Follow Simple Lifeforms

• RSS
• Email
• FriendFeed
• Twitter
• MySpace
• Facebook

How do Massive Multi-Player Online Games (MMOs) Make Money?

Posted by Alan O'Dea | Mar 12, 2009 | Filed under News, Research

DFC Intelligence has recently released a report on the most commercially successful massive multi-player MMOs (MMO). World Of Warcraft, the most successful MMO has an estimated annual revenue of $500m. With the top ten MMOs in the world generating estimated combined revenues of $1,875m* there is no doubt they have matured into a highly successful commercial sector presenting considerable revenue and profits for their operators. Successful MMOs clearly can realise significant profits for their operators and investors. How?

Here are some initial facts that you may find interesting:

• Only one of the top-ten MMOs (Lineage) was launched in the 1990’s whereas all others have been launched in this decade.
• MMOs are distributed fairly equitably around the most significant global market territories i.e. North America, Europe, Asia (Korea, Japan and China). Many of these games target global markets and are active in various territories.
• MMOs have a wide diversity of styles and demographically targeted groups with children, teenage and young adult markets all well-represented.
• The majority of the top-ten MMOS are in the fantasy genre. This is typical of emerging game markets. Fantasy is typically the first successful genre to be commercialised because it tends to attract early-adopter gamers first. Subsequent genres such as sports, children, family, adventure, action genres find their place in the market as new entrants carve out niches and segment the market for second and third tier adopters.

Retail

The early stages of the MMO market were dominated by a traditional and relatively unsophisticated commercial model. Retail was a dominant factor in the industry value chain and large game publishers (i.e. EA, Sony, Ubisoft) were the principle financing source for the majority of MMO products. Publishers sold a boxed version of their product in established retail channels, which was then played and updated online, with revenue coming from a combination of retail sales and subscription fees. This model is still quite popular with World of Warcraft the primary example.

This model was developed in the time between the cross-over from dial-up to broadband. It made sense to distribute on CD or DVD because there was no other way to distribute the required large amounts of data files to enough users. Early generation MMOs such as Everquest and Ultima Online had to be concerned over the download speeds that most users had and tailor their technology accordingly. Those restrictions still exist today (World of Warcraft updates come on multiple DVDs and most users still don’t have the means to download so many gigabytes of data in one sitting) but are for most practical concerns considered irrelevant in the modern market.

Now that operators have the ability to develop sophisticated and targeted MMOs and a means to distribute them, the business model is very different. Distribution may be cheaper, but MMOs are increasingly competing for user attention, and so user expectations of what they exchange for their attention have changed.

Within this context there are two new mechanisms by which MMOs in todays market typically monetise: Subscriptions and Virtual Goods.

Subscriptions

A large proportion of western (i.e. USA, Europe) based MMOs are based on monthly subscriptions. Customers pay the operator a monthly fee typically ranging from about £5-£15 GBP. The difference between this model and the older retail model is that the initial install version of the game is free. Users typically are given a gratis period in which to try out the game, or a limited sub-set of features, and they are encouraged to become subscribers.

Virtual Goods Sales

This mechanism was popularised in the East (i.e. China and Korea). In a virtual-goods based game, users are typically allowed to play the game as long as they want, but have the option of buying some form of property within the game. A virtual good might be something of tangible benefit to a player’s character or a visual customisation. Virtual good items are typical of small monetary (01p – £5.00) value but enhance the player’s experience, accessibility or individuality within the game significantly. This model is sometimes called micro-transactions.

Hybrid

Some MMOs use a hybrid approach of subscription and virtual goods, either offering different versions of a game for subscribers or virtual goods buyers, or combining the two. This trend toward sophistication throughout the methods available to monetise customers of MMOs is ongoing, but the hazard of a hybrid approach is that it can over-complicate the value proposition for the customer.  

Top Ten MMOs

1. World of Warcraft, launched 2004

• Genre/Platform: Western MMORPG; client install with 3D graphics
• Revenue sources: Monthly subscription, retails sales, prepaid cards (in Asia)
• DFC estimated 2008 revenue: $500 million-plus

2. Fantasy Westward Journey, launched 2004

• Genre/Platform: Asian MMORPG, client install with 2.5D graphics
• Revenue sources: Prepaid cards
• DFC estimated 2008 revenue: $150-$500 million

3. Maple Story, launched 2003

• Genre/Platform: Asian MMORPG for kids, client install with 2D graphics
• Revenue sources: Microtransactions, prepaid cards, international licensing
• DFC estimated 2008 revenue: $150-$500 million

4. Shanda (company, includes Legend of Mir and World of Legend series), launched 2003

• Genre/Platform: Asian MMORPG, client install with 2.5 graphics
• Revenue sources: Prepaid cards, virtual item sales, Freemium, subscriptions
• DFC estimated 2008 revenue: $150-$500 million

5. Lineage I and Lineage II , launched 1998 and 2003

• Genre/Platform: Asian MMORPG, client install with 2.5 graphics (Lineage) and 3D graphics (Lineage II)
• Revenue sources: Subscription, prepaid cards
• DFC estimated 2008 revenue: $150-$500 million

6. Runescape

• Genre/Platform: Western MMORPG for kids, web-based with 2.5D graphics
• Revenue sources: Premium subscription, prepaid cards, real-world advertising
• DFC estimated 2008 revenue: $50-$150 million

7. Club Penguin, launched 2006

• Genre/Platform: Virtual world for kids, web-based 2.5D graphics
• Revenue sources: Premium subscriptions, prepaid game cards
• DFC estimated 2008 revenue: $50-$150 million

8. Lord of the Ring Online

• Genre/Platform: Western MMORPG, client install with 3D graphics
• Revenue sources: Subscription, retail sales
• DFC estimated 2008 revenue: $50-$150 million

9. Warhammer Online

• Genre/Platform: Western MMORPG, client install with 3D graphics
• Revenue sources: Subscription, retail sales
• DFC estimated 2008 revenue: $50-$150 million

10. Age of Conan

• Genre/Platform: Western MMORPG, client install with 3D graphics
• Revenue sources: Subscription, retail sales
• DFC estimated 2008 revenue: $50-$150 million

* even with extremely conservative estimates

Sources : http://gigaom.com/2009/02/01/top-10-money-making-mmos-2008/, DFC Intelligence