Blizzard Getting Sued (Yay)

I never did just the Authenticator.  I understand the concept and how it is supposed to work but to me any game with an authenticator on it is just so poorly designed for security that they’re trying to tag on that added expense as per design.

And that’s exactly what a group of plaintiffs are arguing in a class action law suit against Blizzard Entertainment.

The plaintiffs in this case argue that the authenticators do not work because of a massive hacking and cracking that happened to the authenticators last year.  The authenticators were cracked and people were losing personal information to Chinese farmers left and right.  It was suggested over 1,000,000 accounts were hacked and that 90% of them had authenticators on it.

This go by and large to how Blizzard has setup their network.

Back in a day before Battle.net (and I mean the WoW version launched a few years ago) World of Warcraft required a username and password.  Usernames and passwords are by and large the most secure login method because it created a 5-16 letter code (your username) that only you know.

And of course at some point Blizzard created Battle.net and made everyone log in with their E-MAIL.  Emails are one of the more publicly available identifiers in the world.  If I know for example that your email address is snappyprincess2012@hotmail.com all I have to do now is hack your Hotmail account (which is easier) and I’ll see that you in fact have a World of Warcraft account that I will freely be able to hack as well.

It was too much of their security being tied into personal information that is easily obtainable.  It is like when someone steals your wallet with your picture identification card, call your phone provider and verify using your name and address…. information that is available in a PHONE BOOK.

So the authenticator was rolled out to deal with this, a $6.50 purchase (plus shipping) that would authenticate your account and provide maximum security.  And of course as the story goes…. it failed.

So the case is arguing what we sort of have known for all of time.  Blizzard Entertainment has crappy security.  They sell the authenticator to people and make a profit off of it knowing full well that their security sucks.  The case argues that there is a conflict of interest here in which Blizzard’s handling of personal and private information that is law regulated conflicts with their selling authenticators at a profit.

That is to say, the worst their security gets, the more side profits they will make off of these authenticators.

I really hope they win this law suit.  In reality we all know it’ll just settle out of court for some insanely low amount.  But hey it’s the first step in tackling these demon developers.

Why WoW is Losing Subscribers

So it was announced to investors that Blizzard’s World of Warcraft has lost another 100,000 subscribers.

In the past Blizzard has shrugged off these numbers as people trying other things and people who will come back.

That was true in the past, but not now.  It is true when you lose a few thousand people, but when you lose 2M people… that’s something else.

So why is WoW losing subscribers.  Well I have my theory and it is three fold

Reason #1: WoW is Old

The cool new thing is what people are going to buy.  Because WoW is a subscription you are essentially paying for every second you play.

World of Warcraft is not exactly the new kid on the block.  WoW has had three expansions over their 8 year life spam with a fourth in the works.  Expansions are not new games.  Expansions are expansions on an existing game.  They are like the DLCs before DLCs existed.

But much like DLCs, you can only make so many before they stop selling.  Eventually people are going to overplay your game and move on.  Every game has a shelf life and you can’t just keep making DLCs for the same old game.

Blizzard thought my making expansions only a five level expansion they could try and milk their franchise longer, they were long.

Games have shelf lives and will eventually get replaced by the new shiny buck.

Now no game has fully replaced Counter Strike is the king of shooters.  There are still more cash money tournaments for Counter-Strike than any other shooter in the world.

But it has definitely been phased out of popular media and is seeing far fewer people purchasing the game.  Although it has retained a very large player base it hasn’t exactly grown.  The young guns are all heading off to Battlefield 3, Halo 3, and Modern Warfare 3 which have flashier graphics, different game mechanics and a more satisfying experience.

A game can only get so old before you have to release something new, and WoW is there.

Reason #2: The Formula Has Changed

I have a series where I claim games have failed.  But when you go to the dollars most of these games have actually done quite well.  Age of Conan for example sold more than enough copies to cover their production costs and held on to enough subscribers to more than maintain their servers.

The same is true of Warhammer Online which didn’t do as well but did alright.

Even Rift which has 1/6 the player base of SWTOR is doing so well that it has expanded into Europe and Asia as well as started production on two different MMOs.

The formula for a successful game has in fact changed.  The people at Blizzard saw the game market as being something of keeping people occupied.  It didn’t have to be particularly fun.  It didn’t have to be innovative.  All it had to be was something to do.

But people don’t want to just do stuff anymore, they want to do something fun.

