escembachelor

The Massively Multiplayer Online Role Playing Game: Resistance & Competition

Alexis Kissan Jason Barth

Thesis of applied specialty Year: 2011-2012

"The views expressed in this document are those of the author."

ABSTRACT
Alexis Kissan Jason Barth, for the Bachelor in Business Management and Commerce, presented on May 2nd , 2012, at ESCEM. Title: The Massively Multiplayer Online Role Playing Game: Resistance & Competition The interactive entertainment industry has seen impressive growth over the last decade. No longer a sub-market, it has become a major player in the world economy. This is ability to continue growth with little impairment during economic decline, such as the 2008 to 2012 recession, has permitted developers in the industry to move from niche target markets to the larger casual consumer market. With growth has come variety, which can be seen with the array of gaming hardware and genres available today. In particular, the rise of the massively multiplayer online role playing game has resulted in impressive, unexpected statistics that continue to break sales records world-wide. The online gaming community has become a solid, reliable market to which many developers have oriented their products. The purpose of this study is to explain the factors have contributed to the success of the MMORPG industry, with an emphasis on the competitive nature of the industry developers and their strategies employed over time. This study was built on a variety of theoretical backgrounds and studies. The sources used range from previous studies published by recognized universities, online articles from reputed sites, and information gathered through personal efforts such as direct interaction with industry competitors.

ACKNOWLEDGEMENTS
I would like to begin by acknowledging ESCEM School of Business Management and Commerce for giving me the opportunity to carry out this project. The administrative team has provided me with great support throughout the completion of my research and dissertation for which I am grateful. ESCEM has provided me with the necessary tools to ensure the quality of my research. In particular, I would like to thank Brigitte Grandiere for her constant support and guidance over the last 7 months. Her advice has allowed me to work diligently and effectively in order to produce this report. The regularly meetings have been insightful, giving me a better understanding of areas that required improvement and an appreciation for having a supportive reference. I would like to acknowledge the Dalhousie Killam Library for allowing me to access it's online data base. The quality of this report would not have been achievable without the permission to higher my knowledge through the information available. I am thankful for all of the professors that have helped me improve my skills over the past years. I greatly appreciate their teachings and the time they have taken to spread their knowledge to the younger generations. In addition, I am thankful for the support I have received from my family, that has instilled in me the value of higher education. They have given me the motivation and courage to work through difficult times and persevere. Their love and support has contributed greatly to the completion of this thesis.

Table of Contents
INTRODUCTION

.......................................................................... 6

INTERACTIVE ENTERTAINMENT INDUSTRY ......................................................................................................6 MASSIVELY MULTIPLAYER ONLINE ROLE PLAYING GAME .............................................................................7 ISSUE: HOW DO MMORPGS DO IT? .................................................................................................................8 1. FOCUS: MAIN INDUSTRY COMPETITORS

............................................ 10

1.1 ACTIVISION BLIZZARD - WORLD OF WARCRAFT ........................................................................................ 10 1.2 ARENANET - GUILD WARS 2 ..................................................................................................................... 11 1.3 BIOWARE - STAR WARS: THE OLD REPUBLIC ............................................................................................. 12 2. P.E.S.T. ANALYSIS OF THE VIDEO GAME INDUSTRY

................................ 14

2.1 POLITICAL ................................................................................................................................................ 14 2.2 ECONOMIC ............................................................................................................................................... 15 2.3 SOCIAL ..................................................................................................................................................... 17 2.4 TECHNOLOGICAL...................................................................................................................................... 19 P.E.S.T. CONCLUSION .................................................................................................................................... 22 3. MARKETING MIX: THE SUCCESS OF MMORPGS

.................................... 24

3.1 TARGET MARKET ..................................................................................................................................... 24 3.2 PRODUCT.................................................................................................................................................. 25 3.2.1 MMORPG Genre .................................................................................................................................. 25 3.2.2 Unique Selling Proposition .................................................................................................................. 26 3.3 PRICE ....................................................................................................................................................... 28 3.3.1 Development Costs ............................................................................................................................... 28 3.3.2 Purchase Price & Bundles ................................................................................................................... 29 3.3.3 Subscription Fee ................................................................................................................................... 30 3.4 PLACE ...................................................................................................................................................... 31 3.4.1 Retail Distrbution ................................................................................................................................. 31 3.4.2 Digital Distribution .............................................................................................................................. 32 3.5 PROMOTION .............................................................................................................................................. 32 3.5.1 Advertising ........................................................................................................................................... 33 3.5.2 Early Access ......................................................................................................................................... 34 MARKETING MIX CONCLUSION ..................................................................................................................... 35 4. THE FUTURE CONCLUSION

......................................................................... 37

........................................................................... 39

Introduction
As a sector of the Interactive Entertainment Industry, MMORPGs have evolved into one of the most recession resistant consumer products on the market, proven by the market's strength over the last four years. The 'Interactive Entertainment Industry' refers to companies in the media sector that design, create, and distribute content in which the consumer choice directs the course of events that take place. As such, this industry consists of a variety of forms of entertainment, most noticeably video games. With the recent world economic crisis, many markets are only just now regaining strength, allowing for a rise in household spending and for retail products, among others, to shine once again. Despite the recent good news, the 2008 to 2012 period saw great hardship for many industries including real estate, construction, wholesale and retail1. Video games, however, and more importantly MMORPGs, saw little decline in comparison during this period. In fact, US computer and video game sales have doubled in the last decade alone. With the recession changing consumer habits and technology becoming more innovative and accessible than ever before, it is to no surprise that the MMORPG continues to succeed in today's market.

