The Economics of Hardware Requirements

September 4th, 2009 No comments

There are two main categories of games, based on their hardware requirements. There is a category of games that require souped-up Alienware machines that are constantly upgraded, showing the user the most realistic and technically advanced graphics and sound possible. And there is the camp of games that use lower-end graphics and sound, but work on any dinosaur made in this century (and sometimes even older).

I started EverQuest in late April 1999, shortly after its release. When the Shadows of Luclin expansion was released in December 2001, it caused me and a number of my friends problems. We found that our current hardware was unable to run the new expansion without significant performance problems. This meant that we had to all either pay for upgraded hardware or quit the game. In effect, it added about $200-300 to the cost of playing the game in addition to the monthly subscription fee. Many others simply quit and went to another game.

There are many people who will gladly pay the extra hundreds to play (and sometimes keep playing) the latest graphic-intensive games. The problem is that this group of people are generally limited to younger people with sufficient discretionary income and free time. There are millions more who have families, bills and mortgages to give their time and money to. The other problem is that it is extremely expensive to develop these games, frequently approaching the cost of producing a feature film. That combination leads to lower profits and even losses for most.

The pushback on this game model is increasing, in favor of the “anything thrown from the back of a truck in the last five years” model, as described by Dana Massey (and also discussed by Richard Aihoshi). One of the reasons World of Warcraft became so popular is because a computer with any video card, motherboard, reasonably minimal memory and an old copy of XP will run it fine, even on an ancient dial-up connection.

As people lose more jobs in this economy, less of them will have an extra $100 to throw at an upgraded video card to play a game (and realistically, what other reason is there to ever upgrade a video card?). Many won’t be putting money into increasing RAM and getting faster motherboards either. I don’t see the economics working out for anyone wanting to release any new graphics-intense game without also having a very strong pre-existing consumer base.

Another angle is how the ubiquitous browsers are becoming even more ubiquitous with smartphones, netbooks and Google’s desire to use the Chrome browser as an OS. These new, cheaper netbook computers won’t be able to run any of the games that require special graphics cards, but they will play any Flash or Silverlight game. Why raise barriers to playing that may deter paying customers?

The growth and the profits are in games that anyone can easily learn and play for cheap, but have a hidden complexity that keeps them coming back for more. Take the simple game of Rock, Paper, Scissors. It is easy enough to teach to a young schoolchild in minutes, yet has international competitions (and yes, even has a unique F2P Facebook version called StripPRS). It does not require an souped-up video card to enjoy.

The future of gaming is Free-to-Play games that have low barriers to entry, including low hardware requirements, easy to learn, and no commitment/subscription, which is why they are growing like wildfires in Los Angeles.

Soccer/Football Flash Games

Here are a couple flash games from Ultimate Soccer Boss (USB), an MMO soccer/football manager game that I manage. Ultimate Soccer Boss is the first free-to-play soccer/football manager browser game that evolves your team players with Digenetics’ Evolution Computing technology.

The flash games presented here are a sample of the “training games” available in Ultimate Soccer Boss. When played from within USB, you will be helping to increase the training and evolution of one of your players. This will help your club compete against other clubs in instant training matches, league matches and cup tournaments.

Feel free to try the games out here, though playing them outside of USB will not affect your soccer players. If you want to embed these games and others from USB, the embed code is available from within USB.

Ultimate Soccer Boss Ball Control

Ultimate Soccer Boss Attack

Categories: MMO Games Tags: ,

Immersion and User Interface in MMORPG Games

A constant challenge with MMORPG games is the question of immersion. Immersion is a critical part of MMO games, particularly MMORPGs, leading them to use the latest graphics engines, sound engines, etc. The player wants to become part of the game world and escape the real world during their game sessions. If the user has difficulty with the interface (i.e. the key commands, mouse movements, etc. required to operate the game), game world immersion becomes very difficult or impossible, regardless of the video and sound capabilities.

The best way to achieve an interface that allows the best immersion is to make it highly customizable. Different games use different keyboard commands or mouse movements to achieve basic movements. For example, many older Asian games such as Deco Online and Dungeon Runners only allow the use of the mouse to move your character. It is not possible to use arrow-keys or WASD to move your character. American and European games generally don’t support the use of the mouse to move, favoring exclusive use of they keyboard.

In more recent times, Asian games have become more flexible. For example, Perfect World, Jade Dynasty,  and others have added basic keyboard commands to movement and other UI interaction in addition to the mouse.