The reason why so many MMOs have made so much money is because people are always wanting to look for something fresh.  So a person is willing to pay $59.99 for Star Wars: The Old Republic to play it.  But that doesn’t mean after they’re done with SWTOR they’re going to go back to WoW anymore.

No as it turns out everyone is making the 2-month subscription MMO and they are releasing many of these a year.  This means that a player can effectively jump in between games and only play them when they were updated.

In the past Blizzard could count on everyone to just sit around and wait for new content to come out.  Now people just go to a different game… and stay there.

Success in the MMO world now doesn’t mean having a large player base but merely having high initial sales and slowly tapering off.

In 2002 when Lineage 2/Everquest 2 they failed because at the time the market stuck to their original game (Lineage/Everquest).  Today people are more than willing to play different games and show no loyalty to just one (as if they were a football team [Go Pats]).

Reason #3: Market Competition

One of the simple factors involved deals with market competition.  In 2004 when World of Warcraft came out its competition was Ultima Online, Ragnorak Online, and Everquest.  Lineage was really only popular in Asia.  With such a small group of MMOs it was no wonder WoW did so well.  Released in the same year as WoW were Final Fantasy XI and Star Wars Galaxies.

Almost every year since WoW’s launch there have been at least two MMOs out.

Don’t believe me?

2004: City of Heroes, Dark and Light, Everquest 2, Lineage 2, Matrix Online

2005: World of Pirate and Guild Wars

2006: Dungeons and Dragons Online and Eudemon Online

2007: Lord of the Rings Online and Vanguard

2008: Age of Conan, Perfect World and Pirates of the Burning Sea, Warhammer Online

2009: Aion, Champions Online, Fallen Earth, Football Manager Live, Free Realms, and Jade Dynasty

2010: Final Fantasy XIV, Red Dead Redemption, Global Agenda, LEGO Universe, Star Trek Online

2011: Battlestar Galactica Online, Gods and Heroes, Hellgate Global, Rift, and Star Wars: The Old Republic.

And that’s not ALL of them that’s just significant ones.  The market for games has grown but the suppliers are out pacing the demand.

We have seen the end of PC exclusive MMOs.  We have seen the end of MMOs costing a subscription fee.

Blizzard is now in a market full of sharks and not even giving an unlimited trial helps them.  The fact is the market is grown quite a bit, Blizzard is quite old and people have become content carnivours devouring everything a developer makes in days.

Allure of Freemium Service

World of Warcraft selected to extend the free trial period from Level 10 to Level 20.  This essentially doubles the free to play experience in World of Warcraft.  Certain controls are still in place to slow down the crusade of gold spammers.  This change has made moe people question, is WoW heading towards freemium?

What is Freemium?

Although I can’t be sure who coined the term freemium it has been around since at least DDO (Dungeons and Dragons Online).  Freemium offers an odd combination of free to play and subscription basis.  Basically the game is offered to players for free.  However premium services are offered to players.  Premium services can include a subscription fee for ‘bonus content’ pay access to dungeons/raids, item shops, server transfers, class changes, and about 100 other possible options.

Freemiun service emerged as a transitional tool for companies to switch between Subscription service and free to play.  Basically games with a subscription base have people who are willing to pay a monthly subscription fee for their product.  By switching purely to a free to play model these companies would immediately lose money as their existing revenue stream would suddenly cease to exist.  All the while they would be waiting for their cash shops to slowly pay off.  On the other hand by not offering free service their only way of expanding their existing clientel was through advertising and expensive developments on expansions.

Instead the freemium model offered a way to keep existing subscriptions while providing a platform for new gamers to play their product and eventually get suckered into paying for the premium service.

So Why WoW?

WoW for many gamers represents the last bastion of the subscription video game.  Before MMOs there really were no subscription games.  There really never was a need.  Much like Guild Wars people purchased a game played through it’s content and bought the impending expansions and sequels.  A good example of the difference is Starcraft: Brood Wars vs Starcraft 2.  The expansion provided extra content that you HAD to get in order to play the game while Starcraft 2 was stand alone from Starcraft 1.

World of Warcraft followed a pattern of MMOs that provided games for subscription fees.  Most of the post WoW MMOs have gone free to play.  Most of the MMOs before WoW are either free to play…. or dead.  World of Warcraft is this interesting ‘pivot point’ in gaming where it has done insanely well with the subscription basis.

