Blizzard Studios = BIG BUSINESS!

[BomberBill]

WoW earns Blizzard Studios a reputed $1 billion a year in online subscriptions.

Can you believe that? I cannot believe that. But, true to its form in relative journalistic integrity, this week's Time magazine has thrown out that figure as fact.

I've really got to get my arse into game development. Think about the inevitable future of gaming here folks. A more globalised world can only mean a more globalised marketplace--as WoW is already proving--and figures like I've just mentioned will be the icing on the proverbial behemoth that will be the Gaming Cake.

New Age Entertainment will most certainly mean the demise of hours spent in front of the TV with consumers instead choosing "virtual worlds" where they'll "be their own heroes" (as Sony so cleverly marketed that seemingly innocuous line in a Zelda playstation game some years back).

One billion clams per year courtesy of one game. How many years will WoW be playable? The next 5? Next 8? Humans are terribly habitual and as Rob has already reported on the addictive nature of the aforementioned game, I wont go into it any further, but think of the revenue this one game will produce?

You cant beat that sort of cash producing product. You simply cant. Casinos and poker machines have nothing on the prospects of gaming. Gaming will go so corporate over the next decade that it will be unbelieveable the money we'll see invested.

Time for me to get my copy of WoW, I think. :lol:

 

[Morton]

Blizzard is supposed to make some incredible announcement early 2007. They might be working on Stacraft 2, Diablo 3, Warcraft 4 or WoW 2 right now. I hope they'll release some cool DX10 game before summer 2007, at least they have the money to make one.

 

[BomberBill]

You're not wrong there, mate. Blizzard truly must have an enormous cash vault to draw on now.

Unlike other businesses, they are in complete control of costs--to a high level anyways--and I can only imagine the developmental freedom that must be at hand for them now.

World Of Diablo, maybe?

 

[cafuddled]

I know I should be happy and really glad for blizzard for creating such a good moneymaker out of a business model that has been going on for decades, but as a gamer and a tight fisted one at that I must say I am rather unhappy.

Ever since I got in to gaming back in the 1990’s there has been MMORPG’s, they where really big in Internet café’s when I was young (that’s how I got in to gaming). But in large I managed to ignore them all choosing the competitiveness of Counter Strike and all other games like to be more fun compared to them. But now after about 6 years of sporadically playing MMORPG’s I am glad I never got in to them. I find them terribly boring and only good for a few months before I want to quit playing. I am the type of person that reaches level 29 then either starts a new player or just quits completely.

But anyway to my point, when I was growing up around the MMORPG’s I would always find my self asking the people that played those types of games “isn’t that a bit expensive to pay all that money a year to play a game, what is it all for”. And with out fail they would always answer back “it’s to cover the cost of the servers and new content needed to play”. Back then I thought that paying $11 (~£5.88) was a high price to pay per month to play a game. But now it’s hit £8.99 to play games like WOW monthly, that’s after the £30 to actually buy the game. I believe it’s become a joke.

Not only are the companies now making millions out of sales of the actual game they developed, that hardly needs any artificial intelligence and needs next to no content created in the offset but they are also making what seems to be 75% profit margin on the cost of what I have always believed to be the cost of keeping the game going. It’s hardly like any charge is needed. Take Phantasy Star Online or Guild Wars for instance. Both where MMORPG’s of sorts but they did not require you to pay monthly instalments.

A few figures I quickly done:

If the 6 billion dollar figure is made out of people playing for one complete year then that would mean, that at the very least (worst case scenario) they would have done 1.66 billion dollars turnover out of sales of the actual game. Now throw in expansion packs every 6 months worth say £20 (~$35) and you would be still talking at an insane amount out money being made. Hell they could even reduce the monthly charge to £2 or £3 a month and they would still have more money than Scrooge Mc Duck, and he swims about in his money!

Am I the only person that thinks the monthly payments are there just for pure greed?

 

[judocricket]

But now after about 6 years of sporadically playing MMORPG’s I am glad I never got in to them. I find them terribly boring and only good for a few months before I want to quit playing. I am the type of person that reaches level 29 then either starts a new player or just quits completely.

If you don't play MMOG's, why does paying for them bother you? If you don't like the idea of paying to play a game, then don't.

