The MMO industry has grown from a two-horse race at the turn of the century to one of the largest segments of the gaming industry and perhaps the last true foothold games have on the PC. Yet, during this same period, there have been innumerable failures, and many questions remain wide open. Can MMOs truly be global? Is the subscription model in decline? To what extent should developers innovate or evolve gameplay? What role should established IP play? Have these games gotten too expensive to make?

To answer these questions, we spoke to cross section of people from around the industry to get a handle on the true “State of the MMO”. We spoke to SOE President John Smedley, ZeniMax Online Studios General Manager Matt Firor, Themis Group CEO Alexander Macris, GamerDNA.com Director of Community Sanya Weathers, EVE Online Game Designer Chantel Zuurmond, IGN PC Executive Editor Steve Butts and the former Executive Producer of Star Trek Online Daron Stinnett to get their thoughts on all these issues and much more.

State of the Genre Today

“It’s pretty bleak right now!” explained Daron Stinnett, formerly Executive Producer of the ill-fated Star Trek Online. “If you take a look at the games in the shadow of WoW, you’ll find a pack of MMOs that have managed to hold onto one or two hundred thousand subscribers.”

It was a sentiment shared by most of those we spoke to. It’s obvious that World of Warcraft has the market by the throat and have become perhaps the only truly global game in the MMO-space. That means some tough realities for the games in the next tier.

“[MMOs are in a] state of unrest, right now,” said Matt Firor, General Manager of ZeniMax Online Studios, a sister company of Bethesda. “World of Warcraft is ruling the subscription game market, and no one wants to compete with them directly, so they go off for niche markets.”

Chantel Zuurmond, Game Designer for CCP Game’s EVE Online, agreed: “I think any game that wants to coexist with WoW and do well should try to cater to a niche.”

This leaves developers and investors with a choice. They either run at the colossus that is WoW head-on, or they do as Zuurmond suggests and try and carve out a unique – but smaller – niche.

“Publishers and developers look at the 10 million-plus subscribers and can’t help but want a piece of the action,” noted Steve Butts, IGN PC’s Executive Editor.

Over the last two years, a slew of MMOs have hit the shelves and failed utterly. Games like Tabula Rasa, Auto Assault, Vanguard and many more were all big budget, retail subscription MMOs with loads of marketing dollars behind them that have either fallen off the face of the Earth or settled into a small niche. Clearly, the most recent generation of MMOs hasn’t been doing enough to fire the imagination of gamers.

“It seems like many people learned the wrong lessons from WoW,” commented Sanya Weathers, formerly of Mythic and now Director of Community Relations at GamerDNA.com. “[They] are busy spending ungodly amounts of money on what amounts to feature creep with bonus graphic bloat.”

Her deadpan delivery aside, it’s become a valid point that many in the industry agree with. The simple fact is that World of Warcraft is an accessible game, both in gameplay and system requirements, and most of the forgotten MMOs of yesteryear failed at one or both of those things.

“What’s happened in the MMO-space parallels what’s happened in the game industry as a whole,” noted Themis Group CEO Alexander Macris. “The cost to create a AAA title is now greater than the expected return from selling the game to the core gamer audience.”

As such, developers and publishers have had to expand their horizons and appeal to more than just core games. When you release a game with system requirements that outstrip the average consumer’s machine, you’re definitely in trouble.

“That’s one of the biggest places we made a mistake with EverQuest II is the system requirements,” admitted SOE President John Smedley. His title, a sequel to the most successful MMO on the planet at the time, did well enough, but was completely overshadowed by World of Warcraft when both launched in late 2004. Later, they published – and then absorbed – Vanguard, which Smedley noted sold 250,000 copies, but had no chance to retain a good percentage of those players given the number of people who simply couldn’t run the game on their PC.

So what can be done? Where should development companies be spending those resources?

“The ‘me too’ approach to development won’t work,” added Butts. “Any game that hopes to compete with WoW has to do so by offering a substantially different setting or game design.”

Weathers agreed. “The Next Big Thing will come out of a studio that tries to build a wind powered car.”

Innovation or Evolution?

While Weathers argued for the wind powered car, there was far more varied opinion on the evolution vs. innovation debate. Others took a more conservative approach.

“If you try for too much innovation, you turn people off,” argued Firor. “That’s the Catch-22 of MMO development. MMOs are about giving people a world they are comfortable in, and if you don’t follow the rules they expect, then they are not comfortable and look for online housing elsewhere.”

And Firor wasn’t alone in a call for balance.