Blizzard Entertainment has not and cannot ignore the pattern of newly developed MMOs.  Games like Age of Conan, Warhammer Online, Star Trek Online, and Hellgate London which were all hyped up as WoW killers… failed.  They failed all the while the games that had switched to the free to play model or came in as free to play were actually in competition with WoW.

When I walked into Walmart today I saw something that shocked me.  While purchasing my items I looked at the giftcards and there it was…. a Perfect World Entertainment gift card.  Worst yet… they were almost sold out and the cashier informed me that this was one of the most popular gift cards they were selling.

PWE is a company that is becoming more and more popular in North America.  PWE provides the following title:

• Perfect World
• Forsaken World
• Rusty Hearts
• Jade Dynasty
• Battle of the Immortals
• Ether Saga Odyssey
• Raiderz
• Torchlight
• Legend of Martial Arts
• Heroes of Three Kingdoms
• Blacklight
• Star Trek Online*
• Champions Online*
• Neverwinter*

* Titles are offered through Cryptic Studios which is owned by PWE.

Perfect World Entertainment is doing better economically than Blizzard Entertainment and many of its games are out performing World of Warcraft.  It’s a sort of revelation that very soon World of Warcraft will go in competition with Asian companies.  There’s a historical short falling in America to buy from Asia because they are willing to work for less.  I think MMOs is a very easy transfer to this historical truth.  Literally American MMOs are going in competition with people who are giving it for free.

No doubt Blizzard adding on another free ten levels is an acknowledgement of who their real competition is.

We often look at games like…. Rift… and think this is the game that might some day replace WoW.  In truth Rift is an example of why the fremium model is looking more appealing.  When people saw Rift they thought it would be a game like Age of Conan or Warhammer Online which posted strong openings and diminished.

When launch day came for Rift sales were underwhelming.  I don’t think anyone expected Rift to perform as poorly as it did.  But as it eventually came to be known, Rift ended up being one of the worst selling games of the year.  Fans of Rift HATE to hear this.  I made a post stating that Rift had only sold 130,000 copies in it’s first month and it’s players simply would not accept that fact.

Compare that to say, Prius Online which is only six months old and celebrating it’s five millionth account. Prius Online isn’t nearly as good of a game as Rift.  It is filled with awful translation errors, mass punctuation where grammar ought to be and a traditionally bad broken Engrish.

Freemium Isn’t for Baddies

Freemium service is not made for baddies.  Freemium service is for great games that failed to attract an audience.  Most recently Age of Conan and DC Universe Online have both converted to mixed freemium services.  Each of these will let you know the benefits you would have gained had you premium service.  For DC Universe the reminder is there every time you vendor stuff.  It indicates to you how much extra money you would gain if you promoted yourself to premium.  On top of that it will tell you that you can get all of this money if you only convert to premium service.

Age of Conan has an option called rested days.  This will give you free levels for time spent offline.  When you log on next it will tell you how much extra XP you would have gained from logging on or how many extra levels you would have gained.  It’s very generous, 1 level per 2 days offline.

This model of business is more attractive to the casual gamer market.  It is telling you that you can play this game for free and have less… or you can take it easy and pay some dough for more.

The other thing these games offer that is huge is DLCs.  DLC stands for downloadable content.  The concept is simple, you will gain access to large clusters of content if you either subscribe to the premium service or if you purchase this content separately.  DLCs are generally fairly easy to make and will usually involve a few videos and a few levels or zones that are designed with a content customization model.

Many people feel that if Rift moved t o the freemium model they would have far more success.  They are producing so much content and getting so little for it.  They are sitting at a player base of 300,000 and producing content designed for a population of 2,000,000.

Will Rift feel the allure of freemium service?

Will WoW the last bastion of the subscription convert to freemium?

It’s doubtful.  At best WoW will continue to offer more free stuff to lure people into paying for a full subscription fee.

Many people have indicated that Star Wars: The Old Republic is going to be the last game that will have a subscription fee.  This is because freemium games are making too much money.  SWTOR was made based on a time where people were willing to pay subscription fees.  There are 80,000,000 people playing MMOs now.  Only about 20,000,000 of those are playing games with subscription fees.

Times are changing.

MMOs are Bad Investments

In a few months the most expensive game ever made (over $300M) will be released. It is none other than Bioware’s The Old Republic. I have no doubt that this game will be spectacular and well-liked by the public. But what has always shaken me is how people will pour so much money into MMOs… despite them being poor investments.