Not only are the companies now making millions out of sales of the actual game they developed, that hardly needs any artificial intelligence and needs next to no content created in the offset but they are also making what seems to be 75% profit margin on the cost of what I have always believed to be the cost of keeping the game going.

Yes, they are making millions off of the actual game they developed, but just like with any non-MMOG, most of the money that comes in for that is just to recoup the cost of developing the game. Once that's done, then they can make a profit off it. And yes, Blizzard has made millions just from sales of the game WoW. Just like they did with Starcraft, Diablo and Warcraft, all non-MMOG games. And as for artificial intelligence, quite a bit is needed to make the game world function the way it does. All of the mobs (monsters/enemies) in the game have to be able to react to every class that a person can play. After all, if all the monsters fight back when you hit them with a sword, but not a fireball, soon everyone will be using fireballs. Is the AI in WoW the best there is? No, of course not. But you can't simply write it off either.

As for needing new content, as soon as WoW was released, Blizzard was already working on new content. They knew they couldn't rest on their laurels, and expect people to continue to play past a few months with nothing new.

As for the 75% profit margin, that's nowhere near accurate. If that was the kind of profit margin that could be made on an MMOG, those are the only types of games that would ever be produced, considering how much copy-catting goes on in the games industry.

Take Phantasy Star Online or Guild Wars for instance. Both where MMORPG’s of sorts but they did not require you to pay monthly instalments.

I haven't played Phantasy Star, but I have played Guild Wars (as well as WoW), and I can tell you that pound for pound, GW doesn't measure up to WoW in terms of content. With Factions, and the upcoming Nightfall release, this has changed somewhat, but WoW still has much, much more to do than GW. Add to that the fact that the GW team is trying to release an expansion every six months, and you understand why they don't charge a subscription fee.

Guild Wars has been out for a year and a half I believe, and they are about to release their second expansion, and are gearing up for the every six month release cycle. They have had patches in the time they've been out (no MMOG can escape this), but aside from the expansions, they don't get a whole lot in the way of content updates.

WoW on the other hand will have been out for two years come this November. It has been patched at least 11 times to date, but these patches many times include a LOT of content as well as game fixes. New areas, new mobs, new raids, and other features have been added, changing the nature of the game. The first expansion pack is due to be released by the end of the year.

Am I the only person that thinks the monthly payments are there just for pure greed?

Monthly payments aren't there for pure greed, they are there to support the business model that Blizzard has in place. I don't know if you've played WoW, but there are dozens and dozens of available servers to play on. And each of these isn't just a single server, but a cluster. Think of the amount of server space that Blizzard has to use JUST for WoW. Considering the amount, they wouldn't own all (or any) of it, they would rent it. Also, they have to pay the people who not only created the game, but also the additional content that is being created. They have to pay people to test the game, act as a GM, monitor the forums, etc.

You can point back to Guild Wars and say they do all this too, and they don't charge a montly fee. True, but they aren't on the level that WoW is either. I believe at last count GW had around 2 million people playing. WoW has over 6.5 million playing, and is probably closer to 7 million by this point.

Besides, everyone always forgets the most important aspect of discussions like this. Blizzard is a BUSINESS. It is their job to make money. Yes they make games, great games, but if they didn't make any money, they wouldn't make any games. No gamer should ever be unhappy that a game company is making money, unless they are doing it at the expense of the gamers themselves. Instead of being unhappy that Blizzard is making money, be happy that they are, so they can keep making great games. Maybe we'll finally see Starcraft 2 because of that.

 

[guruofchem]

I too have played both Guild Wars and WoW, and the content in WoW is vastly superior. I am not much of a PvP type in general, so the PvP focus of the GW expansions has not been appealing generally. If you do the math, the cost of playing either game is not that different; once GW gets 2 expansions a year out, you will spend about $100 plus tax, while a WoW subscription will run $150-$180 depending on how you pay it. That is not a huge difference for 2 games with pretty significant differences in content. Looked at in a more realistic way, the cost of a WoW subscription is about what you would pay for a Starbucks beverage or a pack of cigarettes once a week, and that is a pretty small price to pay for a hobby.

