Bruno Fucci Mori
06/20/2005
The Economics and Marketing Strategies of Massively Multiplayer Online Games
Starting with the old Arcades and continuing with games like Space Invaders and Pac Man, the economics of videogames and its marketing strategies have improved for the better. The capitalist world wants to make a profit out of it. In Arcades, the idea is to have the largest quantity of quarters or tokens inside the machines. The game industry’s main objective is to sell as many games as possible. On other games also the idea is to sell and extract until the last line of programming from the affectionate gamers. New marketing and economic strategies in sales, advertising and promotion are the answer for the online game industry today.
In 1985, there was a market crash for the videogame industry. As a result, many games were not able to make a profit. Fortunately, the market is almost fully recovered. But, this recovery pales in comparison to the videogame’s “Golden Years”. Since I heard that Japan didn’t have enough coins to supply the Arcades, I realized the power of many today’s companies can never be compared to Atari. Like most things, games can be a big hit or a big sink. In the past, most game companies couldn’t fix their ships. As a result, they went to the button of the sea at the end of 1985.
Many games still use the produce and sell strategy, especially games that don’t have a multiplayer feature in it. This is strategy is not a bad thing. Lots of profits can be made using this strategy. A number of console games use this strategy and are very successful. In my opinion, this isn’t the best way to sell a game. But, it is the easiest and fastest. If it works with groceries and other common goods, it should work with games as well.
Today with the immense power of the Internet, PC game companies’ marketing strategies are turning to the Internet. When you have something online you always have to beware of hackers and cheaters. Cheating is a really big issue for all online gamers. As a result, games and servers have to always be updated.
The most common way to get a profit on online games is simple. Banner ads can be put anywhere, starting from the game’s website continuing beyond its chat rooms. The problem is that banner ads aren’t that profitable as compared to other strategies that game companies can use. In many games, like Warcraft III from Blizzard, banner ads are on their chat rooms. While players are waiting for a game, they can watch the banner ads and sometimes gamers may click on them. On games that reach more people banner ads may be very profitable because banners are priced by its page views or hits. These banners can even be a promotion for other games from the same company as well as other related gamming goods like fast DPI mouses on first person shooters websites.
The advantage of banner ads on game’s related places is that, companies can target the public very well. They know who is playing the game or what they want and need. The demographics of a specific game are easy to describe. However, there was a change that was made not so long ago that caused some problems in this area.
Ratings were created for videogames. The market of videogames was really harmed because of it. For example, a game like Grand Thief Auto cannot be sold for audiences under the age of 17. As in movies, the higher the rating, the harder it is for the young public to get access to it. Companies are always trying to get their ratings as low as possible. But, it is hard since laws that protect children are always being put in first place. Even though, the possibility of a “big brother/friend” buying games for an underage person is high. Games sales are really harmed by when the ratings are too high (ESRB).
Advertising may still be the best answer for marketers in the game industry. Sports games may use banner ads placed inside the Stadiums or on the team’s jersey. The main problems that companies face from banners is that they are annoying to people. Not only gamers, but all Internet users are tired of banners and pop-up ads. But the good thing about these banners on sports games is that they are not annoying. They are placed on the same places that other ads would normally be placed on, just like during a real sports match.
If banner ads don’t obstruct the flow of the game, they can be placed anywhere. Today, game companies’ slogans always talk about reality inside a screen. Real life is full of ads and brand names. If they have placed a coke can instead of an Acme branded soft drink it wouldn’t influence the flow of the game and it would make it more real. Since Dragon’s Lair, many games are more like a movie than a game. Playing a game is like watching a movie. Game companies should use the same advertising strategies that movies used to put brand names on the big screen.
Sponsorships for game teams or tourneys are also a good way that game companies can promote their games. Large tourneys like the CPL and WCG can become international with heavy purses that are not less than thousands of dollars. Game companies can promote their products placing ads around the “game arena” by sponsoring the tourney with computers or prizes. Also, they can have booths at these tourneys where direct marketing can be made. The public can be targeted very well. If it is a Counter-Strike tourney, promoting first person shooters only, would be a good strategy.
Besides advertising and promoting, there are some new strategies that can be used to extract the very last penny from gamers. Some games like World of Warcraft also created by Blizzard, requires that all its players pay a monthly fee. The advantage of a monthly fee is the guarantee of a good service. World of Warcraft is always updated to get rid of cheats and bugs. Also, included are updates with new items and features. The server’s latency is also good. The problem with this strategy is that some people don’t want to pay two times for one game. Players will have to pay the monthly fee plus the game it self which is $26.88 for two months and $49.99 for the game (Blizzard). Also, World of Warcraft reached a record of 2.000.000 subscribers on June 2005 (Blizzard). But, the monthly fee will create monetary barriers for low income gamers. Also, common gamers may not want to pay for it. If a different strategy was used for this game, I am sure that a new record would be easily achieved if all players on pirate servers were added to the official server.
