Realistic Budgeting – A Feature Your Game Must Have

It’s winter in Canada, and that means snow. And cold. This year, it means both, at the same time, in a relentless assault that’s led to a state of emergency being declared in Saint John. When snow is causing a state of emergency in Canada, you know it’s a rough winter.

The problem with this particular weather is that it’s just been an onslaught with no breaks. There is at least one and potentially two more storms in the seven day forecast, one of which is another 40cm (that’s over a foot for my American friends). At the same time we’re getting bitter cold (-20C with windchills pushing into -30C), without the occasional thawing period that we usually get this time of year. The combination is enough that we’re running out of places to put the snow, it’s getting hard to see around corners on roads, pipes are freezing, and other similar problems. It’s messy. Locally, my snow banks are as tall as I am now, and that’s a problem when I have to shovel more snow over them later this week.

Realistic Budgets Are A Feature – Your Game Must Have It

Paraphrasing Joel Spolsky there when he was talking about “shipping” being a feature software must have. He was bang on. But a realistic budget is also a feature and you must have it. Why MMOs aren’t making enough money lately has been a hot topic with Elder Scrolls Online going free to play, and then Sony Online Entertainment being sold off. Is it really as simple as blaming the players for not being willing to subscribe? Or maybe we are reaping what we have sown? Do we have to pay somehow?

Well… yes, and no. It’s true that games need to make money to survive, and that publishers will try to find ways to do that if a sub model fails. It’s not at all true that these are poor suffering companies because the players are too mean to pay. That thinking totally ignores the cost side of the equation: absurd budgets.

Should We Even Make This Software?

In my life as a software developer, there are a couple main kinds of projects: For sale, and not for sale.

Not For Sale

Not for sale is easy. We’re making it for some reason, probably to fill a need internally. It will have a cost to develop, which we’ll call E (expenses). We’re going to do it because it’s going to either boost productivity somewhere, improve an ineffecient process, or allow us to do something we can’t do right now. All of those things tend to have a monetary value to the company, which we’ll call P.

In some cases, there is a commercial off the shelf product that can do what we want, available for some cost, along with training and support. We’ll call the total of that C.

We figure out if the software is even worth making by comparing P to E and C. If P > E, it’s worth our time to develop it. If P > C, it’s worth our time to buy something to do it. If both are true, we can compare E to C and figure out which way is best. If neither are true, then it’s not financially logical to do anything.

For Sale

For sale software is similar, except instead of benefit to the company, we’re looking at revenue (R). Unlike savings to the company for an internal efficiency project, we don’t usually know what revenue will actually be. We have to estimate it based on the size of the market, our ability to penetrate that market and take share from other companies, opportunities to grow the market, and so on. If we have a good revenue estimate, then we can figure out if it’s worth the risk of developing the product by comparing R and E (E now also includes advertising along with external user support and so on).

If the numbers don’t work, we shouldn’t make the product at all. If we don’t have the money to make the product in a way that can be profitable, we shouldn’t make the product at all. This tends to be easy to understand in the world of physical goods: If someone came to you and said they needed $5 million to make a new soft drink but it’s a good investment because the worldwide soft drink market is huge and thus they only need 2% of it… they’re delusional. How are they going to get 2% of that market away from Coca-Cola, Pepsi, and the other massive, entrenched, global players?

They’re not. I mean, it’s not impossible, but the vast majority of plays like this will fail spectacularly.

MMOs Have The Same Problem

This is also true in games, and MMOs in particular. FPS games at least have a shelf life, and the market has shown repeatedly that it will buy a new game when it’s bored with Call of Duty/Battlefield. Single Player RPGs run out of content, so there’s a market for new ones. On and on it goes.

MMOs don’t run out in the same way. Successful ones stick around and hold players a very long time, and those players are much harder to draw to another subscription game.  We’ve seen that play out time and time again – players try a new game, but most don’t stick around. AAA level MMOs a few months after launch tend to be somewhere in six figures for subscriptions. That’s the realistic expectation.

So if you’re spending $200 million (ESO’s rumored budget) to $500 million (to borrow Tobold’s number for SW:TOR) to build a MMO, what are your expectations for numbers? The only way to make a profit on a $500 million investment in a MMO is if you get WoW numbers.

Problem? WoW is an anomaly. It is an order of magnitude larger than everybody else. It sucks up most of the paying player base, and those players are extremely hard to suck away long-term, because Blizzard has a massive development budget and a very experienced team. If you budget your game on the basis that it will be more successful than every single other MMO ever created except WoW, you are delusional. There’s no other way to say it. This is not how corporations that seek reliable profit are run.

ESO turned to F2P because ESO is a medicore MMO, with an appropriately sized customer base for the game they actually created in the MMO market. That isn’t good enough, because their costs were astronomical for the size of the market, and that is entirely on them. Players have no obligation to buy something just because a company puts it out. That is not how a free market works.

The players have spoken pretty clearly. Millions of them are willing to pay for WoW. FFXIV is experiencing a strong rebirth and is doing well with paying customers as well. People will pay for what they want, but the market that will pay for MMO gameplay is only so big, and most of it is tied up in games already. For your game to be successful, you have to pull players away from those games, which is extremely difficult.

Given that, the revenue expectations for a lot of these games are absurd. In a world of sane corporate planning, some of these failing MMOs would never have been developed in the first place. That’s just what the size of the market dictates, and unless you really can do better than Blizzard, you should not expect your game to be bigger than all others that came before it.

After all, even Blizzard didn’t expect that.

Leave a Reply

Your email address will not be published.