The thing that has long worried me about the success of WoW is that the financial success would act as a deterrent to future innovation. Blizzard has created some truly benchmark games, and creativity of that sort is much easier to maintain if you are small, flexible, and hungry. Needless to say, these are not generally characteristics of established, larger companies. I am very interested to hear what the grand announcement will be - World of Diablo would be sweet, assuming it has distinct differences from WoW, and Starcraft 2 would be glorious as well.

I am an unabashed fan of the Blizzard franchises, having spent more enjoyable moments gaming with their products than anyone else's, and the large silence from them on future projects, coupled with the disappearance of some products in production (seen Starcraft:Ghost, anyone?), had led me to conclude that Blizzard had peaked, and was content to rake some well-deserved profits. We'll see if they can dazzle me again with something new, or depress me with something merely derivative and beneath the high standards they have created for themselves...which I will probably end up buying anyway. :lol:

 

[Morton]

LoTR MMORPG could become a serious rival for WoW because of the popularity of the movies, especially if people start to become bored with WoW. By the way, does WoW ride mainly on popularity of Warcraft games or is there some other reason why it's the most popular MMORPG right now?

 

[BigMac]

You cant beat that sort of cash producing product. You simply cant. Casinos and poker machines have nothing on the prospects of gaming. Gaming will go so corporate over the next decade that it will be unbelieveable the money we'll see invested.

Time for me to get my copy of WoW, I think. :lol:

In case you hadn't noticed, Gaming has already gone corporate a while back.

 

[cafuddled]

The point I was making is that they are making too much profit, not the fact that they are making it. When a company that makes game reports a pre tax profit of the like petrol company’s report you know there is some serious ripping off going on.

How much per year would 20 WOW servers cost to run… Not $1 Billion that’s for sure.

 

[guruofchem]

Where did you see their financial reports? I would be very interested to see just how much of their subscription income ends up as bottom-line profit. The other thing that can be difficult to evaluate (even with a financial statement) is the amount needed to fund development of unreleased products (or failed one, for that matter). Game companies are a bit like pharmaceutical companies, in that they subsidize developing and future products with profits from released products, which can make them look like greedy, gouging scumbags when in fact they are merely taking profits in the respectable to borderline excessive range.

I'm with you on the oil companies, though - some major league gouging and price-fixing going on there. Not that anyone will ever be able to do much about it; US politicians don't get elected without supporting big business, and it doesn't get much bigger than oil... :x

 

[judocricket]

The point I was making is that they are making too much profit, not the fact that they are making it. When a company that makes game reports a pre tax profit of the like petrol company’s report you know there is some serious ripping off going on.

How much per year would 20 WOW servers cost to run… Not $1 Billion that’s for sure.

It's not all profit though. BomberBill said they EARN $1 billion a year, not they make a PROFIT of $1 billion a year. That is a HUGE difference.

Let's take 2006 as an example. For the calendar year, Blizzard EARNS $1 billion dollars. That is not pure profit. Blizzard has a whole lot of expenses they have to take care of. First, there are the servers the game runs on. WoW doesn't have twenty servers, it's probably around 50-75 (or more) at this point. And these aren't just servers, they are server clusters. So instead of a single server, you have three, or five, or ten, or however many servers clustered together acting as a single server. A good server today, the kind needed to run WoW effectively, can cost many thousands of dollars. So a cluster could easily cost tens of thousands of dollars. Which means that 50-75 server clusters can easily get into the hundreds of thousands of dollars, and that's just to get the hardware/software purchased, installed and running.

But to my knowledge, Blizzard doesn't own all (or any) of the servers they are using. I think (and I may be wrong) that they rent space at server farms. This doesn't change anything though. The server farms still incur the above cost, cost which is passed on to their customers, in this case Blizzard. You also have to factor in power costs to keep the servers running, HVAC costs to keep the servers cool, and the human cost of the server farms employees, who get paid to maintain the servers. And to respond at a rapid pace if there is a server problem. So this part of the equation can equal many hundreds (if not millions) of dollars alone.

Second, Blizzard has to pay their employees. They have to pay the people who created the game, programmers, designers, artists, musicians, testers, etc. They have to pay the GM's who work in the game, the customer service reps who take customer calls, and all the other employee's who work at Blizzard. Just because this money was made from WoW doesn't mean that it only goes to fund WoW. They also have to pay for the building space that they are in, their power, water/sewer and HVAC needs. They have to pay for maintenance to their building and grounds. They have to pay for a healthcare plan for their employee's, assuming they have one (and I highly doubt that they don't).

