WOW and MSM

The extraordinary rise of WOW continues to enchant the MSM (mainstream media). The Gray Lady has a piece today on the success of WOW, and does a nice job of explaining its significance. My favorite bit in the article is this, though:

In any case, as in years past, there are those who believe that paid online gaming is all a fad anyway.

"I don't think there are four million people in the world who really want to play online games every month," said Michael Pachter, a research analyst for Wedbush Morgan, a securities firm. "World of Warcraft is such an exception. I frankly think it's the buzz factor, and eventually it will come back to the mean, maybe a million subscribers."

"It may continue to grow in China," Mr. Pachter added, "but not in Europe or the U.S. We don't need the imaginary outlet to feel a sense of accomplishment here. It just doesn't work in the U.S. It just doesn't make any sense."

The sad news, boys and girls, is that securities firms like Wedbush Morgan are not publicly listed, so it's not possible to take a short position against them. But in the unlikely event that Michael Pachter is reading this, let me be the first to bet him a steak dinner that he's wrong. I am absolutely certain that WOW will continue to grow, and morever that the MMO market will also expand at rates that will continue to boggle the imagination. People who invest based on his advice are going to lose their shirts, virtual and otherwise.

Comments

[Dmitri Williams]

1.

There's a virtuous circle here, in that the coverage inspires more interest from casual players, which expands the market, etc., etc.

But on making predictions, this fellow is showing more cultural bias than much sense. I would agree that there is what's known as the "back of the wave" phenomenon in most entertainment products--a large spike in interest hits a peak, levels off and remains steady. For example, the rollerblade market: frenzy, copycats and leveling off, then equilibrium.

Yet what makes this long-term market different is the cohort effect. New players infuse the market yearly as younger generations age. Meanwhile older cohorts--who play less--die. We've all seen the average player age rise, and this is why. It also implies long-term steady growth, all else equal.

Moreover, if you buy the assumption that I post a lot on--that these games are about the drive for community in a country where community has become scarce--then these games will continue to appeal so long as people have a hard time finding RL community. Given the continual expansion of suburbs and the general atomization of communities, I see no imminent change. Thus, steady growth. I don't see the analyst, or the NYT for that matter, picking up on that essential driver.

[Edward Castronova]

2.

My favorite part: "We don't need the imaginary outlet to feel a sense of accomplishment here. It just doesn't work in the U.S. It just doesn't make any sense."

How true this is. Our American educational and career system, which Europeans from the Atlantic to the Urals have wisely chosen to adopt, clearly provides the most rewarding experience imagineable. No one in their right minds would trade our merit-based hierarchy, which stretches elegantly from billion-dollar busted Telco CEOs down to 12-cents-a-day migrant farmworkers, for the achievement systems provided by contemporary MOGs. Truly: That would make no sense at all.

Let's take the example of Harold Pilgrim, an unskilled former auto worker from Bay City, Michigan, and let's imagine him choosing between the American Way and the Way of Lunatic Fantasy. In the latter, he joins a vast rabble of undifferentiated agents who then pursue one of millions of paths, paths that are foolishly made equally available to all, with the macro level affect of creating a chaotic, cloud-cuckoo economy where the only thing that distinguishes the good people from the bad is the individual's taste for spending time there. Not only that, but the allegedly 'rich' in this place are only rich based on their holding of virtual items, which are not real as everyone knows. Madness. Contrast that to Harold's current job at Taco Bell, where a solid 9-hour day of slinging lettuce and ground beef (with 20 minutes for lunch and two five-minute bathroom breaks) yields $40 before taxes. Yep, a pair of REAL 20-bills, the good-old American greenback, the self-same paper money that good people like Oprah, Mark Cuban, and Bernard Ebbers use to signpost their achievements, money that had 15 times its current purchasing power only a few decades ago. And Harold knows that if he keeps working and working (and working), someday he may become manager, and just before retirement he may top out at 1/100000000 of the pension that the GM CEO and Eton alum who laid him off is getting. Now, THAT'S accomplishment.

Seriously, where would any sane person go to seek a sense of fulfillment: the cloud-cuckoo land of level playing fields and balanced classes, or the real-world reality of America's win/get lucky/cheat-or-go-home money game? Seriously.

[Mike Sellers]

3.

It's an interesting article -- sour grapes regarding MXO (do they really think it would have taken the world by storm if not for the long shadow of WoW?), and a good quote by Richard Garriott, who oddly seems to be channeling Mythic's Mark Jacobs:

"Every year someone writes a big article about how the M.M.O. business has reached a new plateau and won't get any bigger. And then every year we seem to grow 100 percent. World of Warcraft is just the next big step in that process."

The quote that Dan provided above from Pachter, the analyist, is sadly and maddeningly familiar. "I don't think there are four million people in the world who really want to play online games every month," Who wants to tell this guy's boss that there are four million people playing WoW already? And that there are those who play other games but not WoW (it's rules the market right now, but it's not the extent of the market).

Even setting that aside, I wish the article had made mention of the profits from a now-mid-level success like EQII (500K users is rougly $90M in annual online revenues, plus another $25M in box sales -- not bad by any standard), or even the low failure rate of released MMOs (set against the erroneous impression that MMOs are as hit-driven as box games), rather than giving the column inches to the failed licensing experiment of MXO and the same thinking that led people to believe that TV was just a fad too.

[Daniel S. Holder]

4.

These comments are great.

How many times do vague, over-zealous, nationalistic statements precede a wave of change? What I am hearing is a futile cry against inevitability.

One look at the world of fiction today is all it takes to prove that the American people want fantasy. John Updike himself says that we live in an age of "escaptionist fiction." Anyone wonder why Harry Potter is the best-selling series of the past 20 years and not Chomsky's Understanding Power?