Runes of Magic is a very good example of not preventing the user interaction from interfering with immersion. It allows you to use the mouse to move around while allowing you to use they keyboard for the same thing, which goes the further step that American and European games tend to go. The user can highly customize the key mappings for nearly every command to whatever the user wants. Aion: Tower of Eternity is another excellent example of a game using this idea.

This level of UI customizability lets the player use the muscle memory they have previously developed in other games without having to fumble around the keyboard and mouse in the heat of battle.

Casual players won’t want to bother with customizing their UI, so it is important to also keep in mind what other games are using for their basic commands. Most games allow both WASD and arrow-keys, for example.

Some may wonder about the additional cost associated with adding this customizability. Compared to the cost of developing the rest of a game, it is a very minor cost. The cost is in providing an interface for the player to do the customizing. The actual implementation expenses of adding customized key commands is nearly non-existent if it is planned in properly at the beginning of the project. It is simply a matter of using a variable for each key and mouse command, instead of hard-coding them.

As competition in the games industry heats up, I expect more games to follow Aion’s lead in giving players the option to highly customize their interface for the way they like to play. The game can be easily adjusted to fit the player’s style, instead of the other way around. This will lead to greater immersion and the player can better focus on the gameplay. Gameplay and the virtual worlds envelop the player when the interface used to deliver and interact with the game are “forgotten” in muscle memory and the background of the mind.

Measures of Success: Game Audience vs. Revenue

Over the years that the web has been mainstream (from about 1995 to the present) Internet companies have been fascinated with large audience numbers instead of traditional revenue figures. They believed that if lots of people came, then lots of people would pay (or advertisers would pay for them). The problem, as we learned in 2000, is that companies can’t pay office rent with eyeballs.

Unfortunately, I see game companies doing this as well. For example, a recent article on the rise of online games over console games discussed only the rising audience numbers with online games. Though I don’t argue against the premise that online games are rising in popularity compared to console games, the article seemed to ignore the big question of revenue. Console games have proven revenue, since the user needs to pay for the game to play it. Most Free-to-Play online games are not that way.

With the advertising industry collapsing wholesale and consumer spending down in most sectors, more online games (both F2P and subscription) are finding themselves struggling for air. Microtransactions are still in a relative infancy and larger percentages of players are holding off on buying more Gold, Points, Rewards, etc. Most of the F2P games are monetized by advertising with a minor (though growing) microtransaction component using either real money or CPA ads.

A lot of F2P game companies are now learning what the rest of the web industry learned in 2000 (and subsequently forgot). Eyeballs do not equal revenue. The Average Revenue Per User (ARPU) is the critical component to viability and success. In the past, the rule of thumb was 10% of users become paying users. Now I think that number is dropping significantly. I wouldn’t be surprised if more games are doing 5% or even less paying users. Unfortunately, such numbers are super-secret to each company.

As the economy recesses further, many companies that relied on eyeballs, registrations, audience size, etc. will be finding themselves without a revenue base to pay the bills and payroll with. This will cause an even greater shake-up in the industry than we have seen thus far.

This does not mean the end for gaming is coming, just as the dot.bomb crash did not kill the web. It means that our industry needs to focus on how to provide value to players that they are willing to pay for, instead of hoping that someday they will pay. Bubbles are founded on the hopes of future revenue, hopes for future ARPU. True growth is based on a foundation of current profit and incremental future growth.

Niche games based on a common platform are the future. A number of companies have worked on developing a platform that can be used for many different games. Make a niche game that pulls in 2k-3k paying users with a solid ARPPU (Average Revenue per Paying User) and a profit can be made provided development costs are kept in line. This would mean 20k – 30k active users, if we wanted to assume a 10% paying user rate which is common. The masses want everything for free. The costs involved with getting 1M active users (100k paying users) is becoming more difficult to cover.

Don’t try to make a blockbuster for the masses. Make a tight, focused game that can be developed to a beta stage in 2-3 months, released after a month testing, market within the designed niche and start making revenue. Use cheap pre-release marketing and buzz to gauge interest and market viability so that if the game has a low chance of success it can be canceled before all development and testing costs are incurred.

Once a base game is released, use the initial revenue to expand the game if justified. If the game flops (as Pareto’s Law of 80/20 says will), kill it and move on to another game. Only a maximum of 3-4 months of expenses are lost (instead of years with blockbusters). That leaves the company with enough capital to live another day with another game.

Remember the lessons of the dot.bomb. Active users alone do not make payroll. Only paying users pay the bills and the hosting costs. Find niche markets who are focused enough to be willing to pay for the game. When online game companies focus on that, the industry will recover.

