Switching costs fall

Everyone hates the leveling treadmill, but the business strategy makes sense: Once people spend 800 hours to get to the great content of your game, they will be less willing to spend another 800 hours to get the great content of your competitor's game. So long as every game has a leveling treadmill, each company has considerable pricing power over its installed base. You usually don't see this in the form of higher fees (I am not sure why not), but rather in the form of cost-cutting (minimal customer service, buggy expansion packs, the developer-is-always-right syndrome*). The competitive response is, of course, to cut the switching costs. One way would be to lessen the leveling treadmill or make its effect on the fun of gameplay minimal. Another would be to allow people with powerful characters in your competitor's game to enter your game with a similarly buff toon. A step in that direction: Playvault's migration service (mentioned in this comment by Joel Hutson first), through which a company can set an explicit exchange rate between a competitor's currency and their own. The service is expanding, apparently. If you are a millionaire in Ultima, you can now switch to Horizons and still be rich. Thanks Andres for the tip.

* Of course, everyone at Terra Nova knows that the developer IS always right.

Comments

[MM]

1.

* Of course, everyone at Terra Nova knows that the developer IS always right.

Oooooooooooooh! ::shakes fist::

Not everyone!

[Nathan Combs]

2.

company has considerable pricing power over its installed base. You usually don't see this in the form of higher fees (I am not sure why not)

I wonder if this is an artifact of the subscription revenue model. If you believe this, then perhaps may see this open up more when industry switches to different fee system.

[CherryBomb]

3.

Well, heck, knowing that my reward for putting in many hours of busy work will be a hike in subscription fees sounds like it would discourage me from purchasing that game in the first place.

[MM]

4.

I don't believe there is anything wrong with the subscription pricing model. Nor do I believe that providers will be able to get away with much in the way of price hikes.

Everyone who plays knows what a gold mine these games can be if successful. Charging $25 a month to play a game will be perceived (by me at least) as nothing but greed. Part of the attraction to these games is what a great deal they are for the money. A month's worth of entertainment is what you are selling me. If you keep making it a good deal then I'll keep paying. If it's not a good deal (or I don't think it's good a good enough deal), then I'll stop paying.

Now if you want to make a game that uses some of that money making the game better... then we can talk. But I'm not going to pay more for no other reason than to line someone's pockets. And I think I'm Joe Average consumer.

I know there's entire marketing departments that will fight me on this, but even charging for the box reduces your potential player base. And when you are raking in hundreds of thousands of dollars a month, development costs get recouped within a year. Folks can say what you want about the expense, but I don't buy it. The rest of the business world is willing to wait 5 years from opening to turn a profit. I don't understand why MMO's have to be bought and paid for in 2 weeks.

So far, no one has been too abusive with the fees. But getting too high and mighty over your players will only hurt you. Every game has it's addicts. But toying with your subscribers will only reduce their numbers in the long run. And that means less money.

And on a closing note... the customer service issue is just disgusting in most games. You can get this done almost for free if you pick from your player base. Thousands of people would LOVE to have a position like that. You could pay people $6 a hour and have a completely blissful staff. So cutting costs there is just ridiculous. People don't complain enough, but a good customer service staff could really bring a good game to a new level if the folks in charge would just treat the issue with the respect it deserves. Ask folks in SL what they think of the Lindens if you need proof.

[Brask Mumei]

5.

I'm surprised there has been little outrage over the Playvault service. From appearances, this involves the printing of money on the part of Horizons. Each migration thus artificially increases total virtual world currency. (I presume playvault doesn't just delete the money in the source world, but resells it on ebay for an extra source of revenue)

I'd much rather virtual worlds allow ebaying then engage in this sort of money printing to lure in customers.

- Brask Mumei

[Andres Ferraro]

6.

Brask,

Each migration has two simultaneous effects on the game: It brings in currency and a new subscriber at the same time. This is not unlike "starter" items and loot. Although the amount can be a higher, it is actually capped by the game provider and the overall rate determined by them - It is a system tuned to the needs of the game world, by the game world.

Ethics aside, selling exit currency is something our business model and plans do not allow. If we supported our service by doing this, then we would be unable to offer our service to the larger games. We would become dependent on a model that stunts our own growth.

There is a strong sense of ownership and rights with regards to in-game accomplishments, and therefore a compelling argument for taking 'your things' with you. The argument for buying your way into a game, however, is not exactly a selling point we have seen on any boxes or hit upon in any game review thus far. Licensing our logo to Partner games to display on their game boxes/literature is not far down the road, however I seriously doubt putting the eBay logo on game boxes will boost sales in any way.

[Sal]

7.

hmmmm. I can see how the treadmill might be one aspect of strategies for player retention, but I would have thought the social networks and ties are a more obvious driver of player retention.

[ren]

8.