Third, Blizzard is a business in the USA, so that means they have to pay taxes. And considering what they earn, they probably have to pay a lot of taxes. And before anyone brings up corporate loopholes, let me ask you when the last time was that the government gave anyone in the video games industry a break on anything.

Fourth, although Blizzard is not a public company to my knowledge, their parent company Vivendi is. Being a public company means they have shareholders, and those shareholders want the company to be profitable. This means that Vivendi is under pressure from the shareholders, and that pressure is then put on each business unit in Vivendi. Fortunately, Blizzard is very profitable, so they get left alone. Blizzard is in the position (like many companies) of trying to please their customers who want the best product at the cheapest price, and please the stockholders of their parent company, who want the best return on their investment possible (i.e., they want to get the most money back for the money they put into Vivendi).

So as you can see, although they EARN $1 billion, they are not making a PROFIT of $1 billion. A very large difference.

I'd like to ask the question again though. If you are not paying to play WoW, why does the amount of money Blizzard makes bother you?

 

[BomberBill]

Mac, of course I was aware of that, but I notice Rob's latest piece is drilling along the corporate theme and by "so" corporate I meant that I had the foresight to acknowledge before actually knowing what was happening that players like Murdoch would move into it.

It annoys me that you take me for an idiot/dolt more times than not.

 

[BomberBill]

And with out fail they would always answer back “it’s to cover the cost of the servers and new content needed to play”. Back then I thought that paying $11 (~£5.8Cool was a high price to pay per month to play a game. But now it’s hit £8.99 to play games like WOW monthly, that’s after the £30 to actually buy the game. I believe it’s become a joke.

Yes mate, you raise a very good point and one that concerns me too. The more regular "subscription" fees that are applied, the more disinclined I am to pay to play.

The theory is, like with any free market situation, that the market will sort itself out.

Now, if you had told me that guys and gals would be willing to shell out the money they currently are to play WoW online I would have said you're mad. But, here we are and the profits are unbelieveable.

 

[BomberBill]

Besides, everyone always forgets the most important aspect of discussions like this. Blizzard is a BUSINESS. It is their job to make money

That's ridiculous! The thread is entitled Blizzard Studios = BIG BUSINESS!

:lol:

Otherwise, I think you made some fair points.

 

[BomberBill]

It's not all profit though. BomberBill said they EARN $1 billion a year, not they make a PROFIT of $1 billion a year. That is a HUGE difference.

I'd just like to re-stipulate the point, that the figure quoted is earned money for online subscriptions alone. Game sales etc., are separate.

Yep, costs for the business (including servers and continued development, wages etc..) are to come out of that plus whatever profits they're making from their other products must be included for the entire business; but I think we can all agree that Blizzard is enjoying a terrific bottom line.

 

[jacobdrj]

Interesting numbers. I never would have immagined that a pay subscription game service could ever be sucessful. I can't say it is ever something I would participate in. I remember playing RuneScape religiously in high school. But as soon as they 'added' pay subscriptions, all bets were off, and the game (while still thoretically free if you wanted) went down the tubes.

I never had a problem paying an initial fee to 'get into the club', but all this subscription stuff... I don't even like having a subscription to my Cell Phone, I use a pay-as -you-go service. Why would I add another monthly bill to my utilities?

 

[BomberBill]

Interesting numbers. I never would have immagined that a pay subscription game service could ever be sucessful. I can't say it is ever something I would participate in. I remember playing RuneScape religiously in high school. But as soon as they 'added' pay subscriptions, all bets were off, and the game (while still thoretically free if you wanted) went down the tubes.

I never had a problem paying an initial fee to 'get into the club', but all this subscription stuff... I don't even like having a subscription to my Cell Phone, I use a pay-as -you-go service. Why would I add another monthly bill to my utilities?

Hey, great points, and I think similarly, but guess what! They're not only paying, my friend, they're lining up at the proverbial pearly gates to have a crack at the game and you want to know why?

Because like the hugely successful "The Sims" people get to socialise in a virtual manner. The game is so red hot that people are saying, "you know what, I can justify the amount every month, its not too bad and if i lessen my trip to the cinema [which is happening] and if i work that extra part-time shift at [insert fast food joint] then I can afford to play,"

Ok, simplistic and jovial example used there, but its true. People, in particular younger people, are re-prioritising their time to factor in the "new" entertainment and they're watching less and less of tv, playing sports etc..