The Rise of Microtransactions

Microtransactions have been discussed for many years as a way to monetize content. Unfortunately, the reality has not lived up to the hype and promise. Until recently, that is. Games have been slowly replacing porn as the innovators of the Internet. One area they have made great innovations is in the promised land of microtransactions.

The idea of microtransactions was originally to pay very small amounts ($0.05 or so) to read an article or some piece of content. This would be done on credit card. The trouble which has plagued that model is the transaction and processing fees assessed by the credit card companies. For such a small transaction, the processing fee is more than the transaction amount.

MMO Games (and later, other online games) have developed a great way to do this, without the problems of processing fees eating up all revenue. Virtual currency. For example, a player buys $10 or $20 of virtual currency with their credit card and then uses units of that virtual currency to buy items for small amounts like $0.05 or any other amount.

A significant benefit of using virtual currencies for microtransactions is that users don’t necessarily need to pay with cash to buy the desired content. CPA (Cost Per Action) advertising is doing well in the games industry as a supplement to cash transactions. CPA ads allow people to complete actions, like surveys, subscription sign-ups, or buying another product or service from the advertiser, to earn virtual currency. The user’s game account is credited with a stated amount of virtual currency after the action is completed and verified. The advertiser pays the game publisher only for the completed action.

This model of advertising works very well and is replacing old banner and interstitial ads in gaming sites and ad-supported Free-to-Play games. Advertisers like it because they only pay for conversion results. Game publishers like it because the resulting payout is much higher because of the increased value of the ad display.

It took over 10 years for microtransactions to really develop into a working revenue model outside of isolated sites. Now virtual currencies have grown into a real force, large enough that the Chinese government recently passed new laws restricting their use. They are concerned about virtual currencies being used to trade in real-world goods and services or gambling, all avoiding the reach of tax collectors. I’m sure this type of legislative change will be seen in other countries too, as their tax revenues decrease due to the economy and virtual currencies rise in prominence.

The microtransaction and virtual currency model has become such a success, fueling the fast-growing Free-to-Play game industry. As this industry develops further, probably replacing the old subscription model in most games, I see the virtual currency model appearing in many other industries. Newspapers, magazines, blogs, shareware, and any other type of digital content can be paid for with virtual currencies.

It will be exciting to see the new innovations that will revolutionize the digital goods industries and bring the virtual currency model to a new level, realizing the promises originally advertised with microtransactions.

Future of the MMO Game Industry

Like all industries, the MMO game industry follows the business cycle of innovation, saturation and maturation. There was a grand period from about 1997 until 2004 when new MMOs were released with consistent improvement and innovation driving the industry growth. This innovation peaked with World of Warcraft in 2004. As WoW made ever more money, many other games (too many to count) were released as essentially WoW clones with a slightly different story, marginally different graphics, and slight twists in the gameplay.

Many of these newer games did make money, but it was as a result of the growth of the MMO gaming audience, characteristic of a new industry.

This changed in 2008,  as it became obvious that the innovation saturation point has been definitively reached. Games started collapsing on themselves as they lost (or failed to reach) the required critical mass for success. The much-hyped Tabula Rasa was shutdown after a very short life. Other games like The Matrix Online and Shadowbane are also belly-up and formerly subscription-based games like Dungeons and Dragons Online are changing to a Free-to-Play revenue model.

As 2009 progresses, I expect to see a number of other shutdowns of large games along with even more smaller games.

So what is the future of online gaming?

Here is what I as the future of successful MMO games:

  1. Focus on the casual gamer. Many people are completely engrossed in their games, playing many hours each day on them. But there are many times more people who would prefer to play a game for a short time when they get a chance. The potential audience is much larger when a game can be enjoyed for as little as 15-30 minutes and does not require daily play.
  2. Free-to-Play. Casual gamers are not willing to pay a monthly subscription fee. Many of them may go for a month or two playing very little or without playing at all. Additionally, people are reducing their monthly expenses and game subscriptions are one of the first to go. When a game can be enjoyed for free with in-game enhancements purchased when they feel the need (or have the cash), it opens itself to a much larger audience. MMO games require a critical mass of people. People have more fun in an MMO game when it has a lot of people playing and will be more interested in purchasing from the cash shop when they are having fun. This means that even players who never pay a dime for an MMO still bring value to the game by attracting and retaining paying players.
  3. Niche games with unique gameplay. Not everyone wants to play WoW. Not everyone wants to play an MMO that features characters of different races and standard classes running around a fantasy (or sci-fi) world killing beasts for loot. Many people love this type of game, but not everyone. I see games with unique gameplay coming out of this industry shake-down. After playing games for 10 years, they all start to look and act the same. It is time that different ways to play are developed.

