Sunday, July 12, 2009

Free: The Realistic Direction of the Internet Economy.

Hello all!

Call it the universe, call it luck or call it a co-INKy-dink but I was reading my morning blog posts. I was impressed by Ivan's post on "MTCW" about the transference of DDO and TCoS to F2P. That was on the heels of Beau hitting the nail on the head about TCoS, both articles put me in a thoughtful mood. So I went outside, enjoyed the sun and read some of the Sunday papers. While I was reading the NYTimes Book Review…yes I read the book review!

"He's a supergeek! A supergeek! He's supergeeking owwwwww!"

I'm Rick James…, ANYWAY, to my point it seems the sun had shed light on the whole "where is the P2P MMO community going" conundrum. It was in the shape of an article written by Virginia Postrel who reviews Chris Andersons new book "Free: The Future of a Radical Price" (Hyperion). Chris Anderson is the editor in chief of Wired Magazine and Author of "The Long Tail", he explains why many of the common services we use online are free, and the future of the internet price point is going.


Postrel writes, "Driving the trend are the steeply declining prices of three essential technologies: computing power, digital storage and transmission capacity". In Anderson's book he says, "The trend lines that determine the cost of doing business online all point to the same way: to zero." It seems that all the functions that make content accessible are getting cheaper and that enables online companies to shave off margins so that there over head gets so cheap that they can afford to charge nothing for customers to get in the door.

That may be a reason why a company as Frogster can charge nothing to download the Runes of Magic software, because it costs them nothing to ship it to you and store it. Same as the mirror sites as well. Now how do these internet companies, take for example get away with charging nothing, give so much and charge absolutely nothing. Anderson's answer is, "Most obviously, online advertisers pay for eyeballs…" as you see all the ads for games, free to play and otherwise on the home page of mmorpg. That's how they make their cash, and possibly pay nothing to run the site other than manpower, serverspace and bandwith. And obviously Anderson writes that those are getting cheaper as we speak.

According to a NDP survey from, online and in-game advertising to grow from $886 million to $1.4 billion by 2010, so with margins down and sales expected to grow like this, who do you think is going to make the most money here?

So my answer to both questions from beau and ivan's post are yes, it will help both DDO and TCoS tremendously to embrace the F2P model at this point. However there is a sobering statement made in Chris Andersons book, "Everyone can use a Free business model, but only the number 1 company can get really rich with it." This means that only the strong will survive, and they both better bring their "A" game with them.

Free is a powerful word to consumers, it almost gets anyone's attention. Sometimes skeptically, but never fails to turn a head or two. Case in point when WoW developer Tom Chilton admits that the fact of WoW going full force micro-transactional isn't out of the question in the future. They will need to adopt a different business strategy for according to Game Analyst Michael Cai "the biggest competition to Wow will be from the F2P market." He explains that a new company will have to invest from 500 million to 1 billion to create a "subscription based model" to compete with wow.

WoW changing to a free to play/cashop is a possibility according to the new trend; what will it do to the struggling games like Age of Conan, Chronicles and the new DDO Unlimited. TCoS was introduced with a failing business model, "so I can kiss you and don't have to pay for dinner? Sweet!" Even I who played from CB got bored at level 4 and uninstalled, it just didn't have the "sticky power" to keep me playing. If it was a freebie, then I probly would have kept it on my hard drive. Plus the whole Akklaim coin thing turned me off, it seemed they were trying to charge you for an Akklaim account and then for the Spellborn sub. Uh-Uh, I was born at night, but not last night.

DDO, they need to admit that they tried to catch the WoW vapors and failed with a buggy launch, forced grouping, and lack of content (then). Agreed, they have made big changes to the game and are offering much more in the way of solo content, this makes it a better game. But going freebie/cashop will get more people that never played the game to give it a shot, as Ivan describes it as a "saving grace". Even as a F2P do they have the power to compete or even survive this market against pure-bred f2p's like Atlantica Online? DDo sin't a bad game, I did some interviews of the community (failed project) and I've read many blogs lately, Hudsons Hideout gives a very good, "this game isn't bad after allz" review of DDO.

How much do the purebred F2P's are making, we really don't know. Most companies keep that information guarded and I for one have been crawling for that info continually. The closest I got was from Ralph Coster's website, where he says that "in his observations free-to-play MMOs are that they typically earn from 30 cents a head up to $2 or so in terms of ARPU and from $10 to $60 in terms of ARPPU." A game like Puzzle Pirates nets $230,000 just from 5,000 users, that's a pretty good average for an obscure game.

What does all this drivel mean? I will sum it up with, "It is hard to come into a house with a 900 pound gorilla living in it and find a place to sit." The market is dominated by one game, one company with a couple of not so bad number two's. It is hard to demand a fee that is par with a more popular (I didn't say better, I said popular!) game and be profitable while giving sub-par content or service. With the costs of distributing going lower, advertising revenues on the rise and an open door "limitless" micro transactional model becoming the norm, then it benefits latebloomers and struggling games to switch gears.

Will it save games like DDO and TCoS from the scrapheap alongside Tabula Rasa and The Matrix Online; we really don't know, time will tell. Our job as consumers is to benefit from their competition and get some free game time, most importantly have fun; and talk about it on our free blogs.

One thing that Anderson does touch on is the amateur market, the people like us that want to contribute, "to have an impact and to be recognized as an expert in something", he says. This is a never ending flow of really good, amateur content on the internet. I mean the podcasting, vid-casting and blogging market that I just stumbled into like a drunken sailor stumbles into a whorehouse on leave. Just look at the guy who trashed United over his busted up guitar. I would of paid a couple of bucks for that CD single back in the day I used to buy CD's, again point proven, I don't pay for music anymore.

But all this free feel-good feeling lies a warning, "It is false to assume that no price means no value. But it is equally false to argue that value implies profitability." I pay for value but I like free anything, don't you. I'm going to find that book tmrw in the library so I can give more information on this oh, so interesting topic.

Until then…

Play safe,

Frank AKA Inktomi


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