CoX Quarter Earnings - Q1 2011

Perhaps I'm having trouble putting the desire to want to have something that isn't necessary into the right words.

For all gated things, regardless of the nature of the gate, there will exist people for whom a critical reason why they want to play the game requires that gated item. So its always true that all gates act as a barrier to *someone*. If NCSoft reduced the price of the game by eight cents per month, that would eliminate the barrier to entry for someone on Earth: its basically inevitable.

The question is not whether gated content is a barrier to *someone* but whether or not the ungated content is *enough* to make a reasonably playable game to *enough* people. You aren't targeting everyone on Earth, nor are you targeting every MMO player on Earth. Just by being about superheroes, we eliminated the majority of all MMO players on Earth already, there doesn't exist such a thing as an MMO genre that has universal appeal. Millions of people don't play WoW because they don't want to play a fantasy genre role playing game. They don't care, and neither do we care about all the people that don't want to play a superhero game. That's the genre we've staked out, and that's what we care about.

Analogously, when it comes to gates, the gates help in some areas and hurt in others. You minimize the pain and you maximize the gain but at the end of the day if the gates reduce your target audience because some people won't accept the gates, your decision should not be based on whether some people object, but whether the rest are enough for you.

Quite possibly, because I'm only coming up with two versions. Either you are referring to objects that have a perceived necessity to play or you're referring to any item being sold that a player may want to purchase.

The first, I addressed. The later, I feel is a ridiculous claim that's about as sensible as complaining about the cost of express passes at theme parks.

Quite, it is always a balancing act, since people are notoriously diverse .

So while it may be a failure for a population, it's may not be an overall failure, a fair concession. Someone being brought to a generic term of

The issue being, you want the people you are recruiting to want to play the game and enjoy playing the game. Players you recruited because "Hey it's free, let's try it out", aren't going to much enjoy the game if they find out it's free in all but name because you need to spend money to enjoy it. This holds far less truth when you start talking about f2p games where the economy/currency transactions are primarily player driven, and the developer primarily makes money off of server-leases and money changing. But, that's a different beast than most are considering here anyway .

Guess a decentish summary would be that you don't want to scare away the new 'free' customers with a bill upfront.

Not disagreeing with you, but these things are learned over time, prioritized, and have tradeoffs.

(assuming that its safe to at least use NCSoft offerings in comparisons)

Guild Wars , with its buy-once / play-forever model, for example needed an insanely lean model that really minimized communication.

Tabula Rasa, with its near-FPS system that had rapid mobility and short low-rooting animations, on the other hand, needed more frequent mapping updates to keep things in sync. They traded off the extra data requirement for a specific kind of gameplay value.

City of Heroes, which came earlier in MMO history, started with an independent studio's initial foray into the field, and had some elements that took it beyond the previous generation's tradeoffs, while making some of those same tradeoffs impossible.

All three are very different beasts.



There was a game that, in beta, tried to do away with targeting a foe. You'd hit whoever was in the range of your sword-swing. Period. Worked fine in alpha tests, but betas quickly showed that too much could happen between updates for remote users to have a playable system. When they increased the positioning data communication, they had to reduce the number of people tracked... so they instead started tracking CLOSE people much more frequently and accurately than DISTANT people, causing you to see people skipping and warping in the background.

Eventually, they reached a compromise that reduced the # of people per region displayed... but not as far as previously, reduced the threshold of tracking at a distance, increased it locally, AND added a targeting reticle that would always be considered within range if they were within range on the client when that player started the attack (making it a less-noticeable problem as at least SOMEONE would be hit)

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Its much the same for customization of elements. Do you prioritize expandability (and have a block of data that can handle more than what you're currently communicating) or flexibility? Do you have to send each color hex value, or can you just say color "2" from a more limited selection? Do you send all the data for the face sliders when you first communicate a model to the user (while they're well out of view) or only send the basics initially and do another pass with more detail if/when the person gets within close enough visible range to matter? Do you send the full stats of a custom item when the item is displayed, when inventory is opened, or after a user specifically clicks "examine?" Sending it on 'examine' can reduce load, but put a longer wait on the user. Will examining have to take place during critical gameplay moments? Is it better just to drop the extremely-custom-intem model and perhaps just have "low-med-high" qualities for a single item? That way you could have all the stats precached in the client files and only send the item ID without the stats data.