These changes will lead to a time of new innovation and a new business cycle. It will cause a lot of new startup companies to be created, as true innovation is very rare in large established companies due to shareholder demands of consistent profits. Many of these will fail, but there will be a couple that will rise above the ranks and be able to produce free-to-play niche MMO games. Look at the Facebook and MySpace games that have come out in the last year.

I see successful MMOs being produced by companies that create a game development platform allowing them to produce many smaller games that will, together, make the companies successful (Zynga is a good example).

It will be very interesting to see and play these new games.

Categories: MMO Games Tags: , , ,

The Face of China

One of the top things to understand about Chinese culture is the importance of “face.” Though reputation, or “face,” is important in the US, it is much more important to Chinese. For example, if a project is experiencing problems (as they sometimes do), a Chinese developer might hide the extent of the challenge to save face. They might say that there is a small delay, but not explain the extent (which might be long) or the reason for the delay in detail.

There are a couple ways to handle such things. One is to become very authoritarian and demand detailed explanations for the delay. Shaming them can be an effective motivator if you need them to work late, work weekends, etc. to get the project back on track, as it can reduce their face which they want to avoid.

Another way is to handle it more delicately by emphasizing how you’re working together with the Chinese developers to please someone else, the client. You can remind them how you both need to look good to the client and that any delays in the project need to be discussed. That will allow you to explain to the client in a way that saves the most face for everyone.

There are two types of face in Chinese culture: mianzi and lian. Mianzi refers to the prestige and authority a person is viewed by others as having. Lian is the view society has of a person’s integrity and moral character.

For example, to avoid causing a loss of mianzi, Chinese will avoid bringing up embarrassing facts in public. Sometimes those embarrassing facts might have an influence on the progress of a project, so the developers will avoid mentioning them. If you sense that something like this might be happening, you should talk privately to one of them and tell them how it is important for the project’s success that you know.

To illustrate the role of mianzi in Chinese culture, there was a big mistake made by the development team in a project we worked on. The client asked for a specific database software to be used, but instead different software was used. The Chinese project manager knew how it was supposed to be done and thought it was done correctly a few weeks earlier, so he was surprised when he found out it was not done correctly. He told me and the client about the problem and I wanted to know which developer was responsible for this so I could better understand how the mistake occurred. This would help us avoid it in the future, along with giving me a chance to reprimand the developer, as I would my American developers.

To protect the developer’s mianzi, the Chinese project manager did not reveal his or her name. He instead emphasized that the individual(s) who caused the problem are not important, but they will work together to fix it as quickly as possible.

This incident also demonstrates the collective group mindset that the Chinese culture has, where actions are seen as being done by a group, rather than by individuals. This is a topic I will cover more in the future.

When difficulties occur, as they do in any software development project, there is no single best response that will fit all situations and development companies. Sometimes an approach that combines the authoritarian and the delicate approaches might be best. In general, I’ve found it better to try a delicate and harmonious approach first, but the culture of some companies require a more direct approach.

Saving face is one of the primary motivators in Chinese culture. Working with someone and allowing them to save or gain face will make them a close ally in completing successful projects. Keeping this in mind when managing or otherwise working with Chinese software developers will help them work with or for you as a harmonious counterpart to your American staff.

Outsourcing software development to China

The US is both fascinated and fearful of China. We see it as a source of unlimited labor, while we hear of rampant intellectual piracy, fake infant formula, lead paint in children’s toys, and other horrors. Americans want to tap into that labor pool and get our products (both physical and intellectual) made while avoiding all the pitfalls.

This can be done, but it requires a few things on our part.

  1. We must recognise and respect that China has a different culture than America or Europe.
  2. Though some Chinese try to put out bad and cheaply made products, there are many other Chinese people who pride themselves on doing good work.
  3. We cannot think of China as an American colony, a source of cheap labor that we can exploit for our benefit without regard to the Chinese people. Many other nations, including Britain and Japan, have tried to do this and have seen its consequences.
  4. Constant good communication is critical. Misunderstandings happen within American companies, so the chance of misunderstanding increases when working with people in another culture.

I will write more about these points and many other aspects of creating software in China in this blog. Stay tuned.