Beyond learning to accept change, researchers like Mr. Pachter are going to have to learn to respect MMORPGs as they become increasingly more appealing as tools for market research. To dismiss this social phenomena as a mere entertainment fad is to reject one of the most intriguing components of our quickly-evolving world: the ability of the human race to take control of it's own experiences. This imaginary outlet is becoming more real by the second.

[Martin Im]

5.

If the evolution of MMOG and virtual worlds had come to stop today then maybe we would hit a peak, or even see a decline, in some years because of the limited variations. Considering that virtual worlds build on our need to socialize, I don't think we are even close to saturation. But all users won't be hunting trolls in the future.

[Brent Parker]

6.

There are quite a few reasons that MMO growth won't slow down. I think people enjoy being able to interact w/ thier entertainment. Now if the MMO world would have a storyline (like tale in the desert)we'd be set. I think people don't wanna be sitting on thier ass watching TV, they'd rather be part of the story. I don't know how many people watch TV, but I'm willing to bet that it's a little more then million. I think MMO's are going to become as much of fad as TV.

I wonder what the first soap opera MMO is going to be like. The first publisher to be able to hit the soap opera market will be able to sell soap all day long.

Another reason is gamers are raising gamers now. This weekend my guild from wow got together, and there were families there, and most of the kids there played WoW right along w/ the adults. It's become a family pasttime. A bonding activity that everyone in the family can partake in. Let's see TV try to do that. One of the families there had 6 accounts and a room devoted to game playing... all over an ISDN line (ouch.)

[Green Armadillo]

7.

The big problem with this article is that no one involved can call a spade a spade and still have work in journalism the next day. MXO is by all accounts I've heard a poorly designed game that they've attempted to prop up with live actors running a plot (based on a property whose movie sequels were widely lambasted, which can't have helped the game any). When a game with all costs upfront is mediocre, that's only going to affect sales if poor reviews reach people before they make their purchase. But if a game is bad, and continuing to play it is costing you money every month, predictable consequences ensue.

In short, quality in the subscription-based genre is at a premium previously unseen in gaming. That's very very scary if you're trying to round up millions of dollars in development funding for an unproven programming studio. Market saturation, on the other hand, now there's a problem that can be solved by throwing money at it. If your shoddy licensed MMORPG flops, it must have been the fault of the property, the competition, an insufficient ad campaign, bad positioning/marketing something, anything but failure to deliver a quality product. Why the shareholders and venture capitalists paying for these things are blinded by the temptation of sweet, sweet recurring subscription revenue and have yet to catch on to this paradigm shift is beyond me.

[Bart Stewart]

8.

Michael Pachter> "It may continue to grow in China," Mr. Pachter added, "but not in Europe or the U.S. We don't need the imaginary outlet to feel a sense of accomplishment here. It just doesn't work in the U.S. It just doesn't make any sense."

I suspect he's wrong, too, but why get annoyed that not everyone sees the world the same way?

The most important word the quoted analyst used was "imaginary." Based on the quote, he wasn't condemning play; he was rejecting what to him appears to be unrealistic play.

As I read it, Pachter doesn't see a future in "bowling alone," either. The problem is that he mistakenly thinks online games are an escape from the real world into solitary fantasy. He sees the trolls and the spaceships on the screen, but not the real people behind them.

What's interesting is that people who see the world this way aren't so much anti-play as pro-reality. Recreation is acceptable, as long as it's got a real component.

Playing sports is OK, but playing a golf sim or an online poker game is mildly strange. Building a cabinet or tinkering with your car's engine are OK, but using tradeskills to craft items is odd. Watching a travel show is OK, but wanting to hang out with elves and wizards and aliens on a computer screen is just weird.

So where does the transition from OK to not-OK happen? At what point is the sense of interacting with something or someone real lost?

Is there a clue here for how online games could be designed to be more appealing to realists? Or will online games always fall on the "just doesn't make any sense" side of the line for a lot of people because their settings aren't simulations of present-day reality?

--Bart

[Mike Sellers]

9.

How "real" is reality TV? I wonder if what matters here is a perceived sense of social reality, not physical reality. That is, when MMOGs become something you can talk about around the office without feeling any sillier than you do talking about Survivor, Average Joe, or say Lost, then they may exceed some necessary social reality threshold and thus become socially acceptable.

But for now at least any game that leaves you saying, "yeah so we getting ready to take on a bunch of ogre mage grognards and and up comes Leroy Jenkins with his nerfed Sword of Throbbing Cathexis..." isn't likely to clear that hurdle. I'm sure Mr. Pachter can't quite picture himself saying that while talking to his colleagues on the 23rd floor.

[jj]

10.

Michael Pachter> "It may continue to grow in China," Mr. Pachter added, "but not in Europe or the U.S. We don't need the imaginary outlet to feel a sense of accomplishment here. It just doesn't work in the U.S. It just doesn't make any sense."

Quick! Appoint this guy head of FEMA!

[Bart Stewart]

11.

Mike Sellers> How "real" is reality TV?

Well, the competitive and social situations in these reality shows are certainly contrived, but the people playing them are still dealing with grittily real environments. In fact, those environments are nearly as much characters in these stories as any of the human participants, almost in a "Heart of Darkness" way. That's very engaging for a viewer who equates reality with sensation.

In fact, I'd say that sports in general are much like reality games. Both have contrived rules, both (these days especially) make much of the social interactions and personal stories, and both depend for much of their challenge on the environment in which the game is played producing lots of difficult sensory input.

