Converting from a pure subscription-based title to a hybrid free-to-play (F2P) is something than more than one MMO title has seen happen. And generally the indication from the studio is that such a move makes mad bank. When Cryptic Studios converted Champions Online to F2P, they said revenue went up 1000%; when Turbine Studios converted Dungeons and Dragons Online, they indicated that revenue went up 500%. Then Turbine again indicated that Lord of the Rings revenue doubled (i.e. a 100% increase) when that title when hybrid F2P. Sony Online Entertainment said that DC Universe Online’s revenue went up 700% after going F2P.
But percentages can be misleading. If Cryptic / Turbine / SOE were earning little from their subscriptions on those titles, it wouldn’t take much of a revenue improvement to show a high percentage increase that is quickly turned into a press release. Since neither Cryptic or Turbine announce their revenue figures, it is impossible to know the true impact of going F2P was on revenue in dollar terms. (Also I should recognise that some of those announcements were a little bit down the track from the F2P conversion – it wasn’t necessarily an immediate leap).
Which makes City of Heroes / Villains conversion to F2P interesting – the move to the Freedom version of the title – because its quarterly revenue figures are available for every month since it launched. The Q4 2011 figures have just become available and that time period coincides with CoH/V’s first quarter of going F2P. Freedom launched on September 27 2011, while Q4 started on October 1 2011.
A Question of Expectation
I’m using my typical approach I have to this guesstimation about how CoH/V is going so as usual you can trust the earnings report figure (CoH/V earned 3 435 M Won in Q4 2011, up from 2 812 M Won in Q3 2011) and the rest below is built on a few assumptions and limitations. The Korean Won strengthened against the $US, which didn’t help Paragon Studios this quarter.
Converting CoH/V’s revenue from Won to US$ sees Paragon Studios earn around US$2.97m in Q4. Outside of the revenue spike coming from the sale of CoH/V’s Going Rogue box expansion, this is the most the title has earned in a quarter since the start of 2010.
So, that’s a positive. But the increase isn’t huge – going F2P saw a 23% increase in revenue versus last quarter, or a 5% increase year-on-year. It certainly isn’t a 500% or 1000% revenue jump. Although certainly better than the alternative of continuing that downward revenue trend, there is also the cost of the F2P transition (including all that new content and systems) that needs to be factored in, along with the increased demand for new content that comes with going F2P.
It’s also important to consider that going F2P likely leaves the base subscriber revenue mostly unchanged. The core group of CoH/V players who love and subscribe to the game aren’t going to all run and hide at the shift to F2P – they’ll just keep paying their sub for a while. It is new and returning players that generate the bump in revenue. A key question (that the figures in the Q1 2012 earnings report will help show) is if these new / returning players stuck around to keep putting money into CoH/V, or if the conversion model didn’t offer enough to hold them.
And because I know how much you love charts, here it is:
Paragon Studios said they were “blown away” by the response to Freedom, and maybe they were (but if you note Lead Designer Matt Miller talks about being blown away by the number of returning players, not revenue). It’s the first improvement in revenue for a long while (Going Rogue aside), so it isn’t hard for Paragon Studios to be happy about it.
But if there was the expectation that a F2P conversion would see revenue double (or more) then CoH/V has fallen far short of that target. I do wonder if revenue still isn’t at target levels, or if player numbers fell further after Christmas (and Star Wars: The Old Republic launched) given that Paragon Studios introduced variable ratio rewards that players need to pay real money for, aka Super Packs.
That said, Paragon Studios appears to have done better than other NCsoft West organisations in terms of revenue. NC Interactive (NCsoft’s US arm), ArenaNet and NC Europe all saw revenue declines over the past 12 months, with both ArenaNet and NC Europe generating about half as much revenue at the end of 2011 as they did at the end of 2010. NCsoft itself saw some pretty significant declines in key metrics, including operating profit. So although CoH/V’s revenue did move in the right direction, it was at a time when other parts of NCsoft didn’t perform quite so well.
So, About Those Player Numbers…
F2P destroys the ability to determine how many active subscriptions CoH/V still has. If I was using the ‘old’ method (dividing the revenue by 3 x $15 and then increasing the result about 10% given historical evidence that supports such an adjustment) we end up with an active subscriber equivalent in the 70k – 75k player range, which is a big jump over the previous estimate of 55k – 60k active players. However, since F2P kills the idea that CoH/V’s average revenue per paying player (ARPPU) is anywhere near $15, it’s a highly questionable metric about something that was always a guessimate. I (probably) won’t be estimating CoH/V’s player numbers again, even if I look at their revenue results again in future.
