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Is Blizzard Planning to Move to Free to Play?

Yes, I know I’m a bit late on this, but I’ve been busy this past week, so sue me.

“Recently” (putting quotes around that because what’s recent really depends on who you ask), an item was data mined from the PTR that caused a bit of a ruckus among the World of Warcraft community. The item in question is the Enduring Elixir of Wisdom, an item that increases experience gained from killing monsters and completing quests by 100%. Now, by itself, an item like this wouldn’t garner that much attention, except for one tiny, but important detail. Apparently, this item is flagged to be purchased from some sort of in-game store.

Now, we’ve had micro-transactions for a while now, I’m one thousands, if not millions, of players that have purchased vanity items from the Blizzard store. But this is different, never before have you been able to buy, with real currency, items to improve your gameplay, make the game easier, etc., this is the first non-vanity item Blizzard is, potentially, adding.

Does this mean Blizzard is going to move World of Warcraft to a Free-to-Play model supported by micro-transactions?

So, first off, the answer is basically no; at least not now, and not for North American and EU players (and players that play on these servers). CM Zarhym posted this tidbit about this magical elixir:

We are currently exploring the possibility of adding a way for players in certain regions to make purchases directly within the game. As part of this process, elements related to this will be appearing on the PTR. We’ll provide additional updates on our plans as development progresses.
Source

As I understand it this means the Asian markets, specifically Korea, where the players there pay per the minute basically instead of on a subscription based model. Given that they pay for every minute they play, it makes sense that an item like this would be introduced there, no?

But leaving it at that isn’t much fun, I mean, I’m barely 300 words in yet! So, let’s speculate a bit about World of Warcraft and Free-to-Play.

My usual disclaimer here: I’m not an economist, an accountant, a game designer, or anything that would really add credence to my musings here. I’m a gold blogger, that’s it. Well, and an engineering student, but that’s not really relevant.

How does Blizzard currently make their money?

Four ways basically:

  1. Game subscriptions;
  2. Game purchases;
  3. Licensing fees (I assume);
  4. Micro-transactions including:
    1. Character and guild services;
    2. Vanity items.

If World of Warcraft got moved to a Free-to-Play model, basically the subscription fees would go away, and Blizzard would get paid through the other three revenue streams.

How Much Does Blizzard Make off of Subscription Fees?

That’s hard to pin down because as mentioned in the first part of this post, not every player pays a month-month subscription. Another issue, albeit much more minor, is that the average a player spends per month varies depending on how far ahead he/she buys their time, and what region they are in (I assume EU players don’t pay based off the USD).

But, assuming every one of the game’s current 8.3 million subscribers (as of the report released by Blizzard in May) paid in six month batches and therefore paid an average of $12.99 USD per month. Again, this assumes the subscription rates in other regions are similar. I don’t know if they are, but this is just some napkin math, so lets roll with it (and that’s also why I took a conservative estimate of the monthly fee).

If 8.3 million players are paying $12.99 every month for the privilege of logging into Azeroth, then Blizzard’s income from subscriptions is $108,000,000, gross. That’s right, that’s one-hundred and eight million U.S. dollars a month, or $1.3 billion.

According to the earnings report from Activision Blizzard for the three month period ending March 31, 2013, their net revenue from online subscriptions was $275 million. Now, that’s net, and it might also contain revenue from any subscription services other than WoW Activision Blizzard owns (I don’t know of any others, but there might be), but this figure gives a monthly net profit of $91.7 million dollars, so my estimate of gross revenue in the area of $108 million can’t be that far off.

What this means is that if Blizzard dropped their current subscription based model and moved to free-to-play, they’d have to find that $108 million a month elsewhere (and then some, because if they just drew even they probably wouldn’t do it).

How Would They Make Money With Free-to-Play?

Basically the idea is that instead of making money off a fixed subscription, Blizzard would use the revenue off things like micro-transactions and licensing fee to support the game. So instead of paying for your server use directly, you would be paying when you caved and bought the latest sparkle pony, or whatever items Blizzard would put in their store.

If Blizzard did move to this model, we might see more potent items, like the aforementioned elixir, making its way into the Blizzard stores. I doubt we’d ever see things like gear or weapons in the store, at least not ones more powerful than what you could get for free, but we could see a lot of quality of life improvement items being added to entice players to spend more in their store.

Theoretically when the game moves free-to-play the player base would increase, I know many people who don’t play because of the subscription fee, and I’m sure you know such people too. A surge of new players would mean more players to support their micro-transaction model; more players buying sparkle ponies, more character services, and more people buying the actual game (assuming they decide to charge for the actual game and expansion packs still). I also suspect there’d be a bump in licensing revenue as more players are exposed to World of Warcraft and deck themselves out in swag (I know, I can’t believe I said that either).

Will Blizzard do It?

Honestly I don’t think so. They still have a stupidly huge subscription base still (they have what, more players than their next top 5 competitors combined?) that are paying their subscription fees, and giving up that revenue will sting, a lot. Plus, they’re already making loads of money off the in-game store (I assume) and character services, so they really have the best of both worlds here.