How far removed is:

"yeah so we getting ready to take on a bunch of ogre mage grognards and and up comes Leroy Jenkins with his nerfed Sword of Throbbing Cathexis..."

from:

"we came out of the huddle ready to hand off to the fullback, but they sent both their safeties in on a gap blitz and we had to go play-action"?

Why is it strange to discuss the former on the way to the boardroom, but not the latter?

I can imagine the Online Killer App being a new "sports" game that uses realistic props and physics, with rules allowing thousands of simultaneous players.

Would the MSM get that? Or would such a game still be easy to dismiss as mere geek chic?

Or do we just have to wait until the old-school reporters who loathe technology are replaced by Wired journalists?

--Bart

[Matt Mihaly]

12.

Bart Stewart wrote:

Why is it strange to discuss the former on the way to the boardroom, but not the latter?

If you have to ask....

--matt

[DeAnna Burghart]

13.

>>Why is it strange to discuss the former on the way to the boardroom, but not the latter?<<

I would argue purely from an anecdotal standpoint that it doesn't clear the "weird" hurdle because sci-fi and sci-fantasy are still, by and large, the province of youth. Granted that "youth" is loosely defined and includes both my soon-to-be 37 self and my 57-year-old mother, but there is still an element of the genre as a whole that is tainted by, for lack of a better word, the perception of immaturity. Does anyone here actually imagine that the venerable Mr. Pachter is a 30-something with a couple of kids and a few computers at home? I envision a 50- or 60-something WASP exec or exec-wannabe, possibly with grown children, none of whom ever played D&D (or if they did, they sure didn't tell Dad about it). The doubting Thomases of the MMORPG world are the same folks who don't "get" Star Trek and Trekkies, or Star Wars afficianados, or Harry Potter, or Dragonlance, or the Sci Fi channel, or any of the other massively successful outlets for fantasy entertainment in the last 30 years. They probably don't play computer games at all, let alone the novelty (let's face it, it still is a novelty in the grand scheme of things) that is an MMORPG. My own brother-in-law who is an avid computer gamer hasn't yet played an MMORPG, but he at least gets the cool factor. The world has changed enough in the last 20 years that when I mentioned getting together with friends to play D&D recently, my mother's reaction was, "Oh, great! Hope you have fun," in stark contrast to her reaction 20 years previous: genuine fear that I'd end up like Tom Hanks in Mazes and Monsters. It took her -- a tried and true sci-fi fan raised on Green Lantern comics and Dr. Who -- 20 years to make that journey. How much longer will it take the folks who have never seen Star Wars, have never heard of B5, and haven't read a novelist other than Danielle Steele or Tom Clancy since they got out of college?

[Samantha LeCraft]

14.

So where does the transition from OK to not-OK happen?

To some extent, I think this is a generational divide. I'm going to go out on a limb here and guess that Mr. Pachter is over the age of 40. The skewed demographics of TerraNova aside, most people over the age of 40 do not play video games -- they didn't grow up with them, they don't understand them, and they don't like them. The generation of kids that grew up with consoles in their homes and arcades in the local malls are just starting to get to the age where they could possibly be the ones running business and politics. It's going to be a few years yet before the Atari Generation are the research analysts giving quotes to the New York Times.

Talk to any 18 year old, and you're much more likely to find them telling stories about their video game experiences -- everything from crushing their buddy at Madden NFL to narrowly escaping death in Molten Core. Talking about video games the same way one would talk about a Saturday morning game of touch football or the most recent episode of Survivor isn't strange to anyone who grew up during the 80s or 90s. I think that around 2020 or so, we're going to see a cultural shift towards a greater acceptance of video games. Once those who grew up with video games start taking leadership positions en masse, sentiments like those expressed by Mr. Pachter will become the cultural minority.

[gordon.calleja]

15.

Dimitri wrote-> "Moreover, if you buy the assumption that I post a lot on--that these games are about the drive for community in a country where community has become scarce--then these games will continue to appeal so long as people have a hard time finding RL community"

Bart wrote-> "Why is it strange to discuss the former on the way to the boardroom, but not the latter?"

I fully agree with Dimitri about the importance of viewing mmogs as being appealing because of the lack of third spaces argument, but only within the context of the US (and other countries that have adopted similiar social structure, like, in many respects, NZ). But what about countries where people have a very rich social life and a profusion of third spaces? I m from Malta and have lived in the US and now NZ and there is obviously a stark difference in social life and opportunities to engage in "thirdspaceness", yet WoW has exploded there (Malta)too.

Relating this to the second quote by Bart, people DO talk about WoW at the office without any fear of being looked down upon. One thing which struck me about the US is the stigma attached to role-playing, which seems to have carried forward to mmorpgs to some degree or other, which I had never experienced in Malta in my lifetime of RPGing. What I m trying to get at is that I suspect that in a place where there are ample opportunities for social richness and participation in third spaces there is little (if any) negativity attached to rpgs, mmorpgs, and game playing in general. At the same time worlds like WoW are still highly popular and so one cannot claim that the need they address is solely a social one. On a similiar note, Edward's point about satisfaction from the real world equated with jobs and satisfaction from an MMORPG does not apply in a place like Malta where people do not generally prioritize the work place as much as, say the US. As in for most people satisfaction is not derived from, and is rarely expected to derive from the work place (whether one works at a petrol station or manages a graphic design company)but from activities that occur after the mad rush for the door fifteen minutes BEFORE work time is up. And thus equating satisfaction with work is only teneable in a very particular socio-cultural setting.

[lewy]

16.

Samantha LeCraft wrote:

"Talk to any 18 year old, and you're much more likely to find them telling stories about their video game experiences -- everything from crushing their buddy at Madden NFL to narrowly escaping death in Molten Core."