Pirate servers may emerge when monthly fees are applied. These servers usually have fewer players than the main server. But adding all the pirate servers can create a high percentage of the main server. Of course, the quality of the pirate servers are not the same as the main one, but still some people that doesn’t want to pay a monthly fee will want to move to a free server. My friend, who plays on the main server is always telling me to buy World of Warcraft, but I don’t like to spend any money besides the game’s CD itself. Therefore, I would definitely go for the pirate server. RPGs are games that I like to play from time to time. World of Warcraft is one of the best RPGs ever made, but the monthly fee makes World of Warcraft just another game in my CD case. On the consumer side, pirate servers are terrible. Pirate servers may have rollbacks which are a reset of the server. This means that all characters may be erased. Imagine that you worked on a character to reach a high level one day and the next day, it is gone.
While discussing about erased accounts in RPGs games, violence in games should be mentioned. There was a case that a young boy committed suicide because his hardcore character on Diablo II Lord of Destruction died. Hardcore characters cannot be resurrected and all items as also lost when the character dies. I think it is a big loss for someone that spent hours and days playing the game. So, will an increase in profits for companies result in an increase of violence in videogames? Some other games like The Sims Online also required a monthly fee. The Sims Online was the biggest mistake that Maxis, today EA Games have ever made. Nobody was playing the game.
Another strategy that game companies like to use is the virtual money idea. There are many good games like Gunbound that are freeware online games. The graphics and game play are pretty good, as compared too many paid games. If the companies wanted, these games can be easily sold in stores as other games, but the marketing strategy of those companies are different. Softnyx the company that developed Gunbound is growing everyday. The company has franchisees in many different countries including Singapore, Korea, Brazil, Thailand and the U.S., with many players in each of them. Of course being a free game with quality, everyone will want to play.
Softnyx can profit from advertisements on championships and events. But most of its profit comes from “Cash” sales. Cash is a system that allows players to buy with real money items from the game. In the beginning, nobody wanted to spend money with Cash, but today, about 75% of the players have at least bought cash once (Softnyx). Cash also allows players to buy a “Power User Card”. This card allows card holders to have their game on the top of the list, more gold in each game and unlimited kicks. Because, there are many players online at the same time everyday, having your game at the top of the created game list will result in you not having to wait long time to play a single game (Softnyx).
People usually spend Cash on “Power User Cards” that needed to be revalidated when expired because the maximum time you can buy it is for a month. These cards work as a hidden monthly fee that players pay. Given an advantage over other players, this hidden monthly fee works in a different way from World of Warcraft Because of the amount of cheaters and bugs in the game is large, the game is a freeware. However, Gunbound has just released a new version of the game Gunbound WC (World Champion) that has better graphics and new features. The new version fixed lots of bugs and hacks, but there are still ways to hack into the game (Softnyx). The good thing is that players forget about the problems because they know that a real monthly fee may be applied if Softnyx invest lots of money to improve the service.
Also, I played a game called HoverBoard ASDF. It was a race of Hoverboard (futuristic skateboards), it looked like that they were planning to use the same strategy that Softnyx is using right now, but before the strategy was placed, they went out of business. The company didn’t actually tell the customers the reason that the server was closed. I am pretty sure that they thought nobody would like to buy their “Cash” because the game was not good enough. No matter what strategy you use, if the game’s quality isn’t good, it will sink. After all, I think this is a good marketing strategy for online games especially because piracy is one of the biggest problems.
One joke that I like telling to people is “Q: What is the thing that everyone has in common? A: The Office’s serial number”. Getting away from piracy is the biggest priority of game companies. Laws that enforce piracy of games and software are not enforced so much. The number of things that are pirated is huge. From MP3s to Windows XP, home users always have at least one pirate file on their computer. This is one of the reasons that I think that the “Cash” strategy may revolutionize the online game market. But, the problem is that this system may not apply to all game genres. Due to the large number of pirate games, the number of games sold comparing to the number of players online in the server may not be equivalent because many people download the game from a Per-to-Per server or burned from a friend’s CD. Also, it is very cheap to buy a pirate game in many countries (Software). For instance, Brazilian black-market pirate games CD retail around prices as low as $15.00.Even though the charges for pirating a game are high, people still take a risk because enforcing companies usually targets the businesses first.
In the future, I think that this Cash idea may be the most used in spite of the lack of companies using this strategy. Banner ads can be also a solution for companies, but they cannot be annoying and they have to be effective for game companies. There were some games that had monthly fees like the one time famous Ultima Online, and the still popular, World of Warcraft that were a big hits. However, I think that monthly fees are something that will not be used after a while. The regular way of selling games with the produce and sell strategy will always be in the market especially for non-online games.
Blizzard Entitlement Inc. June 2005. 18 June 2005
ESRB Entertainment Software Rating Board. 2005. 18 June 2005
<http://www.esrb.org/esrbratings_guide.asp>
Softnyx.net. 2005. 18 June 2005
www.softnyx.net
Software & Information Industry Association. 2005. 19 June 2005
www.spa.org/piracy