World of Warcraft is in no danger of dying, so why fix that’s not broken?

About the author

Eric Dekker

Gamer. Student. Nerd. Author of The Golden Crusade. Find him on + and Twitter.

12 comments

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  1. philip wing

    Did you see how much screaming was going around when recently Blizzard announced losing one million subscribers. They didn’t publish their revenue average, but the analysts still freaked out anyways. At least one blogger remembered you got a free copy of Diablo 3 for a one year subscription.

    1. Eric Dekker

      I’m one of those people that got a free copy of Diablo 3 :D Barely touched it though…

      I realize WoW is down almost 4 million players since it’s prime, but you got to think about it this way: Blizzard loses more subscribers in one quarter than any other game would drool over having at it’s prime, and WoW is still going strong.

  2. Jojo

    I don’t think they’d ever go F2P personally – well not whilst the game remains as successful as it is! Yes its not at it’s but there’s still a heck of a lot of people playing and ultimately a lot of money in it.
    If it did go F2P and the content availability remained the same then I would probably buy more from the store. However, if content became gated and you had to pay to access it I’m not sure how I’d feel about continuing to play. I know people who have fallen into the trap of F2P games and spent more in a week than on a quarterly WoW subscription!!

    1. Eric Dekker

      Agreed, there’s simply too many people paying subscriptions right now.

      Have you ever played Team Fortress 2? You know how many people spend money on hats and other vanity items? It’s nuts.

  3. Greystache

    I really hope WoW does not go F2P. I’ve tried several F2P games, but you might as well spend 20 bucks to get anything good in the game. I seriously wish there was no blizzard store for mounts and pets. I’ve played for at least 4 years, and I think its unreasonable for blizzard to ask me for more money to get stuff in game. If they sell items like the xp boost elixir, how long will it be before they start selling actual gear items and gold? Also agreeing with Jojo, gated content would be terrible, I think that’s what swtor does, but I’ve never played it.
    The only F2P model I like is what LoL does, you’re not required to pay real money for any game play aspect, but I bought a skin because I thought it looked really awesome.

    1. Eric Dekker

      Have you ever played Team Fortress 2? It’s even more free to play now (well, this happened a while ago I guess). It never had a subscription fee, but now the actual game is free too. I think Team Fortress is a good free to play model, though I haven’t played in a while it might have changed.

      1. Greystache

        Yes, I bought TF2 a couple years ago when I had roommates that played. I thought it was strange how you would get locked crates and had to buy keys with the chance of getting garbage. There’s some crafting in the game, but I never got into it.

  4. Hagu

    I think the Asia question is bigger than you indicated. I.e., we do not know how many of the 8.3 are in Asia, but in a number of those countries you can not be a subscriber yet spend a couple of dollars and count as a “subscriber” and be part of the 8.3. For example, if Bliz added 400k Western subs and lost 600k Asian subs, then the number would drop by 200k yet Blizzard’s revenue would increase.

    So an unknown % of the player base ( I have read estimates of half ) are in places where $13/month is not directly valid.

    Nor do they have to find the current revenue. I.e., if the estimates are that due to competition, especially f2p, that revenue will decline 10% per quarter for X quarters then you start to consider f2p when it is estimated that it would perform better than the sub model estimates. What do they think the 108 will be in Dec ’14: 70? 54? 27?

    I think times are changing; a mandatory sub was a very good thing in 2006. I think it is worse to be sub in 2013 than 12 and worse still in 2014. All the other conversions had revenue increase so I would not be surprised if Blizzard could achieve that as well.

    Yet i still can’t imagine the uproar if Blizzard were to update its business model. Certainly you would not create a new game with this business model. Yet it may be too ingrained in WoW to be fixed.

    1. Eric Dekker

      Well just because they pay differently than us, doesn’t mean they pay less than us on a monthly average. However, I didn’t find any information about what the breakdown of subscribers is, so I just had to assume everyone was paying $13/month to give us a ball park, wasn’t meant to be a specific calculation.

  5. cracklingice

    It is my hope that they drop the level requirement so that it is usable by all levels and that this item never gets a BOA or BOP restriction and that it is used to be the next Guardian Cub.

    1. Eric Dekker

      That would be neat, there would probably be a huge demand for these if they could be sold in game

  6. Pedro

    When star wars mmo came out they mentioned they were studying an environment in which wow would not have a suscription fee. There are several new mmos whith high quality content and other services like xbox live and ps network that had been taking wow off the spot light but i agree wow is still strong and its main competitors are not taking it down. So i think they are just reinforcing their micro transaction by adding new types of items and increasing their conversion rates with in game purchases while they can still enjoy the suscription fees and if someone makes them drop the fee to keep in market, well, they will be better prepared to embrace a new business model.

  1. Group Quest #123: When everyone has Enduring Wisdom | Group Quest

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