Yes, with the caveat that the audience for WoW is not necessarily the same audience that plays Madden. There was an article in Rolling Stone a few years back which pointed out that popular music had splintered. In the 1950's or 60's there were genres but you could reasonably expect that any 18 year old would be familiar with any of the top ten sellers in the country. Now there is rap, there is alternative, there is rock/pop, and each genres has its devotees who by and large don't mingle with one another. The same thing could well happen to gaming--consider the disdain with which FPS players and MMO players seem to regard one another.

From that perspective it's a fair question to ask how successful the fuzzy elf genre can be compared to a hypothetical NFL/NBA/FIFA sports sim. And in defense of Mr. Pachter while WoW has been successful it still hasn't reached the heights of something like The Sims and in terms of the MMO market as a whole its still an extreme outlier.

[Darniaq]

17.

I found that article to be, ironically, fairly informative, even for the casual reader. Further, it being on the cover of the Arts section belies the mainstreamedness.

In any case, yea, I don't quite understand how he can downplay potential growth when the explosive success of WoW has been both cannabalistic and additive to the genre. Considering the rather incremental nature of the growth of subscriptions prior, you'd think an analyst wouldn't miss the big honkin' spike, particularly from a game that broke records for launch success, speedy increase in subscriptions, concurrency, and then on to dominate... all in ten months.

Bart wrote-> "Why is it strange to discuss the former on the way to the boardroom, but not the latter?"

Anything new takes a long time to get past the the establishment of conservative naysayers. People who master something, even a knowledgebase, are traditionally rather reticent to let go :) Similar comments have been made about direct-to-consumer sites and legalized downloadable music.

I don't think MMOs apply as an escapist fantasy only for folks unhappy with their lives anymore. What with the games themselves and the support industry behind them (all the fee-based sites and, of course, RMTing), it's fast becoming a legit business.

[magicback (Frank)]

18.

Hey why is there so much focused on Mr. Pachter's comments?

Wedbush Morgan is relatively small and while it sure has some readership, many of the company execs are reading research from bigger houses such as Morgan Stanley. A 170pg report by Brian Pitz (sp?) an associate of Mary Meeker on the Interactive Entertainment Industry have the emergence of the online gaming business models as one of three key growth drivers.

Now if 10% of console gamers were to move online then the number of online gamers would have blown pass the 4m watermark.

There is very little confusion in the boardroom that online console gaming via the next gen consoles is the next thing in the gaming business. And by catering to the console gaming platforms, online gaming will be much easier and streamlined (e.g. less fustration and more fun). Let's not even get to the fable triple-play/quad-play TV set-top box dream. Look even the vaporish Phantom console is still alive and kicking in Europe.

Frank

[Mike Sellers]

19.

Wedbush Morgan is relatively small and while it sure has some readership, many of the company execs are reading research from bigger houses such as Morgan Stanley.

Yes, but an even more well-known company is the one that published this quote: The New York Times. While some investors and analysts might read reports by other groups, a lot more who are even thinking about investing in this sector will read this article or have it handed to them. The problem is, the same potential investors who are just becoming familiar with this market (and so don't yet know enough to punch holes in this article) are the most likely ones to read it.

OTOH, there's the "any publicity is good publicity" school of thought. By that measure getting on the front page of the cover of the Arts section can't be a bad thing. (On yet another hand, our company was profiled in the NY Times Sunday magazine in 1996 before Meridian 59 was released, and it didn't exactly presage a groundswell of mass market interest -- so if nothing else, at least we don't live and die by the NYT!)

[magicback (Frank)]

20.

Oh well, guess extreme remarks get the sound bites. They may even be useful as a counter-argument to balance an article :)

A quick Google on "Online Games" and the following newspapers yields the following. A quick glance indicates opportunty and probability of success rather than a dismissal of the trend.

WSJ:
http://online.wsj.com/public/article/0,,SB112224468814094387-c_lyn_JklKkAgR_5JCbWBwSi_7c_20060725,00.html?mod=rss_free

Washington Post:
http://www.washingtonpost.com/wp-dyn/content/article/2005/08/05/AR2005080501938.html

[Rob]

21.

"consider the disdain with which FPS players and MMO players seem to regard one another"

And then consider how many ex-Counter strike players now enjoy the WoW. You'd be surprised how many FPS players have made the leap across genres. :)

[Biggles]

22.

Bart wrote-> "Why is it strange to discuss the former on the way to the boardroom, but not the latter?"

I think this is to do with the context of the different activities and people's general knowlege of it. Everyone knows the real world, we all live in it. I know that if I jump, I fall, if I run I get tired and if I eat too much I'll feel ill later. No one would find these things strange. Furthermore, I'm going to extend to this the rules of most sports. We all know football is played with a round ball and two teams try and score goals (at least over here you do :), so again, it's fine to talk about football.

The rules of online games (and this applies to a lot of offline ones too), are not quite so intuitive. Furthermore, they're pretty wierd in places and when people hear things they think are wierd (here, say the idea of levelling, for example) about a subject, they conclude that the subject is strange, as is the speaker. Even without the god-aweful slang that surrounds MMO's, most people don't even have a point of reference to the underlying concepts. So it's nigh on impossible to explain the significance of, say, reaching level 20 or having the only healer in your party die just before the last boss of a 2 hour raid (hell, I don't even know what I'm talking about! I don't play these games! but at least I could nod and smile and probably have some sort of picture in my head if you were to talk to me about them).

Now, part of the problem is that the rules of computer games are not always intrinsicly intuitive to normal inhabitants of the real world. And I'd say MMO's are guiltier than most in this respect. In fact some of them take quite a bit to get your head around and I'd like to guess that sooner or later, there will be a very successful MMO which throws out all the old rules, ignores the hard core fans and makes an easily accessable non-geek game which dwarfs WOW in sales. Just to be controversial : )

[lewy]

23.