All of that varies with each game. Heck, some games PATENT their data models so competitors can't (in theory) use the same solution they used. That makes some systems more data bloated than others, and thus, more costly to operate.

Which is why reading these particular tea leaves is such a murky task. Although the earnings graph spells DOOOM to a lot of posters here, I'm more encouraged that NCSoft is earning a better profit on "flat" YOY revenues, which is as good as one can hope in this economic climate. We've already seen NCSoft do some housekeeping with layoffs and shuttering servers on truly old games, so presumably they've made the obvious cuts and saw an improvement to their bottom line (I wish we had some idea of their overhead and costs of doing business). We'll see where things stand in another year, especially if, say, a major competitor were to emerge in the niche with an F2P model. That might convince NCSoft/Paragon either to go F2P themselves or, no less likely, to maintain the current system in order to preserve CoH's distinctiveness.

Well, more like seeing a movie release a several months later.

That presupposes that there's a natural progression from a subscription game (of some kind) to F2P, whereas there are more than a few game as old or older than CoH that continute to existed in their original subscription forms. CoH's model, let's call it "boosted subscriptions", has been in place since 2006 when the first item pack was made available and has been going strong ever since.

First, there are things you sell to everyone: your VIP subscribers, your F2P players: everyone. Things like special enhancements, special powers, consumable temp powers, the occasional costume set. Then there are things you can earn or buy: respec you can earn or buy. Sands of Mu you can earn by being a veteran, maybe you could buy it. Then there are things VIP subscribers get for free, but F2P players would have to buy. Maybe VIP subscribers that own Going Rogue can earn alignment merits, but F2P players have to pay to unlock that feature.

Each of these kinds of things have their own set of requirements. Things VIP subscribers get for free but F2P players have to buy can be almost anything. All you need to make sure about is that the limits on F2P players don't spill over into the VIP players in inconvenient ways. For example, if F2P players cannot join task forces unless they pay to unlock that feature, that would be a pain for VIP players trying to organize them. But if they don't have jetpacks because they didn't buy them, that's their problem. On the other hand, things you sell to everyone have slightly more strict requirements: they have to be things that the VIP subscribers perceive as extra value for extra money or totally optional things: they cannot be perceived as base content that was split off into ala carte content. And things you can earn or buy have to have very accurately balanced earning and purchasing costs so that neither option is heavily devalued, and you also have to make sure that you don't completely devalue the act of earning as a process. Some things are just off-limits. For example, in my opinion if you allow players to buy any badge they don't have, no matter the cost you've just destroyed the underpinning of the badge system which is, however imperfect it is, players who have the badges have usually earned them by in-game action. Sometimes weird or degenerate action, but still actual in-game activity. There is no correct price for Task Force Commander, say.

It doesn't presuppose the progression is automatic. It only presupposes the progression is easier when done in stages than when its attempted all at once with limited situational awareness. Whether NCSoft chooses to investigate F2P or not, they are in a better position to do so than most games that were pushed into made the jump.

It's the price of a purchased instant faction switch then spending two hours to bribe folks to let you run in their mayhems, then another instant faction switch back blueside. :D

(hypothetically speaking, of course. An instant faction switch could be roughly analogous to the types of gate-related items you can get in some F2P games that can be earned normally or just 'Hey, I want it now, so I'll buy it dammit.')

Originally Posted by Arcanaville Softcapping an Invuln is fantastic. Softcapping a Willpower is amazing. Softcapping SR is kissing your sister.

I would buy that power over, and over, and over...

I take your point, although I'd still stress the conditional aspect. One of the many problems about this F2P discussion is that the proponents believe it's a teleological one.

My own interpretation of Paragon's behavior is that they've decided that "boosted subscriptions" are the way to go for CoH's foreseeable future, hence the devs' openness to suggestions and feedback when it comes to art (hi, Noble Savage! hi, Tunnel Rat!). It's entirely likely that if Paragon hadn't set this model up early on, they'd now be feeling far more pressure to switch to a F2P one of some sort, even though they and the community would be less prepared for it.

I'd sell an instant faction switch in theory. Although faction switching is gated, its not gated by any special accomplishment. Its more time-gated than activity-gated and it doesn't have special balance problems associated with it that I can think of. On the other hand, Task Force Commander is at least intended to be a mark of accomplishment: running the task forces to completion. Selling it devalues the accomplishment it is supposed to represent.

