User blog:PsijicThief/ESO Business Model

Introduction
So there's been a lot of talk about business models and plenty of theories about what Elder Scrolls Online (ESO) will take on. Obviously I can't know for sure what it'll be, as I don't work for Zenimax Online and I'm not involved, but I can make some speculation and educated guesses. Before I do that, however, let's take a look at what the current popular business models are.

Pay to Play
This business model requires that you pay a monthly subscription on top of the full price you paid to purchase the game in order to access it and play it. Once upon a time this was the only viable business model for any serious Massively Multiplayer Online Game (MMO) on the market. Today that is not so, as it has been rivalled by a few other options, but we'll get to those later. The subscription-based, or sub-based, business model is explained as paying to maintanence, small content additions and server access. You pay for the game outright before you begin playing, sometimes get a free month or two of gameplay, then you have to pick up the monthly fee. This fee is more or less nominal in the grand scheme of things, around fifteen US dollars is pretty average for this.

The biggest problem with this buiness model in todays market is that it doesn't make the money it used to. Also, when you lose subscriber base, you lose income (which is true to an extent on all the business models). This method was made popular long before Blizzard got into the MMO game, but it's often described as the World of Warcraft (WoW) Business Model. This isn't entirely false, albeit a bit of a misnomer.

Several Pay to Play games have gone away from this method in favor of Buy to Play or even Free to Play supported by microtransactions. However, there are Pay to Play games that have adopted microtransactions for real. straight currency. This is something World of Warcraft started doing after it began losing large number of subscribers, they added the "Pet Store" in the Blizzard Store that allowed the players to purchase non-combat pets and mounts for anywhere from $5.00US to $15.00US.

Microtransactions
I feel that at this point it's important to explain what a microtransaction is. This is simply a small transaction in game or on the game's community site that gains the player an in-game item or buff. This item or buff is purchased using a digital currency, more often than not, that was purchased with real-world money. I'll give an example of the conversion: The microtransactions are always in small dollar amounts and this makes it easier for the average consumer to part with the money. The average numbers for a game supported by microtransactions show that a player will spend anywhere from 100-1000 US dollars on a game each month. In two of the three business models supported by microtransactions you do not have to pay if you choose not to, everything you need is attainable via work.
 * You pay $7.00US for 1400 gold coins (gold coins being the purchaseable, in-game currency in this case)
 * You can then use the gold coins to buy in-game items that are either as good or just under the quality level of a comparable item that you could have earned or crafted with more work and time and effort
 * Alternatively you can use the gold coins to purchase a buff that gains you more experience/quicker gain of other in-game currencies/better drop chances on higher quality items/speed boosts/etc
 * Once the Gold Coins are used they are gone, but you can always purchase more

It is also worth mentioning, briefly, that I used round numbers in the example above. The conversion rate for real-world money to in-game currency can differ vastly from company to company. Some of a rate of 1::1, some 2::1, others even as bad as 5::1 (real-world::in-game).

Buy to Play
In this business model you still purchase the game, just as you would in the Pay to Play model. The biggest difference here is two-fold: [1] you do not have a monthly fee and [2] the advent of a microtransaction process. These games are often-times in the AA or AAA titled market and supported by fairly large game studios. Defiance and Guild Wars are two very good examples of this business model.

A Buy to Play business model is usually used when there's a fair amount of overhead to cover from the game's production. Whether it be caused by needing new equipment, putting up new servers, having to hire and train entire teams of new people, etc., etc., this is usually the easiest way to covering those costs. Everything after that is profit and general upkeep. Most game studios have come to the realization that having too many servers at launch is a bad thing, so that much of the upkeep is out of the picture. This allows them to focus on other things more strongly, or save the profit in the event they do need more server space down the road

Free to Play
A Free to Play was once looked down on with scorn. These were the lowest budget games and offered the worst experiences. This is simply no longer the case. I'm sure somewhere on this wikia there are fans of either Star Trek Online or Torchlight, which were both made by Cryptic Studios and Perfect World. They practically use the same game engines for everything they make. Recently they released Neverwinter Online, which is based on the Neverwinter Nights saga of D&D using 3rd Edition rulesets. The game uses the same base engine as Star Trek Online, so the overhead to create this game was massively reduced. This, along with other cost-cutting measures, means they can produce a game that doesn't need to be bought.