Rob wrote:

"And then consider how many ex-Counter strike players now enjoy the WoW. You'd be surprised how many FPS players have made the leap across genres. :)"

What I find telling is the perception that someone would have to make a "leap across genres". My friends and I will play just about anything, console or PC game, single player or online. I haven't touched WoW in a couple of months (although I'm still paying the subscription) because we switched over to Battlefield 2. That said, it appears that my friends and I are in the minority.

[lewy]

24.

Biggles wrote:

"In fact some of them take quite a bit to get your head around and I'd like to guess that sooner or later, there will be a very successful MMO which throws out all the old rules, ignores the hard core fans and makes an easily accessable non-geek game which dwarfs WOW in sales. Just to be controversial : )"

I don't think that's too controversial. In fact I think the conventional wisdom is that the first MMO to really enjoy mainstream success won't operate in the fantasy genre--sports titles have been suggested as one likely candidate. Also, remember the buzz about The Sims Online. Speculation was that it could be the first title to break out of the MMO ghetto into wider mainstream success.

[Samantha LeCraft]

25.

Biggles wrote, I think this is to do with the context of the different activities and people's general knowlege of it... We all know football is played with a round ball and two teams try and score goals (at least over here you do :), so again, it's fine to talk about football.

I think this is an assumption a lot of sports fans make. I am not a sports fan, I do not watch sports, and I do not play sports. I couldn't tell you the rules of any sport outside of Olympic figure skating or gymnastics. I know that in [American] football, both teams are trying to make a touch down, but if a sports fan were to tell me a story about how the linebacker had a torn ligament at the fourth down and whatever, I would have no idea what they were talking about, nor would I really care. And I would make the assumption that the speaker was a sports fanatic, and therefore probably has very little in common with me, and would dismiss them much the way someone might dismiss me as geeky or weird.

I don't think the rules of sports are at all intuitive, and I don't know anything about them that hasn't been explained to me by a sports fan. I fail to see how sports are any less "weird" than games -- except that more people in the US watch sports than play video games. Men over the age of 40 are still allowed to yell at the TV screen about a bad play or whatever, and are allowed to talk about said bad play on the way to the boardroom, but most do not even play Madden NFL. Like I said earlier, I think this is just a generational divide. Once the "Atari Generation" starts entering leadership positions, what's normal to talk about on the way to the boardroom will change, I think. Will all of them talk about their MMOG experiences? Probably not, but even talking about Counter Strike is a far cry from talking about football. And once the Atari Generation comes of age, if you were to talk about your experiences in WoW with your colleague who plays Counter Strike, I'd bet he would think you less weird than his father would have.

[Greg]

26.

Pachter is one of the best known analysts of the games industry--but keep in mind that his main job is following large publically traded companies like EA, THQ, and Activision, none of which participate materially in the MMO market (except for EA, which has had disappointing results and has pulled back from the market). Essentially, the people who he schmoozes with tell him MMOs are niche.

He may be good at reading EA's balance sheet, but he's been wrong on a lot of things, too. Earlier this year, I was at a conference where he said that he didn't think people wanted to play games on cellphones--this despite the fact that Jamdat had recently gone public with a market cap bigger than Activision's, that we're on target for $200m in domestic revenues for mobile games this year, and that the worldwide market is already over $1b.

He's not an idiot--but he's also employed to figure out likely next-quarter revenues for big game companies, not to follow trends that may or may not be flashes in the pan, and I wouldn't trust his judgment on these sorts of issues.

[lewy]

27.

While professional sports haven't achieved a universal penetration, there's no doubt that more people are conversant with the NFL/NBA/MLB/etc. than are conversant with video games. On a simple numerical basis if you're striking up a conversation with a stranger sports are more likely to be a touchstone than video games.

What's more I'd caution against an "either/or" approach with regards to the sports/video game question. There's no reason that the next generation shouldn't be equally as interested in pro sports as with video games. In fact, the popularity of sports titles like Madden NFL or NBA Jam would seem to support that viewpoint.

[lewy]

28.

"Seriously, where would any sane person go to seek a sense of fulfillment: the cloud-cuckoo land of level playing fields and balanced classes, or the real-world reality of America's win/get lucky/cheat-or-go-home money game? Seriously."

I can't be the only person to wonder if the better course wouldn't be to earn six figures in the real world and then buy everything you want from IGE.

[Samantha LeCraft]

29.

Greg said, Essentially, the people who he schmoozes with tell him MMOs are niche.

Good point, but I tend to think that if The Sims Online had been the first MMOG to break the 1 million US subscriptions mark, Mr. Pachter would have been singing a much different tune to the New York Times. There's an interview with Mr. Pachter from 2003 here, and I think that if any of the seven game companies he covers owned Blizzard, he would have told the NYT that MMOGs are the wave of the future -- invest now! Not exactly what I'd call an objective observer.

[Keith M Ellis]

30.

If you've ever personally known an analyst at a big house well enough to have a very candid conversation (and I have), you'll know that their job really isn't at all the kind of forward-looking analysis that Patcher provides and that we expect.

[greglas]

31.

Greg> Pachter is one of the best known analysts of the games industry

That's the most surprising thing I've heard yet. I had just assumed his comments were thrown in there for the sake of humor, and Dan was making a mistake by taking him seriously.

A bias in favor of EA's vision of the future seems like a reasonable, if charitable, reading -- as Ren noted out a while ago, EA seems to desperately want MMOs to be a fringe non-issue:

http://terranova.blogs.com/terra_nova/2004/08/eas_eyes_wide_s.html

Considering MMOs like TSO, UO, E&B... for EA, I guess they are.

