Monday, August 6, 2007

Seven Ways To Make Money From MMOs

I just came across an amazingly handy list
of ways that online worlds make money, as compiled by Canadian game
developer Adrian Crook. His guide is limited to MMOs which are free to
play, so it doesn’t include subscriptions, the standard since 1984,
when CompuServe began charging $12 an hour to play Island of Kesmai.

While World of Warcraft dominates the subscription model, there’s
been a quiet-but-steady movement away from it; now developers employ
everything from Subscription Tier (play some for free, subscribe to
play more), to Merchandise/Expansion Packs (buy the related toy/game at
retail, play online free), to third party advertising (play for free…
after these words from our sponsors.)

On a hunch, I compared the Crook list to GigaOM’s Top Ten MMOs,
added WoW, and tallied up the users in each model. What follows are the
seven most popular revenue models for online worlds, in terms of total
number of users in each. The results, as they say, may surprise you…

  • Advertising Deals: 14.5 Million
    (Habbo Hotel, 7.5 million; RuneScape, 5 million; Gaia Online, 2 million)

  • Virtual Item/Currency Sales: 10.2 Million
    (Habbo Hotel, 7.5 million; Gaia Online, 2 million; Second Life, 500K; Puzzle Pirates, 200k)

  • Subscription: 10 Million
    (World of Warcraft, 9 million; Lineage I/II, 1 million)

  • Subscription Tier: 9.2 Million
    (RuneScape, 5 million; Club Penguin, 4 million; Puzzle Pirates, 200k)

  • Merchandise: 4 Million

  • Expansion Packs: 2 Million
    (Guild Wars)

  • Virtual Land Sale/Use Fees: .5 Million
    (Second Life)

As you’ll notice, several MMOs use more than one, and there’s a bit
of fudging, for simplicity’s sake. (For example, World of Warcraft does
make money through initial retails sales, though its dominant revenue
source is still monthly subscriptions.) And as always, I welcome
corrections. But the above is, I think, more or less a fair read of the
MMO market in the upper tier.

Seen this way, one point jumps out: just 10 million MMO players are paying mandatory subscriptions, while about 27 million players
are paying some other way– or not at all. Looking deeper, another
point: most of the non-subscription MMOs are aimed at teens and kids,
which is why the subscription model is probably on its way out. If you
want know which revenue model will rule in the next five years, look at
the MMOs that 13-17 year olds are playing now, and assume they’ll
expect to pay for future worlds in a similar way, when they get their
own credit card.

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