State of the Space

Nova Barlow | 23 Oct 2007 08:07
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From penguins to pirates, Metaverse to Metaplace, judging from investment and development alone, within the past year, virtual worlds and online games have gone from "new hotness" to "bubble," and the gold rush has turned into a tsunami. With over 100 online games currently in development, it's safe to say the online space is becoming a powerful force in the game industry, and whether or not any of these games reach WoW status (or even ship), the effect on the game industry as a whole is considerable.

The Escapist has been analyzing the state of the space, and here's what we've found.

It's impossible to look at the virtual world industry without mentioning the overshadowing nature of World of Warcraft. WoW is a vastly popular game, industry dominating in several markets and spawns more memes, articles and internet studies than EverQuest probably did back in its day. Now pushing aside the obvious, it's time to take a look at what the rest of the industry is up to.

Contrary to media appearances, not everyone is playing WoW or making a small fortune in Second Life. Strategy Analytics estimates by the end of 2006 there were approximately 30 million subscriptions across all MMOGs worldwide. While the North American market gets a lot of media attention, analysts have learned there's a lot to be learned from the 73 percent of the subscription market that the west has barely begun to touch - the Asia/Pacific market.

Despite the growing calls for alternative business models and experimental approaches of companies large and small in the virtual world space, the monthly subscription is currently king of the business models in the U.S./European market, providing 87 percent of market revenue.


The reliance on subscriptions remains a Western concept - 84 percent of online games in the Chinese market launched in 2006 can be classified as "free to play." In this business model, game operators substitute "value-added services" for subscription fees. But business models are already changing. In Western markets, developers are taking tentative steps toward new revenue streams, although some still play it safe with a partial reliance on "premium" subscriptions. While some experts are advocates of micro transactions, others are not so convinced based on current attempts by game companies.

During the last calendar year, more than $1 billion have been invested in 35 virtual world companies by media and technology firms. This is not exactly great news for traditional virtual world designers; Disney, the top recipient (Club Penguin; $700 million), is using the money to attack new demographics traditional MMOGs don't serve.

Companies like Trion World Network are working on cross-platform delivery, and Nokia has already made an early effort in the mobile market (Pocket Kingdom). While the console market has also taken steps into the MMOG space, the focus remains mostly on applications such as Xbox Live and social networking spaces like Sony's Home. In the Eastern markets, 3-D synthetic worlds are gaining traction over games, and worldwide new applications for virtual world technology are being reported weekly.

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