[Biggles]

32.

Samantha wrote: "And I would make the assumption that the speaker was a sports fanatic, and therefore probably has very little in common with me, and would dismiss them much the way someone might dismiss me as geeky or weird."

Precisely.

[magicback (Frank)]

33.

Ok, if we are going to discuss Mr. Pachter’s comments then lets look at it in context :)

Attached is the intro to one of his nine fields of dreams outlined in his July 2005 report titled Fields of Dream (Dream or Reality: An In-Depth look at adoption of The New Interactive Entertainment Technology).

“DREAM #6–ONLINE GAMING WILL PROLIFERATE
Microsoft built its Xbox console with online gaming capability, including a built-in online
adapter and a hard drive intended to allow downloads of data that would permit online
gaming. Unfortunately for Microsoft, online-enabled Xbox games were few in number, in
particular due to Electronic Arts’ reticence to make games for the Xbox Live service
without compensation. Microsoft and Electronic Arts mended their relationship last year,
and now EA Sports games supports Xbox Live. Online capability is a centerpiece of the
design of the Xbox 360 and PS3, and it appears that the Revolution will have some
online ability as well. Microsoft views the online opportunity as large, and apparently
believes that Xbox live will drive sales of the Xbox 360 and allow it to gain a sustainable
competitive advantage over Sony and Nintendo.”

“Reality: Two years ago, we said that we thought that online gaming is a joke. Last year,
we acknowledged that online gaming is not so funny, but were still relatively
unimpressed. This year, we remain unimpressed, and think that Microsoft’s focus on
online gaming is a strategic error. Although we think that there is potential for online
gaming to grow into a meaningful niche, we remain convinced that the vast majority of
game play will be done offline.”

And the section on MMORPGs:
“Massively multiplayer online role-playing games (MMORPG) have had modest success,
primarily overseas, with as many as 2,000,000 subscribers. Although we expect the
ultimate market for these games to exceed 10 million subscribers, we are not optimistic
that a substantial portion of this market will be accessible by U.S. publishers. There are a
handful of public companies that are attempting to exploit this market (NCSoft, Shanda,
Netease and Webzen), with all focused on the Asian market. We believe that it will be
several years, if ever, before MMORPG styled games appeal to more than 1 million U.S.
subscribers.”

“Our view is based upon the development of the PC and console game market in the U.S.
over the past 20 years. We believe that most people play video games for a form of
mindless escape. The most popular video games are almost all single-player games,
player vs. console, and allow the player to remove himself from a social environment. In
these games, the player can act out fantasies of power (in shooter games), often playing
the “bad” guy and playing to win. MMORPGs are just the opposite, a highly social
interactive experience. Real people control most characters in a MMORPG, and the
games are generally zero sum (everyone can’t win). The Sims for PC and console varies
significantly from The Sims Online, insofar as the main character must interact with real
people in the latter. The level of social interaction involved in MMORPGs is inconsistent
with the goal of mindless escape sought by most of the U.S. audience.”

Firstly, I think we’ll need to read at least the section in order to get a clear picture and understand that he is coming from a broader interactive entertainment perspective writing to investors who are more familiar with the established companies (focused on console gaming) looking at earnings projections for the next 3 years or so.

One of his points is that the current subscription model will not reach mass acceptance unless a more familiar cable subscription model is utilized. Since the July report, this and other assumptions have been proven wrong already. So, while “yes” online gaming is still a niche, but the consumer demand for online entertainment will probably match iPod’s growth rates.

So what is the equivalent of iPod for online games?

IMO, WoW is not. Habbo Hotel is not either. Ok, maybe WoW is the original version iPod in a world of many unimpressive digital media players.

Frank

[lewy]

34.

Frank wrote:

"So what is the equivalent of iPod for online games?"

Ironically the iPod is no longer the favorite in Asia. Sony's new MP3 flash player is more popular now in Japan from what I understand.

Pachter does mention something I've noticed about MMORPG's: the division between escapism and entertainment. Lots of MMORPG players, it seems to me, like to talk about "work" and "accomplishment" in regards to their playing experience. I, on the other hand, work at my day job. When I come home and play a game I'm looking to relax. How large precisely is the potential market for players whose primary motive is escapism versus the number of potential players who play for entertainment? If anything, WoW with its easy leveling and friendliness to solo play has demonstrated that skewing the playing field towards the casual, or entertainment motivated, player is the way to build up market share.

[Mike Sellers]

35.

Frank quotes Pachter in a 2005 report:
We believe that it will be several years, if ever, before MMORPG styled games appeal to more than 1 million U.S. subscribers.”

This was incorrect when Pachter wrote it, and is ludicrous now. WoW alone has over 1M subscribers in the US. Leaving that one and all the lower-tier games aside and adding up the subs for US-based games like EQ, EQII, SWG, DAoC, CoH, and UO yields more than a million subscribers as well.

Pachter is, as they say, selling something. And it's not positive spin on the MMOG market. This is a terrific example of not letting facts get in the way of confident analysis.

He goes on to say, “Our view is based upon the development of the PC and console game market in the U.S. over the past 20 years. We believe that most people play video games for a form of mindless escape."

Which is a lot like saying "based on over 20 years of experience in wireless entertainment, we believe that people don't want pictures with their radio -- TV will never reach 1 million viewers." The social aspect of MMOs has a market-disruptive effect of which Pachter seems unaware.

