug up, Funcom was counting on 280,000 longterm sustained subscribers.  Instead, they did not even sell that many boxes - if 70K was 30% of sales as of mid-December then their total sales base at the time was roughly 230K and their current total sits somewhere around 300K.  This would indicate only marginal progress since the 200K copies sold number Unsub found at the end of the launch quarter, when he noted that the financials said the studio had not been profitable since 2010.

The stated business model for TSW right now is that some people are going to continue with the optional subscription, and the rest will pay $5-10 for DLC content as it is released.  This model does not make any sense.  Out of that 300K copies sold:

  • Some have left for good, subscription or not.  
  • Another large portion - 70K new players and probably a fair number of less dedicated existing customers - are bumming around Kingsmouth and are months away from ever spending money on endgame DLC content.  
  • Amongst the previous subscribers, some folks will not care about the optional perks on the now-optional subscription and will drop down to paying a smaller amount for DLC only when it is released instead of paying a subscription every single month.
  • There is also the brave handful who opted for lifetime subscriptions - which Funcom appreciated at the time, but who aren't worth that much more income going forward.
  • The only new revenue here are new players who pay for stuff and previous subscribers who continue to subscribe but also choose to pay extra for DLC, rather than using the point stipend included in their subscriptions.

With all of the layoffs, it is unclear how this studio is going to manage frequent content updates that people are willing to pay for - a crucial point because now they only get paid when they release new content.  Even assuming that they manage it, I'm just not seeing a source for an increase in sustained revenue.  This game already had a cash shop, and now may stand to make less money from its content depending on what current subscribers do when their time runs out.

Given the unfortunate financials, one conclusion jumps out from this data.  Funcom just sold 70,000 of what are effectively $30 lifetime subscriptions to the launch game because they need the money right now to keep the studio open.  If I'm right, they're mortgaging their future income because otherwise they have no future.

To be clear, I'm not writing this because I hate the game or want it to fail.  I'm actually enjoying myself.  And I'm putting my time where my analysis is by getting as much as I can out of the game right now, because I'm unfortunately not optimistic that this product will be around to play if I wait six months.

7 comments:

spinksville said...

Interesting, I guess GW2 is also funded largely by item gamblers. (It's a play style I totally fail to comprehend, tbh.)

skapusniak said...

I'm not sure you're wrong about Funcom and TSW given they've still not managed to stem the employment bleeding, but here's a few possible counterpoints.

- Some proportion of the former subscribers who cancelled, presumably cancelled because they couldn't justify a subscription given the amount they played rather than 'this game sucks!' reasons. If they're now back playing occasionally, they're now people Funcom can try to sell DLC (and other stuff) to, when they weren't in the market *at all* before.
- If they're not now back playing, 'log back in and play for no charge (and have you seen our latest DLC now out for $X?)', is surely a much easier sell than 'Come back for an ongoing subscription commitment'.
- I don't see why the DLC would have to be necessarily endgame focused, given that the missions that were added in updates under the subscription model, generally weren't endgame focused.
- Assuming the DLC is similar to the Issues under the subscription model, I don't see any reason for those people who retained a subscription and were happy with it, to drop their subscription.
- Those people who retained a subscription but weren't happy with it, either from a value POV or because they just don't like that model, were surely cancellations waiting to happen. Better for Funcom to keep them marginally attached and in the market. And some proportion of them, will turn out to buy pretty much every DLC individually but be happier because it's not a subscription (yes, people are weird).
- The 70,000 extra people are now customers, and are in the market when they weren't ever likely to have been customers before.

In general I think the model looks pretty good *as a model* in abstract. Unfortunately the best circumstance to introduce it would surely have been at launch, not the current one.

Bhagpuss said...

Heh! You said the magic word "gamble" and summoned up the spammers!

I logged into Vanguard for the first time for a while today and one of the things I was surprised to see was a lively and generally enthusiastic conversation in Qalian chat about Lockboxes. These now drop from mobs and you need to buy keys with Station Cash to unlock them.

You'd think that would lead to the usual railing against the evils of SoE but not at all. The general tone seemed quite positive and I think the reason for that is that the chance of finding something desirable in the boxes is reckoned to be pretty good.

That seems to me to be a key point. In many parts of the world including where I live gambling is seen as a normal, acceptable pastime. It's not seen as particularly dodgy or frowned upon. The main issue is whether it's fair and how likely you are to win. If MMOs stick to lockboxes that offer a decent chance to win things people would like to have then I think they will be popular. If they get a reputation as con-tricks that cost a fortune and never pay out then people will rightly shun them.

Green Armadillo said...

@skapusniak: There's definitely a question of whether the previous subscribers are sufficiently price-conscious/aware to cancel. Some people won't, either to support the game or because they don't want to have to pay attention to when they need to go buy the next DLC. I wouldn't be worried at all if the company had been doing great before this all happened. The underlying state of the company is what is driving the layoffs, the business model shift, etc. If the current base was not enough to keep the team staffed, a one-time shot in the arm is still better than nothing, but it doesn't solve the longterm problem.

@Bhagpuss: I always get spam, but usually Google knows not to post it - maybe the subject matter made them think it was relevant? :-/

Magson said...

Your argument about TSW is compelling, and I wish it weren't, as I'm enjoying TSW immensely and hope it sticks around for a while.

Syp said...

"70K new players and probably a fair number of less dedicated existing customers - are bumming around Kingsmouth and are months away from ever spending money on endgame DLC content."

This is ignoring that TSW doesn't add new missions to the endgame only. The first DLC for the game is in the third zone, accessible fairly early on for players. Now, whether or not people spend money on it is up to them, but it's hardly something they have to wait hundreds of hours to experience.

From my limited perspective, most players I see who are spending money in the cash shop are doing so for the outfits, which are quite popular among the populace. I don't see Funcom only banking on DLC for income, as the studio keeps pumping out new store outfits almost monthly (not to mention pets).

I am pretty amazed that TSW hasn't succumbed to lockboxes yet, however. And I don't disagree with many of your points. I just hold hope that the game and studio will achieve financial stability for TSW's continued operation, because it is such a wonderful game and deserving of a long life.

Green Armadillo said...

@Syp: One key assumption that I may not have been so clear on is this - I assume that the state of revenue Funcom was pulling down in early December would have had to be unsatisfactory. The layoffs, abrupt change in business model so soon after launch, and relatively low price at which the new buy to play offering is available (i.e. wouldn't you hold out for more money up front when dropping the subscription?) all suggest that this assumption is reasonable, but it is still an assumption.

The assumption matters to your point because, if I'm right, purchases of cosmetic outfits by the previously existing customer base were already factored into the "unsatisfactory" baseline. Now, it's certainly possible that the layoffs balanced those books. And I am absolutely not rooting for the game to fail. However, when it comes to my decision about how much additional time I want to spend repeating content to max out skill trees that "I might want to try someday", my best guess on the game's status is a factor in how I choose to invest my time.