Tuesday, March 16, 2010

Why a Long-Term Business Model is Difficult for Some Games

Consider multiplayer video games like Call of Duty or the Battlefield series, and pen-and-paper role-playing games such as Dungeons and Dragons. They both face a similar problem: After the initial publication of the basic game, which (if the game is successful, as these have been) sells a huge number of copies, there is little additional revenue.

Suppose all 400,000 people who want a copy of Battlefield: Bad Company 2 buy one. EA Games loves all the revenue this brings in, but now faces nothing but costs, possibly for years, as EA Games has to pay to maintain game servers (through which players connect, or on which players actually play the game together).

When Wizards of the Coast releases the fundamental Dungeons and Dragons rulebooks--the Players Handbook, the Dungeon Master's Guide, and the Monster Manual--the basic rules are now available to all players. The players and the game master/dungeon master/referee (or whatever you want to call him or her) can use their imagination to create adventures and characters to develop the rest of the game. Again, once the basic rules are released, the publisher brings in a lot of revenue, but after that it slows to a trickle.

In both cases, publishers try to find ways to sell more stuff to the players. Developers of video games release Downloadable Content (DLCs) or expansion packs. These are additional maps or new game modes that make gameplay more interesting and diverse. The danger of these for multiplayer games, however, is that they can splinter the player base. Only players who buy the game can play together; any individual player worries that if he or she buys the expansion pack or DLC, few other people will buy it, rendering the new content useless. Few people operating servers enable the additional content, because they do not want to limit the number of people that can play on the server. This coordination problem becomes a self-fulfilling prophecy: few people buy the expansion pack because of fear that few people will buy the expansion pack. Therefore multiplayer game publishers face a risk if they rely on DLCs and expansion packs to bring additional revenue. It is difficult for them to make additional profits from this content, so players may be stuck with stagnant gameplay.

Publishers of pen-and-paper role playing games also want additional revenue after the initial sales of rulebooks. This is usually done by selling "modules", or pre-written adventures (for those dungeon masters who don't have the time or imagination to create their own), as well as books detailing "campaign settings", the worlds in which the games take place (e.g., The Forgotten Realms, Dragon Lance, Eberron, Greyhawk, etc.). Again, these are only useful to gamers that cannot create their own settings. Publishers can also release additional rulebooks, which create new options for players (The Fighter's Handbook, The Bard's Handbook). Again, these are not necessary for players and dungeon masters with imagination, and they may not even fit the campaign setting being used.

In both cases, the result is lumpy income for the publishers: They get a big pile of revenue upon initial release, and then a small stream after that. Would it be possible to smooth this revenue over time? There are some possibilities, some of which are in use.

For multiplayer video games, the publisher can require that game servers be rented. This helps cover the ongoing costs of the game (developing patches and running any necessary central game servers), and allows the developer to more closely monitor and maintain the online game system. Another possibility is that the publisher could charge more for the initial game, but promise that the developer will release free DLC over time. Whether or not this works depends on the reputation of the developer. A developer like Valve Software could do this, as they have a long history of providing new free content long after a game's release. Publisher EA Games and the developer DICE, however, probably could not do this. They have a reputation for releasing buggy games which are slowly patched over time--sometimes there is free content, but often there is not (and sometimes gamers would prefer that the initial game be fully fixed instead). If this works, it does not smooth income over time, but it does avoid the coordination problem that comes with DLC and expansion packs for sale, allowing the developer to capture the revenue from their sale in the price of the initial game.

A final possibility for multiplayer games would be leasing, instead of sale. The publisher charges players a (probably low--maybe $5/month) monthly subscription fee for access to the game. The game gets upgrades over time. This makes the game much like a Massively Multiplayer Online Role-Playing Game, like World of Warcraft, except that this is a round-based action game, rather than a persistent-world role-playing game.

I think there are fewer solutions for pen-and-paper role-playing games. A leasing model would be difficult; leasing books is simply not practical. Leasing electronic versions of the rules is too susceptible to piracy. Charging a higher up-front fee and then providing free content isn't practical, either--the fee would have to be quite high to cover the costs of developing and then mailing out additional rulebooks, many of which would likely be of little interest to particular players and campaigns. Wizards of the Coast has instead revised the rules every few years, releasing D&D 3.0, 3.5, and 4.0. A danger with this, however, is that some players simply decide that the old rules were good enough, and therefore avoid the new books.

To summarize: Some multiplayer online games share lumpy revenue problems that are similar to those of pen-and-paper role-playing games. There are tools available to game developers to smooth this revenue over time, but pen-and-paper games do not have analogous tools available.


enigmatic said...

Have you looked at D&D Insider? It's an interesting approach to the consistent revenue stream thanks to monthly subscriptions. With DDI you get all the published rules to the game (only via search however), and some nice tools, like a character builder. Outside of daily articles which are consolidated into two pdf "magazines", no fluff. The books add value to the rules by allowing offline access, fluff, and a better presentation.

I don't know where WotC stands economically, but they're definitely looking at how to extend the revenue stream past the initial rulebook purchases.

Really enjoyed reading the post btw.

Mike Hammock said...

That's pretty neat. Do you get access to back issues of the magazine, too? A brief search suggests the subscription rate is $10/month. Is that correct? The basic rulebooks are around $30 each. A year's subscription to D&D insider would be $120, or twice the revenue of selling the three basic rulebooks--with none of the printing costs! (I have no idea what the bandwidth costs are, though.)

I don't play any more, anyway, but I'm still interested in the economics of it.

enigmatic said...

They offer long-term pricing, so 3 months is roughly $24, which is less than the price of a book, then a full year is $75, or the price of two books. Since they release quite a few books a year, if you want to stay current, then DDI is cheaper. Of course, there's nothing to stop you from getting a fully updated Character Builder, then canceling your subscription (all their tools are offline).

In all, it's actually a pretty good deal, and you can get away without any books with it.