Remember when pay tv was ad free and the subscription was cheaper? Now there's ads in everything and they've jacked up the prices courtesy of a very clever marketing ploy that entices and then dices the consumer; its happening every day.

Rob Wright produced an article on the game's addiction, which saw an expert argue that 40% of players are hooked. If they are indeed psychologically hooked to the game then they will prioritise their time to play no matter what--including shelling out the money to enjoy the game.

Personally, I'm glad I am yet to buy it, but I will, and I will buy the timecard like everyone else and repeat the subscription if I love it.

Wouldn't you if gaming was your favourite hobby and this one game gave you enjoyment that nothing else could? I'm telling you, there are more and more people who love gaming that much that they would answer that question flat out YES quicker than I can change a set of underpants.

 

[Morton]

The current system of monthly fee subscriptions almost every massive multiplayer game uses is somewhat disturbing. You have to pay 5-20$ a month and you can play as much as you want. Isn't one of the reasons why people are becoming obese nowadays that there are restaurants where you pay a certain fee and you can eat as much as you want? People who work and have other activities, and who can play an MMORPG only 10 hours a month pay 1$ for each hour, while people who play 10 hours a day pay only 3 cents. The problem is that in most cases there are no other alternatives than the set monthly fee. I wonder if any people have tried taking the case to the court, claiming that their addiction to a MMORPG resulted in the way monthly fee system is arranged. If I remember correctly, there had been such legal cases with those restaurants. It's possible that if the general population and the authorities become more worried about how much time the younger generations spend with computer games, someone might bring their attention to that monopoly in the payment policy of MMORPGs (of course, to make a nice sum of money on legal cases and such).

 

[cafuddled]

If anyone has seen the World Of Warcraft piss take on South Park then that explains everything perfectly :lol:

 

[judocricket]

That's ridiculous! The thread is entitled Blizzard Studios = BIG BUSINESS!

Otherwise, I think you made some fair points.

Duly noted and chastised. (I'm just glad this is Gaming, and not Other, so that my chastisment doesn't leave any permanent scars.)

This pay to play argument is one I've had many, many times with a number of my gaming friends. And what it always comes back to is willingness. Blizzard made a product and offered it to the public. And obviously, the public was very willing to support this product. Frankly, I'm happy about this. I love Blizzard, and the games they produce. I've lost count of the hours I've played their games, but I still remember all the great moments from them. I remember staying up all night to finish Starcraft, beating it just as the sun was coming up. I remember playing Diablo and Diablo II for hours on end with my friends. I remember the first time I played Warcraft II online. I want Blizzard to do well and make lots of money so they can keep making great games. Now, they just need to make Starcraft 2!

Talking about taking Blizzard to court because of WoW is a very bad idea. The talk of addiction/obesity/money spent on the game, and suing to change any of it would set a very dangerous precedent. Because if they (government, authorities, etc.) start to view WoW as dangerous, how big (or small) a step would it be for them to consider ALL video games dangerous. After all, the only difference between WoW, and a game like Battlefield 2 is that one charges for online play and the other doesn't. You know that's not true, and I know it, but would anyone who doesn't play games know it?

 

[BomberBill]

The current system of monthly fee subscriptions almost every massive multiplayer game uses is somewhat disturbing. You have to pay 5-20$ a month and you can play as much as you want. Isn't one of the reasons why people are becoming obese nowadays that there are restaurants where you pay a certain fee and you can eat as much as you want?

Yeah, for sure, its one of the reasons. A sedentary lifestyle is, most typically, the norm for a good percentage of people these days (I'm in Australia and we have horrendously high levels of overweight and obese people here).

I cant mouth off at that though because at the moment I'm 5'10 and 94 kilos (206lbs) which is overweight for sure and only another few kilos from being obese when one factors in the BMI (I got a rating of 29.7 here: BMI).

The more I sit on my ass at work on the computers and then at home on the computers, the less I'm burning those calories so, yeah, for sure, our lifestyles are no good when there's such an imbalance.