And As For Freedom Itself…
I went back to CoH/V when Freedom launched, looking to see what I thought of the changes. But I wanted to know what the ‘new’ player would see, not someone who has a lot of veteran points waiting for them, so I started a new account.
Once I got past the character creation phase – that wouldn’t let me through because I’d chosen a cape, but didn’t tell me that was the reason that I couldn’t progress – I ran smack into the communication restrictions I have strongly disliked for a long, long time. All it has led to is F2P players using the Help channel as general chat.
Plus Praetoria, the new showcase of what CoH/V can do, must be purchased to be unlocked (so much for those zones going free 2 months or so post GoRo’s launch). Yes, there is a new tutorial and refreshed starter zones, but those didn’t grab me (but that’s a subjective viewpoint – I actually liked taking on the Contaminated first, rather than the new “you must save the world on your first day as a hero / villain and fight a massive monster – well done! Now go fight street thugs!” approach). Praetoria was meant to be the alternative starting point for entry into the CoH/V universe, but it is locked away from most on the F2P model.
The other thing that may have impacted on people getting excited about CoH/V’s shift to F2P is that they did it after a lot of other titles, particularly Champions Online; DCUO converted to hybrid F2P about a month after CoH/V did. The people who love CoH/V really love CoH/V, but if a ‘fresh’ gamer looks at CoH/V versus DCUO versus Champions Online, CoH/V ends up looking very dated and slow. Time has seen CoH/V go from a MMO players complained was “too twitch” to a title with almost ponderous superpowered combat… at least compared to ChampO and DCUO.
I’ll be interested to see the revenue figures in Q1 2012 for CoH/V. I don’t believe that CoH/V is in imminent danger of NCsoft closing it, but I wonder how long it will have (at least at the current level of content production) if its revenue resumes the standard downward path the game has seen since roughly 2007.
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Have you seen the numbers for Q1 2012? Would you say Freedom is a failed model at this point, or is it still too early to tell? I’m truly afraid for the future of the game at this point. I’d hate to see it close, but how low can the revenues go and still allow the game to operate, even in maintenance mode if necessary?
I’ve been keeping an eye out for those figures, but missed the actual release until just now.
I have no idea bout Paragon Studios’ internal structure, so I can’t say anything about how low revenues can go before things hit serious. However, the fact that the F2P bump only appears to have lasted one quarter would be a concern for those in charge.
Regarding going into maintenance mode, the key question for NCsoft is if their money is best spent continuing CoH/V’s additions, or if there is a better place to spend that money. If CoH/V continues to decline, then it will make NCsoft’s decisions much easier.
And again, we still haven’t heard anything about Paragon Studios’ next title and I don’t think we we will (except perhaps that it has been shelved).
Thanks for sharing your thoughts on this. I was disappointed when I read the financials for the last quarter, and I don’t see anything on the horizon for the game that would reverse the general trend. I’d hate to see CoH close. I do think f2p was a good idea (I evangelized the idea on the forums) but I think they got their model wrong. The number one problem I think was disappointing returning players by locking their characters and IOs. So many potential customers lost over trivialities.
But the devs have said CoH is not an easy game to monetize into a f2p model, and I have to agree. It’s a challenge. But I think they fumbled on some issues that they didn’t have to, making a challenge into a near-impossible exercise.
It could also be that it’s just CoH’s time. It’s had a great, successful run. It could be that, given the nature of the game, time has passed it by and people just don’t respond to its game play elements as well as they did 8 years ago, so no change of business model would ever save it. I don’t know. I just hope it can avoid NCSoft’s notoriously itchy trigger finger as long as possible.
I fully believe that F2P is how most MMOs will operate moving forward. Sub-based titles put up a $15 a month barrier to play and will pretty much always lose players to those non-sub titles in today’s market unless they are the absolute game / offer some killer feature.
Agreed that PS fumbled their F2P model. My experience coming back was either I lose all my IOs on my main – not desirable – or a completely neutered experience if I started a new account (the fear of gold farmers killed both trial accounts and now F2P accounts in getting players to talk to each other). And then the Going Rogue content was gated to new players, despite it being the most recent.
I’m not going to proclaim CoH/V’s death any time soon. It may be a great cash cow for NCsoft (but that may mean a constant cut back into Paragon Studio resources to keep it that way). A big factor in how NCsoft treats CoH/V moving forward will be the success of Guild Wars 2. If that title flops, NCsoft may stop caring about the Western market – they may more money in South Korea et al anyway. If GW2 is a runaway success, they also may stop caring how CoH/V is doing because GW2 will be a better investment.
I did think the apparent demotion of Melissa Bianco aka War Witch from Lead Developer to Producer was a pretty clear sign that things weren’t going well at Paragon Studios though.
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