MMOs are Expensive

The first side of MMOs that makes them a poor investment is just how expensive they are to start up. Generally speaking with a successful venture you want to start small and build up. You want to pick up ideas that are low risk and high gain at best. So if an idea is low risk and low gain… it’s slightly better than something that is high risk and high gain.

MMOs are just that, high risk and high gain. You are looking to spend really big in hopes of gaining really big. Making an MMO means having access to venture capital. If you are a large studio like Electronic Arts or Activision it’s pretty easy to rummage the $100M budget that the average MMO is requiring. However, for everyone else gaining this venture capital would usually involve selling off a piece of the business or gaining large loans.

Getting large loans is very hard these days and especially for a video game. It’s not an industry that banks are readily investing in simply because it’s an unpredictable market. It’s a little known fact that when Blizzard was making World of Warcraft they were forced to sell a part of their company in order to gain the revenues they needed to finish the game. Of course it paid off in spades because the MMO market at the time was quite limited.

But in such a highly competitive market you almost need to have the game finished to get a loan from a bank. Getting a loan of course means that you will be indebted and have less income later for development.

MMOs Don’t Fail

In a fictional market place you have three competitors. One competitor is squeezed out of the competition by having poor sales leaving only two competitors. As the market grows many more people get squeezed out. The competitors prompt the more in the industry to try something new in order to squeeze people out.

MMOs (as it seems) don’t really work this way. When an MMO is largely unsuccessful it becomes a free game and approaches a different business model. There are so many people playing MMOs these days. Every free to play game out there seems to be boasting around a million players.

With all of the business failures sticking around and acting as a secondary competition it makes the market even more bloated. When Rift hit the scene I knew it wouldn’t have insane sales simply because Chinese were opening up more and freer to play MMOs every day. The market has become bloated specifically because bad MMOs don’t just die; people play them for free and keep them alive through cash shop revenues.

In a market where something is given for free it’s actually the new people who are looking to make money that are not welcome in the market. Economists and theorists have been saying this for years, however in the last few months this has been proven statistically true, and foreign aid hurts third world countries.

It’s simple.

Let’s say there are three bread businesses in Nigeria: Ben’s Bakery, Mahmud’s Bread Store and Johnny B’s Bread. After fierce competition the market price for bread is set to 1 naira (currency of Nigeria). After a year of all businesses surviving and being in business the foreign aid people show up and start giving free bread. The free bread might even be higher quality since its obviously Canadian bread. The customers of all three businesses are obviously going to choose to go for the free bread and spend their money on something else.

Essentially by providing foreign aid you are upsetting the balance of local economics and ruining the chance for local industry and commercial business to develop in the region.

The same is true for free to play MMOs, they are (for the most part) these ghosts of the past that haunt us today by making it much harder for new MMOs to come in and strive.

MMOs Have a Long Play Length

The average game has a play time of 120 hours. The average MMO has an average play time of 40 hours a week infinitely.

The tools industry is one with insanely limited competition. Tools are often held on to the life of a person. It’s only in rare instances where a person doesn’t use the tool for its intended purpose that it is broken. For this reason tools are very hard to sell and more often than not people have to invent tools or new functions for tools to even sell them. Companies that make tools stockpile them and so on top of them being very hard to sell them just sit there when they don’t sell. This makes this market insanely hard to get into and more often than not you’ll have more success pitching a concept to someone already doing it rather than trying to make a run for it yourself.

So in the same way with the vast quantity of MMOs that simply survive too long making a new one won’t add too much. It’s basically the same thing as making a new tools company.

Realistically you will make more money as a developer (for your time) by developing an idea and creating coding for an existing game and selling it to the developer doing it.

This is not like other games which are short term investments. You can make a million first person shooter games because the campaign for a first person shooter is maybe 40 hours of play time if you are slow. It makes sense to continue to develop games like this because under this model you are looking for box sales, not subscriptions.

Unfortunately people will only subscribe to one thing or the other. It just makes sense to join on with someone who is already successful in this market rather than try to work on some niche concept doomed to fail.

Once you buy that Mastercraft wrench you really shouldn’t have a need to get anything else.

Mass Internet is Here

One of the final ‘kicks’ to the teeth of the MMO market is the fact that mass internet games are now the standard. It made sense when mass internet was a foreign concept and sandbox games were few and thin, but both of those things are well too common now.

