Monday, September 3, 2012

Congratulations to Funcom

The Secret World seems to have stabilized at a subscription population of 200,000 users.  There has been a lot of chatter in the press about this being "disappointing".  I couldn't disagree more.

What people seem to be totally forgetting is that, by the numbers at their height, a Zynga made a profit about $1/user/year on a gross of about $3.00/user/year. (As per their IPO documentation.) Secret World brings in a gross of $180/user/year just in subscriptions. So 200,000 subscription users is equivalent to 12,000,000 f2p users-- 3 million dollars a month of gross revenue. 

Thats quite a financial success, actually.

Editor Note: it has been correctly pointed out that this is a sold-through number, not a conversion number.  However its still impressive when you look at the fact that WoW only shipped 240,000 units when  it launched and a shipped number includes the units to fill the retail chain whereas a sold through number does not.  Conversion rate is not clear yet but based on user meta-critic scores Funcom is predicting a high conversion and retention rate.

The market has clearly bifurcated.  The days of mass market product being able to charge a premium price are over.   As is *always* the case in the US market, the mass audience is happy to sacrifice quality for cost.  This is the "lowest common denominator" micro-transaction market where you have to keep cost per user very low in order to see any profit.

However, as usual, there are still premium niche markets in the US that are willing to pay a reasonable fee for content that is deeper, not annoying, and more tailored to their specific wants and desires.  Funcom has demonstrated that you can make a lot of money by successfully addressing one of these niches.

So congratulations to Funcom and thank you for not giving up on the quality market. I am sure they chuckling all the way to the bank at their nay-sayers.  If they don't say so publicly, do you blame them? the longer the industry keeps its jaundiced micro-transaction centric view, the longer they have these markets to themselves.


Anonymous said...

You're citing Secret World as a financial success?

The company just laid off half of it's workforce, they stated the game was worse by 100% of their expectations for a worst case scenario and that the game by Funcom's definition was a "Massive disappointment." That's not the press, that's the creative director and the CEO. On top of all that, their stock is down 80% to a six year low (The lowest their stock has ever been.)

And you're congratulating them?

Furthermore... They have said they are pivoting the company away from the model you are praising them for and into smaller areas. "Such games have shorter development time, and less upfront investment," Funcom said. "Examples are League of Legends, World of Tanks and Minecraft." Two of the games they mention are free to play.

Frankly I would just yank this blog post.

Anonymous said...

Oh and one additional thing, your facts are wrong. They have said they sold 200,000. That's sell through. Industry average is 35-50% conversion to first month subscriptions. In their "Conan" scenario they estimated ~25%.

That means actual subscribers is somewhere in the range of 50-100,000. Which is a colossal failure.

CyberQat said...
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CyberQat said...
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CyberQat said...

I am afraid you are quite wrong in multiple places.

First, they stated that is was less then half of their *best* performance predictions. And predicting the future is always a shot in the dark.

""The effect of all these initiatives together with other factors impacting sales are difficult to predict, but based on the available early data, one scenario is that sales for the first 12 months following launch will be less than half of what was presented in the "Conan-like" scenario," the report continues.

"It should be noted that the sales amount in the 'Conan-like' scenario is significantly higher than for the game "Age of Conan", due to the assumption of better retention implemented in the scenario. "

Although you are correct about subscriptions, you are wrong about the conversion rate. Funcom is actually predicting a very high conversion (and more importantly retention) rate.

"First indication of churn is more positive than for Age of Conan, ... A possible scenario going forward is that the game will sell less than both of the two above mentioned scenarios the first 12 months following launch, but with high customer satisfaction, it will generate a more stable subscriber base than the game Age of Conan. Over time, this will enable Funcom to retain more customers and generate higher revenue."

As for the lay off was the industry standard reduction off a development team to a live team.

""We've had to let some people go, and we're in the process of reshuffling and reorganising ourselves around the remaining staff. This is never fun, but it's the way of things: we need to scale down from a full development team to a more cost-efficient live team."

For comparison, WoW only shipped (not sold through) 240,000 units at launch.

(Plenty of sources for this if you want one, including Bruce's famous charts.)

So yes, I congratulate them. And you should get your facts straight if you are going to try to correct people. (And its only a fact if it comes directly from the source or has a cite to the source. Half-assed journalistic opinions are not facts.)

Anonymous said...

The stock completely plummeting, the team going through layoffs - not sure how you can convince yourself of that.

But if the game is a success, why are they focusing on small scale games and specifically citing games which are free to play. You can misinterpret facts however you like, but that fact alone silences your congrats.