I was trying to put this whole thing into a trend box.
Does it suggest that the industry is now confident and it know that the player base is largely static so what goes around will come around?
Or is this is a sign of desperation, everyone trying to make it easier for people to move to their game?
Or maybe it does not say anything about industry confidence at all.

Andres > selling exit currency is something our business model and plans do not allow.

So what does happen to it? Is it just removed from the economy?

Sal > I would have thought the social networks and ties are a more obvious driver of player retention.

Thx for pitching in Sal, for those of you who don’t know Sal’s work she has written (amongst other things) You Just Got Better At Alteration which looks at a number of MMO things including the role of social capital.

[Scott Jennings]

9.

> And on a closing note... the customer service
> issue is just disgusting in most games. You can
> get this done almost for free if you pick from
> your player base. Thousands of people would
> LOVE to have a position like that.

Most online game companies (correctly) require a certain level of accountability and supervision that isn't possible with unpaid offsite labor.

[Scott Jennings]

10.

More directly to the main topic: Interesting idea. But (and I'm somewhat surprised no one hit this angle): as a game publisher, why would it ever be in my interest to subsidize someone leaving? (Note: as a game DESIGNER, I completely understand that players have a life cycle and providing for the inevitable breakup is healthy. But telling the guy controlling the money - "Hey, I think we should make it easier for people to stop paying us!" isn't going to be a terribly easy sell.

Which is why, unsuprisingly, I don't notice any official partners for LEAVING. Just arriving. And if that's intentional, then Playvault keeps the money from people leaving and does... what? eBays it? How does that make them different from any other eBay arbitrage house?

[Scott Jennings]

11.

A third angle which may or may not be heresy here: if people are trying madly to bypass your low-end game, my view is that it isn't something you should encourage. It's a sign that your low-end game is not fun and should be fixed.

[Andres Ferraro]

12.

Scott,

It is hard to get someone into something you don't offer a way out of. With your first MMORPG you might fall into the trap. For the second one you'll think a lot harder before you commit. Partner games do understand what you stated: Players have a life-cycle and eventualy leave. It is also a matter of realizing that retention is achieved by having a great game, thriving community and accessible support.

Also, it is not about people trying to bypass the low-end game - others out there cater to that segment quite well. It is about people wanting to keep what they have accomplished so far.

[Andres Ferraro]

13.

> So what does happen to it? Is it just removed from the economy?

In the case of our Partners, yes. That is very easy to arrange and a nice drain (it is our arrangement with Horizons - Scott: Partners go both ways, it won't work otherwise). So while PlayVault may open the faucet a little more on one end, it also enlarges the drain on the other, preventing recirculation of the currency of players exiting. The case of the non-partner games is a little trickier since most don't have a simple way of deleting things, so we have to retain it or move it to offline accounts. In effect it is removed too.

>I would have thought the social networks and ties are a more obvious driver of player retention.

These are two different things: Retention Factors and Selling Points. Community is largely a retention factor, PlayVault is largely a selling point. PlayVault cannot undermine a game's retention factors: We do not believe players happily playing a game can be lured out in this manner. What PlayVault does is add a Selling Point to games. Once it is your turn as a player to pick a new game (the retention factors are failing to retain you), and given the knowledge that PlayVault exists, we believe players will have a look at the games supported by PlayVault before the rest - driving increased trials and conversions.

[Bart]

14.

On Playvault's system...

I think this is a great idea. But...it seems like it should be more of a match-making system vs. a pay service (it looks as if you need to register and pay for the current service).
A better approach, and an approach that you could probably setup without the consent of game companies, would be a simple match-making site. Player A wants to migrate from UO to EQ. Player A has a 2-story smithy, 1mil, one 7XGM mage character, and a GM miner/smith. The system then goes out and finds players who want to to from EQ to UO (this is the first filter), then checks exchange rates between UO and EQ, and looks to see if any of these players has a comparable amount of gold to Player A (second filter), then moves on through property and character filters. They system then emails Player A with something to the effect:
Players B, C, D, E are looking to move from EQ to UO.
Player B has (characters, gold, property etc...)
Player C has (....)

Then, it is up to Player A to accept an even trade with one of the other players, or simply reject the swap if he/she doesn't feel it is even. This system would look something like an eBay/eTrade hybrid, as well as taking some cues from social software that is emerging for match-making.

[Andres Ferraro]

15.

Bart,

The PlayVault service is free. The only thing you have to pay for is your game subscription, and you pay that directly to the Game Provider as usual.

We actually toyed with the idea of a matchmaking service about this time last year. It is not without merit. But one of its most significant drawbacks is that you have to match three things:
1) Amounts within an acceptable range
2) Directions of movement to criss-cross players
3) The point in time (how long are you willing to wait until your match comes along).
The combinations are endless, but your time and patience as a player isn't.

