One of the effects of capitalism is that competition drives prices down. Hence globalisation enables us to buy far more stuff with our money than ever before. And where something can be delivered over the interweb the competition is effectively infinite so the price the customer has to pay moves towards zero.
We have seen this most dramatically with journalism. Pre interweb you paid at the newsagent for your newspaper or magazine which in turn paid the journalists. But now news is free, every major newspaper has a website where you can get a better product (because it is more up to date, which matters with news) than the printed one, without having to pay for it. As a result lots of professional journalists no longer have jobs and lots of newspapers have closed down. But as news consumers we have not lost out because we now have citizen’s journalism with blogs and forums supplementing and often replacing the old fashioned news media.
With PC MMOs we have had a similar drive to zero priced games. Maple Story, Habbo, Club Penguin, Runescape and Free Realms all have millions of players. And there are many more such games out there. Obviously the money has to come from somewhere to pay for these games to be written, hosted and supported. This business model works by providing upgrades in the gaming experience for small payments and from advertising. Which with millions of players can add up to a lot of money.
Console gaming works to a completely different business model. They use something called “bait and hook”. You buy the initial brilliant value offering but are then locked into a standard where you have to keep paying a premium price. The huge profit in the high price consumers pay for console games effectively subsidises the cheap price of buying the console in the first place. This business model was made famous by system shaving razors from companies like Gillette and Wilkinson Sword.
These two business models are poles apart, so you would expect them never to come together. However the console manufacturers would still like to find a way of making money from the millions of people who play these MMOs. And the publishers of these games would like the jump in potential revenues that comes from being on additional, widely used platforms.
So sooner or later we will see these games on consoles. But to get there will take compromise by both parties, out of which we will see a new hybrid business model. Mark Gerhard, CEO of Jagex, the developer of Runescape, talks about this and other matters in a recent interview. And Sony have already said that Free Realms is coming to the PS3.
If ever there was an opportunity to break the World of Warcraft position as the world’s number one played commercial game it will be with these console MMOs.
Permalink
“One of the effects of capitalism is that competition drives prices down.”
Competition is not a de facto effect of capitalism, and over here we have a good number of services and consumables which have seen their prices rise as they became private affairs, even with several companies battling for the same market.
Permalink
The only downside (and I admit it appears to be a small one) is that this different revenue model can cause a case of the “haves-and-have-nots.”
I’m probably wrong in this, but take EA’s gambit with the new upcoming Battlefield game on the PC. People will download it at first and praise it for being “free”. When the DLC or “micropayments” is slowly but inevitably introduced, people will start to whinge and call it a con, even though EA have been quite honest from the start. For want of a better explanation, its just “human nature”. Or being British lol.
At least with WoW, it tells you from day one when you sign up that there is going to be a monthly charge plus extra for all the new content thats going to be introduced, and If you want to be “in” the current action, your gonna have to buy it. Theres also this perception, possibly erroneous, that you “gets what you pays for” and that firms like Blizzard more or less deliver on that .Yeah, theres a monthly cost, but everyones paying and grumbling, and everyone is on a level playing field. No haves or have nots. I dont know anyone that is a WoW player who doesn’t own all the added-on content. Sounds completely counter-intuitive, but i believe people would rather pay and whinge than be in this slightly confusing grey area of playing a free game (even if its a good indicator of whether you would actually like it and is worth the time/money ratio-investment) that needs bolt on goodies relative to how involved you are in the game.
Sounds off-topic but look at xboxlive. One of the early reasons for its success, and why people “bought it” was because it offered a more clear payment structure than Sonys proposed offerings at the time. One payment, for a blanket use of all online games. Yeah, people moan, but they rationalise it by arguing that there is less “lag” and the comms are better etc.
Its funny, but the xboxlive system is possibly MS’s undoing with regards to having an MMO on their system. Publishers/Gamers/MS are all at odds more or less as to how they are going to make money and who will get what.
Its late and my ability to structure cohensive sentences are even worse than usual, so many apologies if I havent explained myself competently enough lol.
Permalink
Bruce said:
“Console gaming works to a completely different business model. They use something called “bait and hookâ€. You buy the initial brilliant value offering but are then locked into a standard where you have to keep paying a premium price. The huge profit in the high price consumers pay for console games effectively subsidises the cheap price of buying the console in the first place. This business model was made famous by system shaving razors from companies like Gillette and Wilkinson Sword.”
The above stated model is close but not exact. The console makers take huge losses from the console itself without regard to software. As there is no guarantee that the software itself will sell enough to recover it’s own costs much less the costs of the platform it’s on. The consoles primary hope of eventual profit comes from the cost reduction that can come only through time as the manufacturing process becomes less expensive.
Great article by the way.