I have a Blackberry Torch. I like my phone. I like when I’m at work waiting on something to do that I can load up The Sims 3 and build myself a little family in a virtual neighborhood where other people are building families. I get this on my cell phone.

Fact is everything is mass internet these days. The old massively multiplayer niche that attracted people who could afford cable Internet is gone. It’s now out in the mainstream except instead of doing the RPG format that was popularized in this format they’re just making their normal games mass Internet. This has given people potentially too many options and devalued the MMO format.

Myself, I’m from a strategy background. So when Starcraft 2 brought on a very multiplayer heavy gameplay I was with it for at least a year. Every single game that comes out will be like this. Slowly the pieces of the pie that Blizzard entertainment was serving will vanish and the future of gaming will be found in what was popular before World of Warcraft.

Pandaren Monks and the Tween Demographic

At Blizzcon Blizzard announced the release of the Pandaren race and the monk class for the next expansion. The monk class is one that eventually made sense a hybrid melee healer who would be able to give World of Warcraft a strong link to Chinese culture (a place where World of Warcraft is booming).

The interesting thing is that the choice for the Panda race does not come with trying to increase their share in the Chinese market, but instead to increase its share in the tween market.

The tween market is one of the hardest ones to get to specifically because the tween market is the awkward one that is uncommitted to what it likes.

A Tweenie, tweener or “tween” is a person who is “in between” teen-age and childhood. They are a group of people who are attempting to look and feel more like teenagers yet unable or unwilling to let go of elements of their childhood. The most successful products to market this odd demographic by making a hybrid product that might appeal to a teenager.

A good example of a typical tween product is Pixar films movies. Many argue this is the success of the Pixar computer animation films. Here is a movie (Toy Story) which is so obviously made for children given that it is a story about toys in a cartoon format… and yet it has semi-adult themes and life lessons. It was a movie that swept the world and had massive commercial success. What Producer Steve Jobs (and 33% owner of Pixar) found was that if you can attract a product specifically for 12-year-olds you are going to gain a massive portion of untapped market. As an after effect what they found was that teenagers and adults who had not fully made that transition out of their childhood were buying into this semi-childhood market.

This is also why the iPhone, iPad and iTunes were such a killer success. All of the marketing for the iPod was designed around trying to convince this tweener market that they should buy into this (and through them everyone else). They did this by taking largely unknown bands (The Fratelis and Franz Ferdinand and mixing them in with well known bands (Jet and U2). They used silhouette dancers in the background doing dances that nobody in their right mind would do as a teenager in order to convince tweeners that this is what it means to be a teenager, owning an iPod. Future iPhone and iPad commercials would be done the same. Below is a simple illustration, pay attention to the age group that is doing the crazy dances (teenagers) and the simple color schemes that would appeal to a child:

Apple would market every single product they had as a toy for adults which gave a similar outcome as Toy Story, total capturing of the 10-12 market and large shares of the adult and teenager market.

World of Warcraft developers Blizzard are not stupid. They are aware of how to make a game and how to market it. By telling people they are looking to market for the 12-year-olds the only people they are going to upset are people who are already upset with Blizzard. In truth this move will increase their shares of the market across the board.

As more MMOs are being created they are all looking to capture that premium 21-35 market. That is the gamers who have a lot of money to spend and want to spend all of their time doing it. But as more MMOs are created that means the market is going to be far more clustered and it’ll be harder to make a buck. I’m sure Blizzard has noticed that the child themed Korean games (Prius Anima Online/Rusty Hearts) are those that are doing the best. While Blizzard boasts a 12-13 million subscriber basis these small and cheap games are swinging a 3-4M subscriber basis each… and these games are by no means mainstream or as well marketed as Blizzard’s World of Warcraft.

As the current 21-35 market ages they will be having children and families. Family-friendly games are going to be more appealing and the more casual the better. The pandaren monk is a perfect synergy of age and youth to trap 12-year olds into playing their brand for years to come. It is enough to convince parents that World of Warcraft is harmless fun and enough to keep a younger child interested in a game that is so massively dominated by adults.

So many people misinterpreted this news as them developing for an existing young audience. The truth is they lack a young audience and as the game ages they will continue to lose their player base. Cheers to the folks at Blizzard for proving that they are not an old dinosaur and are willing to make drastic moves in order to stay in a market.

It won’t make me want to come back to the game… but I see what you did there Blizzard.