People who work and have other activities, and who can play an MMORPG only 10 hours a month pay 1$ for each hour, while people who play 10 hours a day pay only 3 cents. The problem is that in most cases there are no other alternatives than the set monthly fee.

Ok, now I thought Blizzard only billed you for the actual game hours you use and that there is only one flat rate. I dont know, maybe you're right and I missed something, but if what you say is correct then there is an ethical issue there with regards to discrimination against certain types of players.

It's possible that if the general population and the authorities become more worried about how much time the younger generations spend with computer games, someone might bring their attention to that monopoly in the payment policy of MMORPGs (of course, to make a nice sum of money on legal cases and such).

In a major newspaper here there was a essay written by a respected journalist who articulated well the argument against kids having access to games. His biggest theme was the health of the kids (not game violence etc..) and I have no doubts parents would have read it and agreed, and to be frank, so do I.

It wasn't until my mid 20s that I developed a few extra kilos in weight; as a kid I did nothing but play sport first, game second, study last. :lol:

 

[BomberBill]

Duly noted and chastised. Smile (I'm just glad this is Gaming, and not Other, so that my chastisment doesn't leave any permanent scars.)

:lol: No worries, mate. Its all good!

This pay to play argument is one I've had many, many times with a number of my gaming friends. And what it always comes back to is willingness. Blizzard made a product and offered it to the public. And obviously, the public was very willing to support this product. Frankly, I'm happy about this. I love Blizzard, and the games they produce. I've lost count of the hours I've played their games, but I still remember all the great moments from them. I remember staying up all night to finish Starcraft, beating it just as the sun was coming up. I remember playing Diablo and Diablo II for hours on end with my friends. I remember the first time I played Warcraft II online. I want Blizzard to do well and make lots of money so they can keep making great games. Now, they just need to make Starcraft 2!

Absolutely! Yeah, I'm all for them raking in the dough. Its a correction in the entertainment marketplace and it was always, always, going to happen.

I dont want to go to a cinema and pay a rip-off price for less than 2 hours of dreary-arsed Hollywood "entertainment" (that's just one example of someone re-prioritising their time to enjoy the gaming entertainment medium). I've waited for years for games to get this good and the future is smelling like roses because companies like Blizzard are getting bigger and better by the day! I'm with your, mate. Its all good.

Talking about taking Blizzard to court because of WoW is a very bad idea. The talk of addiction/obesity/money spent on the game, and suing to change any of it would set a very dangerous precedent.

For sure, and in my opinion, that kind of case would be considered at best to be frivolous.

 

[guruofchem]

Ok, now I thought Blizzard only billed you for the actual game hours you use and that there is only one flat rate. I dont know, maybe you're right and I missed something, but if what you say is correct then there is an ethical issue there with regards to discrimination against certain types of players.

I think the point he was making is that we all pay the fee, but the more we use the game, the less it costs on a per hour basis. Someone who plays 10 hours a month is paying about a dollar an hour for the privilege, while the 100 hour/month player pays more like 10 cents an hour. Paying a flat fee tends to make people feel guilty about not playing (wasted money and so forth), and so encourages players to be on more.

 

[BomberBill]

Ah, ok, look, I dont own the game so dont know the ins and outs.

But are you saying that your time credit runs out monthly does it? Is that how it works? I thought it worked that you were only billed for the time you were logged on?

Sorry chaps, I must be missing something here.

 

[Morton]

Ok, now I thought Blizzard only billed you for the actual game hours you use and that there is only one flat rate. I dont know, maybe you're right and I missed something, but if what you say is correct then there is an ethical issue there with regards to discrimination against certain types of players.

I think the point he was making is that we all pay the fee, but the more we use the game, the less it costs on a per hour basis. Someone who plays 10 hours a month is paying about a dollar an hour for the privilege, while the 100 hour/month player pays more like 10 cents an hour. Paying a flat fee tends to make people feel guilty about not playing (wasted money and so forth), and so encourages players to be on more.

Yes, that is exactly what I implied. Unfortunately, that's how it works with most MMORPGs. I would gladly subscribe to some interesting MMORPG but I usually prefer to divide my time between many different games and other activities than dedicate all of my time just to one game. It would be great if you could pay the fee and choose either unlimited amount of gaming hours for the duration of 30 days (the system used now) or 50-100 gaming hours which you could use when you want during the next 60-90 days or even 12 months.