As added confirmation of where Pacther is coming from, here's a link to a 2003 interview (nod to Samantha for the link). At the time, he said, "The seven larger US publishers I cover are Electronic Arts (ERTS), Take-Two (TTWO), THQ, Inc. (THQI), Activision (ATVI), Midway (MWY), 3DO (THDO), and Acclaim (AKLM)." So... how many successful MMOG publishers are in that list? That's right, zero. (I won't quibble about UO and EA -- EA corporately doesn't do MMOGs, and what with one thing and another has probably done more to kill these games than the rest of the industry combined.)

Pretty clearly Mr. Pachter's interests are in minimizing the potential market effects of MMOGs. And unfortunately this is the voice that the NYT chose to publish in this story. It might be worth pointing out the gross errors in Pachter's analysis to the NYT, but OTOH I doubt they're going to be all that concerned.

[lewy]

36.

Mike Sellers wrote:

"Which is a lot like saying "based on over 20 years of experience in wireless entertainment, we believe that people don't want pictures with their radio -- TV will never reach 1 million viewers." The social aspect of MMOs has a market-disruptive effect of which Pachter seems unaware."

To me it seems like an interesting question: is there a difference in motivation between MMORPG players and players of "regular" video games? In my own personal experience I would say that I find the application of terms like "work" and "accomplishment" to MMORPG play to be baffling. I "work" at my job, after all, and what I am looking for in a game isn't work.

Look at WoW, which is the outlier on the MMORPG list in terms of sales/subscriptions. What's most notable about the game to me is the attempt to make the game much more friendly to casual players, players whose primary motivation is not a sense of accomplishment but rather entertainment. That's all the more notable when WoW is compared to its predecessors, where the leveling grind could be horrific.

My guess is that WoW is going to be a watershed, and that the next big MMOG hit that really breaks through into the mainstream is going to fully embrace the casual player demographic. Players will be able to drop in and instantly engage in action, even if they only have a couple of hours or less in which to play. In combination with that, why not a prorated subscription model based on the number of hours a month someone actually plays the game? The rate could max out at $15 a month, which seems to be the going rate for games like WoW, and be staggered from there.

[galiel]

37.

Mike Sellers:

EQ, EQII, SWG, DAoC, CoH, and UO...MMOGs...pointing out the gross errors in Pachter's analysis to the NYT, but OTOH...

Will the person who, AFAIK, IIRC, more or less coined the "MMORPG" abomination please stop propagating TLAs and other acronyms!!!!

IANAA, but I predict that there will be a market for no more than four or five acronyms in the world.

[Mike Sellers]

38.

IANAA, but I predict that there will be a market for no more than four or five acronyms in the world.

Because most people read blogs 'for mindless escape'? ;-)

[Bart Stewart]

39.

Mindless escape? TN is where I come when I'm tired of mindless escape! *g*

On the subject of EA and sports and multiplayer games, I happened to notice a television ad last night for their "NASCAR 06", which they are promoting as "squad-based racing".

Sam Fisher vs. Jeff Gordon?

This actually ties in with the point I was trying to make earlier. Making an virtual world that realists can feel comfortable discussing with their friends isn't simply about being a sports game -- it's about having some real-world component. Competitive sports are an obvious example of this, but they're just one example.

We could also consider building worlds around:

* outdoor recreation (hunting, fishing, etc.)
* modern military action
* spycraft
* politics
* finance
* burglary
* "reality" TV shows
* gardening / home decorating

I guess that any one of these could produce a major MMOG hit because it taps into the largely untouched market of people who prefer "real" things to "imaginary" things. Some of these may seem a little silly, but who here predicted the sales of "Deer Hunter"?

What all these have in common with "Deer Hunter" is some highly real-world aspect -- real things or real places that can be touched, smelled, tasted. (Politics and finance perhaps slightly less so, unless you consider "power" to be a real thing.) Having such a strongly realistic aspect in a game would give the realist a touchstone; it would make play safe.

I think Samantha's right about the passage of time bringing computer games generally into the mainstream as the Atari 2600 generation matures. (Although I'll bet that by the time they're the captains of industry, their kids will have glommed onto some new technology that Just Isn't Right. *g*)

But having said that... why wait? There will always be realists. Why not build products for them now if we can?

Mindless escape isn't only about going to imaginary places....

--Bart

[galiel]

40.

IANAA, but I predict that there will be a market for no more than four or five acronyms in the world.

Because most people read blogs 'for mindless escape'? ;-)

It will be years before a blog attracts a Mike Sellers.

[Mike Sellers]

41.

Apparently I'm at least as mindless as anyone else. ;)

Bart said, "But having said that... why wait? There will always be realists. Why not build products for them now if we can?"

Well... you ready to fund that, Bart? It's not the creative/gameplay side that's the problem, believe me.

[Jim Self]

42.

Sam Fisher vs. Jeff Gordon?

What kind of odds would you be willing to put on that? Nevermind, I'll put everything on Fisher.

[lewy]

43.

Bart Stewart wrote:

"What all these have in common with "Deer Hunter" is some highly real-world aspect -- real things or real places that can be touched, smelled, tasted. (Politics and finance perhaps slightly less so, unless you consider "power" to be a real thing.) Having such a strongly realistic aspect in a game would give the realist a touchstone; it would make play safe."

Is it really about providing a touchstone however? Or is it more about tapping into a niche market? From that perspective it makes more sense to look at where single player games have been successful and then go from there. Thus politics, finance and home and gardening go out the window--there's no equivilent single player game of any prominence that taps into those genres.

OTOH that leaves a couple of five hundred pound gorillas: sports sims and shooters. Shooters are iffy because they are already largely played online--just without a subscription model.

Sports sims it seems to me are a natural fit. Look at the already existing popularity of fantasy leagues. The problem, I would imagine, would be in securing the necessary licenses.