An arbitrage house works around the problem of matching at the same point in time by investing and divesting at a very different time scale than what the user is willing to wait for. By being a middleman the matching of transaction size is also solved. But the arbitrage house is still bound by player movements and directions, and responds to supply/demand (If nobody wants things from Earth and Beyond, are they worthless?)

We go one step further and remove the need to match directions of player movements by arranging for the creation or removal of the needed data. In the process we deliver a clean -no middlemen- service to players and a trustworthy selling point to game providers.

[magicback]

16.

Andres,

Here's another service that a trusted third-party can provide: Character Crafting.

Character Crafting is essentially converting an avatar whole from one world to another: converting items and character traits in addition to currency.

In LARPs, many organizations have established policies and procedures for converting characters from other LARPs of the same genre. These policies and procedures have proven themselves to be effective at easing the switching cost.

Regardless of the productive uses of this conversion service, it would be personally interesting to see what my Avatar in one world would look like in another world. This would be a fun website.

[Andres Ferraro]

17.

Magciback,

There must be something about LARPs that makes this a viable possibility. When we interviewed players (MMORPGs) last year, migrating everything was unpopular - after an initial "yeah, cool" nearly everyone realized there were quests and generally game content they wouldn't be able to or enjoy if they started at a very high level. This probably has to do with games being tuned for you to go through the treadmill. Starting with a leg up, however, was extremely popular. Some people expressed this as the difference between appearing on earth at age 30 vs being born to a rich family. They don't want to skip all the fun of "getting there", but they don't want to drag through the experience either. This all points to the problem of balancing between depth of the game (for retention) and ease of access (for capture). With our system we're aiming at simplifying this balancing act by offering easier access while maintaining the current game depth.

[magicback]

18.

Andres,

The key focus for the character transfer policy is to allow players to retain their persona as much as possible without being unbalancing.

For example, If I have an elf mage persona with a staff or a pointy hat (that have some minor, but character identifying characteristics) that is an integral part of the persona, the difficulty of migrating to a new world without one of the key aspect that defined my elf mage persona will depend on my level of attachment to the persona. The ability to tranfer an object of sentimental value is a selling point.

However, I understand that many will try to squeeze uber items through the process. Thus, an item policy spells out the procedure.

Also, some games allow you transfer your earned "level" as unspent level/points. You still need to do the quests, learn the skills, and get the flags/keys; but the xp grind is lessened as the xp is already earned.

From another perspective: in expatriate HR management, many programs are targeted to ease the transition instead of reducing the cost of transition. So, a focus on easing the social cost of switching may be an effective complement.

Frank

[Andres Ferraro]

19.

Frank,

"The key focus for the character transfer policy is to allow players to retain their persona as much as possible without being unbalancing."

This seems to be a level of uniqueness for characters/items in LARPs that goes far beyond MMORPGs. If my little experience from the outside indicates anything, it is that this creates an incredibly powerful retention factor. When offered a (good) job, an unemployed LARP player refused, stating that he would refuse *any* job that might mean he would sometimes be unable to make it to the LARP session. Now tying these together I get: "Uniqueness = Retention". When translated to games with hundreds of thousands of players this poses the challenge of making everybody unique. Which is something that has been discussed to death, but it is interesting to see the extreme retention true uniqueness can bring in a game.

"However, I understand that many will try to squeeze uber items through the process. Thus, an item policy spells out the procedure."

Likewise here. Some players on forums voiced concern about unscrupulous players being able to exploit games and pass fortunes around in PlayVault. To address this concern our Partner games can -and have- set limits and revise them over time on what players can bring with them.

"Also, some games allow you transfer your earned "level" as unspent level/points. You still need to do the quests, learn the skills, and get the flags/keys; but the xp grind is lessened as the xp is already earned."

This is indeed something we looked at very seriously, but not only there was the problem of the games not ready for this kind of input, the labor cost of obtaining this data, plus the cost of ensuring duplication didn't occur, would have priced us right out of the market.

"So, a focus on easing the social cost of switching may be an effective complement."

This is interesting. I've seen this done in at least two games very recently. I have to think these are effective tools to improve the odds of someone staying once they get there. Having been an expatriate myself twice, I can agree that expatriate HR programs from the likes of Cendant and others are indeed an excellent complement to a "moving allowance". This is an excellent point you have here!

[Tobold]

20.

I do not think a match-making system would work. Players migrate, yes, but like birds they all migrate at the same time in the same direction. EQ2 and WoW coming out this year will cause huge migrations streams, but they all will be away from old games, towards new games.

A match-making service simply could not provide a matching player moving in the opposite direction for most of its customers. They could only handle the very small market of players moving between two old games, while the much larger market of players moving from an old game to a new game would be closed to them.

Even SOE is trying to lower the barrier of entry. If you pre-order a special EQ2 Starter Kit, you receive some special IN GAME stuff, like journeyman boots.