Incidentally, this also means that while I would sell faction switching, I would not necessarily sell the badges associated with faction switching. I might consider awarding them only for the completion of the appropriate morality mission, and not for "magically" switching by microtransaction.

The one set of badges that I think I might consider selling are the Day Job badges, maybe. Those are literally pure time-sink awards. Not even playing time-sink awards, but literally time-sink awards for not playing the game while your character happens to be in a particular spot. What I might do is sell a token that reduced the day job award time from 21 days to 7, or to put it another way the token would grant you up to 336 hours of credit to any day job badge you chose.

Absolutely agree with that, that's more or less what I was thinking when I brought it up. (though I was VERY happy to discover that the mayhem exploration badge accolade transforms into Task Force Commander; I still find task forces stressful even though I'm alright with incarnate trials. I think it has something to do with sustained effort; I need downtime).

In theory, it could grant the faction state but still be considered to have not run the morality for hitting that alignment yet. So to start getting alignment merits, you might need to do one morality to 'finalize' your alignment (hitting the conditions for the badges), then continue as normal.

That assumes, of course, that the devs are concerned about being able to pop over, start earning alignment merits, then pop back whenever. They seem to be, given the current arrangement. (Personally, I still think that vig/rogue is underpaid for the purported ability to ALMOST play both sides' content, but that's another story.)

A token to add credit to a time-gated badge is probably the cleaner way to do that from a broad design perspective, leaving potential UI complications aside for the moment.

Originally Posted by Arcanaville Softcapping an Invuln is fantastic. Softcapping a Willpower is amazing. Softcapping SR is kissing your sister.

The best time to convert to F2P if you're going to do it at all is when you don't need to, but you want to. Doing it at the point of a gun carries two high risk scenarios for failure: one: people will know its a desperation move, and two: you won't have enough time to do it right.

Based on my own analysis of F2P, if you're going to convert to the model (as opposed to launch with it) you should try to satisfy three requirements:

1. Launch loud. It has to be perceived that the company is both focused and enthusiastic about it. You should be promoting it as if its the best thing that you've done yet, and better things are to come. Its not the end of the subscription model, its the beginning of the new model, and the announcement is the first of many, many quality of life and content improvements that this change will bring. There should be marketing and technical information released weekly leading up to the launch, and there should be a blitz of information about all the good things coming. There shouldn't be a single five day span where you aren't telling your customers something new and interesting.

2. Launch big. The corollary is that to launch loud, you have to have enough to talk about. If you just change model, but the game itself is more or less the same the day before as the day after (I'm thinking of two specific cases here) there's nothing to talk about except to hype vague notions of the free to play model itself. Nobody cares about the F2P concept as a concept. They want to know what you're going to do, specifically, and why they should care, and why they should believe this is a good thing for them. You have to be able to answer specifically: Paragon Studios announces that as part of the launch of its new free-to-play model for just 900 SuperPoints you will get a two minute piggyback ride from Positron. And we're not even talking about in-game either: we've already fitted Matt with a saddle.

There has to be so much more that everyone is getting with the new model that everyone believes Paragon Studios believes so much in the model that they are prepared to invest a lot more resources in making a lot more game, because they know a lot more people will be playing it and a lot more people will be paying for content.

3. Follow through. Launch has to be big. The month after launch has to be as big or bigger. The perception has to be that the model isn't a flash in the pan, but a sustainable one. Every week there should be something new added to the microtransaction store that isn't BS. Every month there has to be something added worth actually promoting loudly. The devs have to be constantly announcing "check this out, this is what's coming" and the studio needs to be constantly saying "here's what's coming in three months with Issue 28: here's what the veeps get, and here's a taste of what we're adding to the SuperStore."

Needless to say, you can't do this if you're on your last legs with a gun to your head. You do this when you are dealing from a position of strength. You do this not because you have to, but because you *can*. And you prove it by making sure that the F2P launch isn't about making more money, its about *spending* more money on *the players*, money you are confident you are going to be making with your better development model.

