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.
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:
- Game subscriptions;
- Game purchases;
- Licensing fees (I assume);
- Micro-transactions including:
- Character and guild services;
- 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?