[Mike Sellers]

44.

If the missing 'ingredients' to mass-market MMOG success are real-world touchstones and a dedicated niche market, why did "Motor City Online" fail so miserably? It was based on a known, real activity that incorporates an appealing regular-guy fantasy (not "fantasy" as in men in tights or as in porn, but as in a common daydream), and there are few more dedicated niches in the regular market than NASCAR folks. So, what would you say it was missing?

[magicback (Frank)]

45.

Motor City Online did not tap the Echo Generation that MTV represents so well. I looked back at the shows on MTV and began to scratch my head. Then when I watched it longer and then interacted with the "target demographics", I start to get it a bit.

Beyond gender-play and other forms of identity exploration, one strong form for the 15-to-25 demographics is role-model play (as in what would it be like to be like my role model). Sports stars, media celeberities, etc. These are the new role model.

Legolas and Strider are role models to only a few people.

Frank

[monkeysan]

46.

While there probably is a market of 'realists' who would jump right into a digital world if, in the words of Rockstar's Jeronimo, it "wasn't about hobgoblins and trolls," I don't think that's the real barrier. The real barrier, imo (take that anti-acronymists) is that even those who the industry considers 'casual gamers' are really not all that casual.

When I started working on Smartbomb in 2000, several designers and producers told me point blank that they consider casual to be 10-20 hours/week online. And the truly casual (less than 6 hours/week) are not about to jump into a competitive atmosphere where their time investment is barely enough to learn the basics of manipulating the user interface, let alone learning and keeping up with a constantly shifting ruleset (which often requires time researching at fan/portal sites offlilne). Add in that even in WoW you need to be in a clan to really get the most out of the game, and it's no wonder many people balk at paying 15bucks a month in addition to the box fee just to feel stupid and humiliated by other gamers.

Aaron

[lewy]

47.

"If the missing 'ingredients' to mass-market MMOG success are real-world touchstones and a dedicated niche market, why did "Motor City Online" fail so miserably? It was based on a known, real activity that incorporates an appealing regular-guy fantasy (not "fantasy" as in men in tights or as in porn, but as in a common daydream), and there are few more dedicated niches in the regular market than NASCAR folks. So, what would you say it was missing?"

I've never heard of Motor City Online. That could have something to do with it.

Actually I never suggested that "real world touchstones" were a necessary ingredient for MMOG success. I suggested pursuing niche markets which have been revealed by single player games as a way to exploit that market and not as a means of pursuing mainstream success. The term "niche" itself is probably incompatible with mass market sales.

For what it's worth my prescription for success in an MMOG divides players into two camps: escapist, or hardcore, players and entertainment, or casual, players. Hardcore players have an escapist motive and are the minority. For casual players on the other hand talk about "achievement" or "work" in a game is baffling. They work at their day jobs after all and their primary motive in playing games is entertainment and relaxation. The game must be fun. For this reason repetitive grinding for levels is verboten. I'm guessing that this may be what Pachter was getting at in the NY Times article when he talked about "a sense of accomplishment".

To accomodate the casual gamer the game needs to immediately start up, by which I mean that as soon as the casual gamer logs in he or she should be able to start playing. No standing around yelling for groups. The casual gamer probably only has a couple of hours available to play after getting home from work.

The game needs a flat leveling curve as with Shadowbane or WoW. In place of the carrot on a stick apprach to leveling as an incentive to keep players in the game I would use content, both player generated and vendor driven, to attract players.

Finally, in combination with all of the above, I would implement a prorated billing scheme. The bill might cap out at $15 a month, for example, and be staggered from there based on the number of hours a player spends in game. Not sure though if that's what Pachter meant with his comment about "cable style" subscriptions.

[Biggles]

48.

lewy wrote: "Thus politics, finance and home and gardening go out the window--there's no equivilent single player game of any prominence that taps into those genres."

Not sure about home gardening, but surely civilization and the 'theme-' games are some of the best known franchises among casual gamers? I know a lot of times when people I'd never have thought would play games said they had fond memories of these. (However, if you were to port them online then I can imagine the regularly required time investment would put casual people off..)

Certainly a well implemented online league for the major sports games would be incredibly successful. If this could be given a 'worldy' feel (ie, you could go watch games as well as play them, buy/sell players. Maybe tie in some real world events, and link the monthly fee to, say, sports chanel subscriptions/match tickets etc... sorry, the ideas are really starting to flow...), would it then qualify as an MMO? (Actually come to think of it, where's a patent lawyer when you need one? (j/k))

[Kafka]

49.

Mr. Pachter's comments strike me as coming from someone whose views are centered in a world that he thinks *should* exist, versus the world that we actually live in. And of course he's speaking through the veil of his monetary interests. No one is fooled, unfortunately.

Maybe if he repeats it enough, people may start to see his point, but only if they close their eyes. :-)

/K

[Lydia Leong (Amberyl)]

50.

Samantha wrote: "It's going to be a few years yet before the Atari Generation are the research analysts giving quotes to the New York Times."

Naw, it really just depends what analysts the press is calling that day. Market research analysts are typically more likely to be paying attention to developing trends than the Wall Street analysts -- and don't have a financial stake in the results.

Joe Laszlo, Jupiter's gaming analyst, for instance, games and blogs about MMOGs occasionally. He also quotes Terra Nova from time to time. ;)

At Gartner, where I work, I'm periodically startled by how many of my fellow analysts also play MMOGs -- quite a few of whom are older (even considerably older) than the Atari Generation.

[galiel]

51.

"It's going to be a few years yet before the Atari Generation are the research analysts giving quotes to the New York Times.

Never trust anyone under (checks age) forty-five.