Basically, the first step to proving to me that F2P is a good thing is the developers convincing me that *they* believe it will be a good thing. And they do that not by telling me they think it will be a good thing, but by acting as if they believe it will be a good thing by making and releasing a game worthy of a bigger and better business model. And as I said, the only way to do that is from a position of strength. You're correct that the numbers suggest Paragon Studios is strong enough to not *need* to go to F2P. I think the sub+booster model would work perfectly fine for years to come. What I'm saying is that the numbers suggest Paragon Studios is *strong enough* to convert to F2P from a position of strength, and I believe by the time everyone thinks the numbers say they have to, it will also be too late to do so.

So I don't think the numbers really tell us if and when NCSoft would consider changing models. Numbers strong enough to be sustainable are also numbers strong enough to switch. Numbers weak enough to require switching are also probably too weak to do so successfully. Right now, I think the numbers still give Paragon Studios options. The safer option to me is to extend the sub+booster model, maybe add a better microtransaction system than the way boosters are sold now. Perhaps add a two-tiered sub system with $14.95 premium subs and $7.95 second tier subs that included most of the game, but not all of it. In a sense, we already have that pseudo-situation of those with GR and those without.

But just because its the safer option, just because its the option I might consider the logical outgrowth of what's come before, doesn't mean its the one NCSoft would go with. Long ago I stopped trying to predict City of Heroes business decisions.

Here's a quick question for the doomsayers: Does the developer comment “Subscriber levels have decreased faster than previous expansions” apply to the OP's chart or ... another leading MMORPG entirely? Only Google can say for sure.

In all seriousness, in the grand scheme of things NCSoft/Paragon Studies are doing all right for themselves.

Lets face it: very few people actually discuss the financials in and of themselves. Every time they are posted, people want to use them to advance a conjecture about what they mean about the financial health and future of Paragon Studios and City of Heroes. No one wants to do the hard work of numerical analysis and economic projection, cost breakdowns and revenue estimates. No one really wants to discuss the numbers. They want to discuss what it all means. That's why people keep predicting the end of the game from the numbers, and why I keep laughing at the people who keep predicting the end of the game from the numbers.

Upstream, I mentioned data which formed the basis for what I believe to be the best ballpark estimate for how much it might cost to support a game like City of Heroes, and by extension at what revenue levels the game might be profitable at. When *I* look at the numbers, that's what I see. That's what I use them for. That's what I ultimately do with them: they are facts that I incorporate into a better picture of reality. Nobody really cares.

That's not where the fun is. The fun is taking a ruler and a pencil and saying based on the trend in 2009 the game will have zero customers by June 2010, ergo the game is doomed. Or, in the last two years, particularly, the game must go free to play or be doomed.

As long as people are going to speculate, I might as well see if that speculation goes anywhere interesting. Because there's no interesting discussion going on about the actual numbers that I can see (and rarely ever is), and the less speculative doom-predicting is honestly completely uninteresting.

The implicit argument for F2P is that the current revenue model isn't viable for the future, therefore DOOOOM!!!!!

Why is the only reason to change to an F2P business plan you guys can think of is that the game is DOOMED if we don't.

Not saying that at all. At least not me, personally. I think the F2P business could possibly be an avenue for City of Heroes to expand and become even more profitable - if done right.

They're numbers. Metrics, in fact. And metrics don't inspire conversation, they dictate action - and the viability of further return on investment. Doom to the average player means the end of the game. Doom to the average marketing executive or VP of business development means "what else have we got to keep our portfolio looking strong?" From a player's perspective, if anything folks are just getting bored again. They'll come back when Issue 21 is announced. In the meanwhile, no need to rush an announcement just yet - its summer, there's a holiday weekend almost upon us and most folks won't be staying indoors to play as it is. I'd say expect an announcement in mid/late June about I21 and let's not worry about the numbers right now.

And as I said upstream, I agree with you: I think the game's performing at expectation - if not a little better. It really is easy money from a net profit standpoint. At this point though, an investor will be interested to know what the CoH brand does next - and not "is this the end of COH?"

The numbers are good; people need to stop panicking. Really.

This is exactly my position.

Originally Posted by Arcanaville Softcapping an Invuln is fantastic. Softcapping a Willpower is amazing. Softcapping SR is kissing your sister.

I can't speak for anyone else, but I've been saying the exact opposite.

You have a reason to change to F2P?

I was speaking in general not specifics. Outside a few exceptions this topic almost always comes up when quarterly earnings are released and the number of subscribers are speculated as being too low.