Friday, October 26, 2012

A current fear...

or "where has all the money gone."

I just did a very interesting and enjoyable phone interview with ArenaNet, the makers of Guild Wars.  I can't talk about the details because they are confidential.  I do think they are both very smart and very capable game developers and they really want whats best for the consumer.

They have convinced me that their "no monthly fee" model for GW2 can work.
My ongoing concern however is "how well"?  ArenaNet themselves admit it isn't the cash cow that a monthly fee is.  Now your first reaction might be "Good, if they can operate with less of my money then its good I don't have to pay them more."  Thats a natural consumer reaction.  We bristle at the idea that others are making a lot more money from us then it costs for them to do what they do.

However, my concern is this.  Games are not utility monopolies like the power company.  The power company can run a thin margin because they know, with absolute certainty, that in a given area X number of people will be their customers.  There is low risk and thus they can survive  on a thin margin stream because they know they will always be getting it.

When it comes to games however, the reverse is true.  The risk is very high.  They cost a lot to make and the return is not in any way shape or form guaranteed. A lot of games *lose* money.  To have a healthy industry the ones that make money must make enough to cover the losses.  Ina  sense, when you pay $15.00 a month for WOW you are also paying for all the MMORPGs that failed.  Without that high profit margin, the first failure kills the game company.  Without the potential for a high return, no one sane would take the risks of failure that exist.

ArenaNet is in a blessed position right now. As the only serious hardcore MMORPg with no monthly fee they are dominating the field and making a lot of money still off their lower margin.  In the process though they are teaching the audience to expect lower margins, which lowers the total amount of money available for new games in the industry.

When ArenaNet is no longer a monopoly in the "no-fee hardcore MMORPG" space, will they still be able to survive on those margins?  And how much room is there really for other players given the reduced total income of the industry under this model?

Only time will tell, but as someone with a love of the industry who wants to see more risks taken, not fewer, it does scare me a bit.

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