“We have the job of making great games, running great games and innovating,” said SOE’s Smedley. “I think you have to balance it. If you go too crazy with innovation, you might drive your loyal customers out.” He then noted that if there is not enough, then their audience grow beyond the current core gamers.

All agreed, though, that the absolute key to success is a focus on quality regardless of the approach taken. It sounds simple and obvious, but it’s the big thing that separates games like World of Warcraft from the rest of the pack.

For his part, Stinnett brought up a great counterpoint to Firor and Smedley’s position. “The Nintendo Wii disproves that theory,” he said of the argument that people need some kind of familiarity to enjoy their online worlds. “People will buy games that are fun whether they are fresh and innovative or simply a surprisingly good implementation of a tried-and-true formula.”

While people at game conferences often stand up and pontificate about the lack of innovation and proliferation of derivative gameplay, this group was not quite as outraged as some might expect.

“I think the industry is incredibly innovative. People who don’t see the innovation simply aren’t looking for it,” argued Macris. “It reminds me of a friend of mine, who used an exploit in Asheron’s Call to level up to 40 without ever leaving one spot in Dereth, then cancelled because the game was boring. “

And it’s a valid point. MMOs have been defined by many – our website included – as a subscription-based virtual world that people must buy in stores. More recently, digital distribution has become an increasingly acceptable method of selling and delivering games, but the real meat and potatos of the industry might lie somewhere else entirely these days. The question is, where?

“I think we’re seeing the emergence of a massive amount of non-traditional MMOs, the Barbie.coms, the Club Penguins,” said Smedley. “The emergence of the much more casual player into the MMO-space.”

Together, these games and others like Runescape may well represent more players than all of the subscription-based MMOs combined in North America, World of Warcraft included. Yet, they don’t get the hype. They don’t get the press. They’re largely ignored by regular gaming journalists, let alone the mainstream media, and obviously have zero presence in traditional retail outlets. Yet, they have millions of players and in some cases – like Runescape – even millions of subscribers.

These companies all started small and have quietly grown into epic businesses, but it is often small companies that make it big that really push the boundaries in terms of new ideas.

“The next big thing is not going to be a sword-and-board, stylized-looking, smack-the-pellet-bar Skinner box. I don’t mean to say there isn’t plenty of room for further success in that category, but the next thing that makes the mainstream do a double take won’t look like it’s related to WoW,” said Weathers. “I think that now that we’re down to two giant behemoths roaming the earth, it’s time for the monkeys to climb down out of the trees and evolve into the next big thing.”

And perhaps these quiet giants of the MMO-space, the free-to-play, generally browser-based and microtransaction-supported games that already dominate the market, will become the next big thing simply by being recognized as such.

It has begun. “Free-to-play games are getting more and more sophisticated, and are starting to compete (especially in mindshare) with the more traditional sub-based MMOs,” added Firor.

But the question remains open: Who drives innovation?

Smedley sees the responsibility for innovation shared between the big, traditional companies and the upstarts. “Some of it will come from the smaller ones and some of it the bigger ones.”

His company is hard at work on FreeRealms, for example, which he insists will have a global appeal, but it’s definitely not a traditional MMO. FreeRealms targets a much younger audience; it’s free to play, free to download and definitely not swords and sorcery. However, SOE is one of the few big companies to make a move like this and are simultaneously developing a host of more traditional games aimed at the core market.

Generally, most agreed that there is a coming gulf between the big and small developers. The big boys are going to make bigger, fancier and more expensive MMOs based on huge IP and carrying huge expectations. The smaller, more independent developers will be forced by spiraling costs to innovate in a few specific areas to carve out a niche.

“Smaller developers have to niche,” Macris said bluntly.

It All Comes Down To Money

The basic fact is that all these trends are being driven by exponentially growing development costs. MMOs were once merely expensive; now they’re multi-million dollar endeavors that dwarf some movie productions. The risk is huge at this price point, and investors need to take whatever precautions they can against failure. That means big budget games are less likely to try anything unproven.

“It’s that the stakes are getting bigger in this space,” said Smedley. “My personal belief is that the quality bar is going to get raised and that does necessarily mean that the cost of development goes up.”

While quality goes up, risk also goes down.

“Sure, spiraling costs have an impact to innovation. But that’s nothing new,” said Stinnett. “Costs have been spiraling in the games industry for decades and I don’t see MMO development costs as out of line given the additional complexity of creating online games.”

But for his part, Smedley doesn’t think the independents will actually be frozen out. “EVE is a classic example of something that came out of nowhere and turned into a real powerful brand.”