Does reduced overhead mean bad game? Not in today's market, no. Game engines can be upgraded modularly these days, and with the line up that Cryptic and Perfect Worls has - all running free with microtransaction support - they can well afford slow updated and upgrades. There will always be bugs and there are definitely better graphics out there, but that doesn't make a game bad. Look at Minecraft and the following it has with it's graphics! Less is sometimes better, even in todays gaming industry. If you can deliver a compelling story, intuitive control system, easy to use and understand interface, then you can make plenty of profit with very little overhead. That is the basis of most Free to Play games.

Pay to Win
The final, and in my opinion more annoying, business model is a variation of the Free to Play and/or Buy to Play model. The game will appear to follow one of the previous two methods, and it will also be supported by microtransactions. Here's the kicker of a difference, if you don't pay money to get the items available through the microtransactions, you will never be as good as the other players who are paying. The average microtransaction in a Buy to Play and Free to Play game consists of items that are good, but not as good as something you can earn in the game. Sometimes the items are equally as good, but just skinned different (i.e.: a mount that goes just as fast as other mounts, but it's the only place you'll get a black and red Unicorn mount that farts flames). In the Pay to Win model that same mount will be faster than all the other mounts, equipable at level five (out of 100) and can fly. Giving anyone that spends the money on it the advantage.

The other issue with this model is, eventually all the players you'll face off with or play against most of the time will end up with that same thing. This make the playing field level until the studio releases a newer, better item. So in the new model that costs more money maybe it farts flames and spits flames, plus now it does damage. And so and so forth until it escelates to a point where only the rich and lifeless play the game anymore. Pay to Win games appear to have shorter lifespans than Free to Play and Buy to Play, but in this man's opinion they aren't short enough!

ESO Theory
So now that I've bored you sufficiently and explained - in a somewhat bias way - the different business models, you might be wondering what I think about ESO coming out. If you weren't you shoudl be now that you read the sentence, and even if you're still not I'm going to write it down next.

In today's market a Pay to Play game just doesn't make the money it used to. Far too many players are seeing that Buy to Play and Free to Play offer a wide variety or games for them, at a fraction of the required cost. I say 'required cost' because you don't have to pay anything if you don't want to once you have the game. This also opens people up to wanting to spend the money. If you tell me I have the option, but you aren't begging or demanding it from me, then I'm more apt to shoot a little your way. Also, when you say I can just spend a few bucks here and there, it makes it easier to part with my money than if you demand it all at once each month like a bill. If it's another bill I'll be mad because I don't need more bills, but if it's just a five dollars here, three bucks there, ten today, two tomorrow. . . well, I can justify that in my head because it was my choice.

Plus, the average player these days is the market for instant gratification, we want to see results now! If you say I can have a mount on every character I make, even if it isn't the best mount, for a small one-time fee of what amounts to $15-20US, then I'll do it. I make characters like people eat popcorn! I love alternate characters, and I love leveling. So do a lot of players in today's community.

What does all that mean? It means that we'll most likely see a game that doesn't require you to pay each month. It just wouldn't make sense. Why on earth would you tell me I have to buy a $60.00 then pay an extra $15.00 each month to keep playing, when I can pay nothing and play seven other games every month? It just doesn't make good business sense in the current shape the industry is in.

Then we have to add the factor of the consoles. There has only been one attempt to put a sub-based MMO on the console, and it failed horribly. Final Fantasy Online was the biggest flop of an MMO in my memory. With games like Defiance on the market (though it's currently failing, but not due to business model) making the cross-platform MMO possible, Buy to Play would be an easy transition for Zenimax to make.

Final Word - Conclusion
The final word from PsijicThief on ESO's possible business model is Buy to Play, it just makes the most sense.