Yes Virginia, AOC is in trouble

This month, Age of Conan went to a mixed F2P/Micro-Transaction/Freemium model.

There has been a lot of arguing back and forth as to whether this is some brilliant financial strategy, or a desperate hail mary attempt to keep the game alive.

Unfortunately, all the real data suggests the latter.

Despite the gushing exuberance of Micro-transaction supporters, if you actually push them you will find their statements are based on little to no actual data. This isn't entirely their fault, the industry has purposefully kept meaningful data to itself. The wide-eyed perceptions being much better for business and funding.

As an actual participant in the industry, I've worked pretty hard to get a realistic picture. Based on what reliable information is available, what is said behind closed doors, and my own experiences, this is the picture I've come to:


Fact: Peak concurrently connected users (PCCU) is the metric that drives your operational costs. Thats what you need to support on your back-end.

Fact: F2P games are typically measured in DAU or Daily Active Users. DAU is 2 to 4 times PCCU as a rule.

Industry Knowledge (backed by real experience): Only 3% of your users of an F2P/Micro-transaction game ever spend anything. The result is that an F2P game is considered successful if it generates between $3.00 and $15.00 per DAU per month, which is $6.00 to $60 per PCCU. The vast majority being in that $6.00 to $10.00 range. (Thats successful games, unsuccessful games generate far less.)

Fact: By contrast, subscription games typically generate $5.00 to $15.00 per account. PCCU is reliably 5% to 10% of total accounts. That means a guaranteed income of $50.00 per PCCU on the low end to $300.00 per PCCU on the high end, with the majority actually being in the $150 - $300 range.

Conclusion: Subscription games generate roughly ten times the income per PCCU than do micro-transaction games.

So, how do people like Zynga make money in this market?

The answer is that casual game developers design and build their games to use absolutely *minimal* server resources, and thus support maximal PCCU per box. When we built ZooKingdom our target was 10,000 CCU per server box, and only one server box to support that 10,000 users. With Oregon Trail, we went to 30,000.

So called "hard-core" MMORPGs however are not built this way as a rule.

Instead, they are typically built to handle between 300 and 1,000 CCU per server box and require clusters of boxes to support a single virtual "server".

Summation:

The simple fact is that the economics don't work. The ONLY way it makes economic sense for an MMORPG to go F2P/Micro-transaction is if your subscription sales are so low that you have unused capacity on your servers. In that case, any incremental income you can get for that capacity is worth it.

But for that to be the case, you have to have fundamentally failed first as a subscription game.

Addendum:
The other argument you hear is that players will 'demand" free to play and micro-transactions in the hard-core MMORPG space. Not only is there strong existence proof evidence to the contrary (WoW and DCU just to name two games being very successful right now with subscription pricing), but in fact there is even evidence that the subscription model will play in traditionally casual markets such as mobile.

(See this article for one example of such a success: http://www.gamesindustry.biz/articles/2011-06-01-order-and-chaos-online-makes-USD1m-in-20-days#justposted)

Addendum 2: If you needed any further evidence my call was right...
http://massively.joystiq.com/2011/05/31/age-of-conan-merging-u-s-servers-today-eu-tomorrow/