CCP’s Zuurmond believes part of the success of EVE is their agility as a company. “We need more MMOs like EVE, where we do try to add completely new content that doesn’t use already established game systems”

EVE Online has organically grown from a game even its creators admit lacked content at launch into a virtual universe. In the coming years, they hope to add avatars to supplement the space flight and truly round out the experience. Their success at producing new content and consistently growing their product has turned them from an obscure Icelandic start-up into a leader in this genre.

They are not alone. “The French guys that made Dofus show what a small shop can do – it’s a great game, but not one that required lots of money or tons of developers,” noted Firor.

Stinnett argued that the biggest obstacle that stands in the way of innovation, at least among the big guns, is the sheer size of World of Warcraft’s lead. “There would be still plenty of investment and innovation if anyone believed they could get more than a tiny fraction of the pie, but so far, no one has proven that it is possible.”

Thought it may seem impossible, there was a time when no one believed EverQuest’s roughly 500,000 subscribers would be topped. Something will inevitably come along.

“I think the space is about to explode with a large number of very high quality name brands getting into the space,” argued Smedley, formerly the Director of Development for Everquest who knows all too well that any game can eventually be topped. “Players like Ubisoft getting in with their Clancy series. That’s a huge thing.”

Microtransactions vs. Subscriptions

There are open questions beyond just innovation, though. Currently, there is a fight underway between two very different methods of monetizing MMOs. For years, games have existed with subscription fees dominant in North America and microtransactions (paying for small chunks of content rather than blanket access to the game) in Asia. Now, as more Asian games are adapted for North America, that model has spread. Coupled with the struggles of some high profile subscription games, it makes one wonder if the subscription model is now on its last legs.

“Publishers love a standard subscription model because they can multiply ‘x’ players by ‘y’ dollars and know exactly how much revenue is going to be coming in next month,” pointed out Butts. “What they’re counting on with MTs is that a small percentage of those players will be so hardcore that they’re willing to pay money out of their own pocket each month to gain access to the premium content.”

Most seemed to believe that the two models could coexist, but it is notable that while some argued purely for microtransactions, not a soul dared to say subscriptions would win the day.

“I firmly believe that this space is going more towards the velvet rope, microtransactions,” said Smedley. “Subscriptions will always be there as a component of that, but it won’t always be there as the primary revenue generator in this space.”

Firor agreed, “Different kinds of games can support different payment models. Blizzard would have been very careless to make WoW free to play or micopayment based – we’re talking Western world here – a subscription model was perfect for them.”

The key point is to tailor the payment model to the game or product on the market.

“I suspect the big boys are racking their brains to go micro, and anyone developing a ‘network’ or an ‘experience’ is too,” explained Weathers, “but I think the smaller products that consider themselves to be ‘games’ will stick with the subscription model.”

There is precedent for markets that employ dramatically different methods of monetization for the same product without issue, Stinnett pointed out. “TV programming happily coexists with pay-per-view.”

Still, not everyone thought subscriptions had a future.

“Subscription is on its way out,” said Macris. “If there’s a segment of consumers that makes sense to reward, it’s the ones with cash, and likewise if there’s a segment of consumers you can afford to lose, it’s the ones without any money. This is just straight economics.”

Fantasy, Sci-Fi: Is That All?

It seems every MMO that comes down the pipe is either fantasy or science-fiction. Why have virtual worlds failed to branch out into new settings?

“When you poll core gamers, their favorite genre is always fantasy, by a wide margin, followed by science fiction,” said Macris. “So it’s natural that we keep going to those genres. That said, we need to either go broader or go narrower, rather than fight for the same core gamer.”

Unlike most genres, MMOs have actually tied themselves to a specific setting through their very nature. Stinnett pointed out that at each game’s core is a progression system, and in many ways it’s inextricably linked to the kind of content fantasy worlds offer.

“The key to unlocking success in settings beyond fantasy will be new progression systems that don’t rely so heavily on equipment and magic,” he said.

But people don’t simply claim to like fantasy games; they also feel comfortable there.

“MMOs are different from traditional games in that they are worlds, and players of MMOs want to be sure that they are entering a world in which they are comfortable before they purchase/download the game,” said Firor.

“Part of the appeal of MMOs is that you can escape your day-to-day life and do something completely and utterly different and be completely submerged into it,” said Zurrmond. “Maybe the other genres are too close to our day to day life in a way?”

Despite this mindset, there is still definitely an appetite among those with whom we spoke to expand the borders and try a few new settings.

“I think horror will be a big genre in this space; I know that’s something we’re looking at,” said Smedley.

Macris agreed, “I think the comic book genre has the potential to be a big winner right now. Spy/espionage is another. I also think something like World War II Online, updated for 21st-centry conflict, would be very successful. In general, themes that are modern but still escapist and action-oriented.”

The consensus was with Macris on this last point. People want to escape; they do not want to leave the real world for the drudgery of another, and the upcoming slate of MMO releases, beyond those in the immediate future, points to a more varied atmosphere. This year we’ll see Age of Conan and Warhammer Online, two fantasy games, but beyond those are games like DC Universe, The Agency and All Points Bulletin, which are all firmly in the category Macris described.

Fantasy is by no means dead, and will likely continue to command an inordinate percentage of new launches, but with each generation, the overall balance should shift away from its current virtual monopoly.

The Intellectual Property Debate

There has also been an uptake in licensed, IP-driven MMOs in recent years. At first, they were almost universally set in original worlds. Now, at minimum, most major MMOs carry a big gaming IP, if not some series of books or movies. This year’s three major releases will be Age of Conan, based on Robert E. Howard’s novels (and obviously not hurt by the films); Warhammer Online, which is derived from the popular tabletop game; and Stargate Worlds, which has both a movie and two TV series behind it.

“We have seen it in PC games where games were released on an IP and they failed miserably because people didn’t really work on the gameplay,” said Zuurmond. “I assume that people learned from that and put the work in and not just hope that because some people might recognize the name it will be a success for everybody.”

Like any game, it remains all about quality, as Zuurmond points out. Gamers just want good games, but again, is this not the divide between the big and small?

“It depends on what type of market you are trying to hit,” noted Firor. “Pirates of the Caribbean Online obviously hits its mark based on IP. Dofus doesn’t need new IP, because they have their sights set lower.”

Recently, Real Time Worlds announced that they had reacquired the rights to their game from publisher Webzen, partly for this reason. As the costs of developing a AAA MMO went up, investors wanted to make sure the game limited its risk, and there is a pressure to go with an established IP from the money men. RTW felt they could better secure the future of their original IP under their own control and chose that route. However, they had the advantage of $50 million in financing, which likely makes them the exception to the rule.

It is entirely possible that the future will consist of original IP upstarts taking on established IP industry giants. And if one of those upstarts makes it big, well, suddenly their original IP is considered a lot more valuable. Look no further than EVE Online for proof of this phenomenon.

The trick for IP-driven games is to secure both IP worth exploring, but also the freedom to do it properly.

“It depends on whether or not the studio with the license has the cajones to innovate and the ability to project the flavor of the license,” said Sanya Weathers. “Not everyone’s got the knack.”

However, it may be about more than “cajones”. Sometimes an IP just doesn’t allow the kind of freedom a developer needs, and it isn’t always because of the licensor. Stinnett’s last project was Star Trek Online, where he constantly marveled at the amount of flexibility they were given to do what they wanted. The question then becomes, will the hardcore fans accept it?

“I like both [original and IP-based MMOs]. Though I think IP MMOs contend with the double-edged sword of familiarity and limitations,” he said. “While it is easier for players to get immersed in a familiar IP-based world, I think they can also come with constraints that hinder great game design.”

Regardless, as IPs driven become more and more common, they are usually tied to higher budgets and a greater fear from investors that a bad product can not only flop a game, but destroy an entire franchise.

“As a rule, the next releases need to go up and up in quality and big name IP helps keep the bar high,” explained Smedley.

Once again, this is somewhere Blizzard has an advantage over most of their competitors.

“The WoW folks have it best of all because they have an amazingly popular IP but they’re still the ones in control of it all,” noted Butts.

Conclusion

The MMO genre continues to grow, but never in a straight line. Everyone we spoke to sees unique trends shaping the industry, and while they generally got along on the major points, there is still obviously a lot of differing opinions on where things will be in a year, let alone five.

What we do know is that 2008 should be a huge test for the subscription model in North America and Europe. Smedley pointed out that in most territories, online games continue to grow, but even he admits that World of Warcraft is the major reason why. This year, Warhammer Online, Age of Conan and Stargate Worlds all intend to test the theory of subscription models, retail distribution and big IP. Will they be the last gasps at the end of an era, or will they cause us to remember games like Vanguard, Tabula Rasa and Auto Assault as abberations on an unchanged course of development? It’s impossible to know now, but as gamers, it definitely will be worth watching.

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