Interactive Entertainment Industry

The term "Interactive Entertainment Industry" encompasses a broad spectrum of entertainment genres including video games played via different platforms such as consoles, handheld devices (portable consoles, mobile phones), and PCs or laptops. As of 2012, the interactive entertainment industry holds its place on the world economic scale as a growing influential industry that has developed largely due to wide spread availability of household internet and investments in technological advancement.2 "Video games should no longer be viewed as the exclusive domain of antisocial teenage boys, but rather as part of the commercial mainstream."3In recent years, sales in video games have grossed higher than the movie box office industry. This phenomena is traceable
1 2

"Casualties of the recession: insolvencies by industry." 2010. "Internet Users in the World." 2011. 3 Wesley, David & Barczak, Gloria. "Innovation and Marketing in the Video Game Industry: Avoiding the Performance Trap." 2009.

back to factors such as a rise in unemployment, public need for new forms of entertainment, and demand for quality entertainment with high returns for affordable investment. The interactive entertainment industry is broken down into different sections. The closed system, console-based market consists primarily of industry leaders Microsoft (Xbox 360), Nintendo (Wii), and Sony (Playstation 3). These companies, which retain the largest portion of market share, offer consumers predesigned console hardware which is aimed at running video games specifically designed for these systems. These companies also offer portable version of their systems such as the Sony PSP and Nintendo DS. While the console gaming community has grown tremendously over the last two decades due to consoles being casual-friendly and the large marketing campaigns carried out by developers, this section of the industry does not have the technological benefits provided to consumers in the personal computer based gaming community. PC gaming has brought about much more than improvements in graphics design, it has created an online, world-wide community in which players of types can interact. Though the online gaming aspect now exists in console form as well, it is much more limited than the PC counterpart in terms of options for interacting and programming. Originally oriented towards hardcore gamers, the PC gaming world has opened its doors to the casual gamer, allowing for players to gather in the same online universe, each with their own personal story and goals. According to a report done by DFC Intelligence, this particular market segment is expected to grow from $15.7 billion in 2010 to $29 billion in 2016.4

Massively Multiplayer Online Role Playing Game

As a result of widespread internet accessibility and the growing demand for innovative forms of entertainment, the MMORPG sub-genre arose. This particular genre differentiates itself from other online games through its concentration on giving players

Usher, William. "Video Games Market To Grow From $52 Billion In 2009 To $86 Billion By 2014. " 2011.

the role of a character in a fantastic, persistent universe. The player interacts with computer generated characters and other players in real-time to progress through content. The merge of the RPG with the MMOG industry has lead to fundamental changes in gaming. It is becoming industry norm for consumers to expect social interaction between themselves and other players through some or all aspects of their gaming experience. For companies such as Activision Blizzard, ArenaNet, and Bioware, this consumer expectation leaves room for much of their skill in development to be appreciated. The MMORPG rests as one of the newest forms on entertainment, having existed in as a solid product for little more than a decade, and yet, has played a major role in innovating the overall entertainment market.

Issue: How do MMORPGs do it?

Having nothing more than a general observation of the MMORPG market, it is no feat to determine that there are elements within this particular industry that allow it to resist to economic difficulties. Determining exactly what this elements are and what roles they play will give us a better understanding of what makes an MMORPG different from other consumer products within the interactive entertainment industry. In addition, by looking at the strategies employed by the companies that design these MMORPGs and the features they offer the consumer public, we will be able to realize why, despite financial recession and a declining will for households to spend on luxury products, they are capable of seeing growth and innovation. Understanding the way MMORPG production companies function and how they market their products is one thing, but it is also important to see how it is that they differentiate themselves from competition within the MMORPG market and how they plan to remain successful in the coming years.

More specifically, the question this report aims to answer is: Despite the recent economic recession and decline in household spending, the entertainment industry has continued to experience growth in popularity and stability, primarily the video game sector. How have companies that focus on MMORPGs competed against each other and other sectors of the entertainment industry and how do they plan on remaining as viable competitors on the market in the years to come? The answer will be found through the use of a P.E.S.T. analysis of the MMOG industry environment, an observation of a marketing mix and the strategies applied by competitors, and a study of company business strategies and models for the future market.

1. Focus: Main Industry Competitors

Over a decade ago, MMORPGs emerged as viable and competitive products in the video game industry. Everquest5, which was developed by Verant Interactive and released in 1999, was one of the first fully 3D fantasy MMORPGs to hit the market and is credited for popularizing the MMO genre. Since then, as the industry grew and accessibility of internet expanded, new titles have taken the throne. MMORPGs, released both domestically and internationally, have found their financial success, gained their acceptance into a mainstream market and have become a resistant force to the economic hardships faced over the recent years. While many companies and their MMO titles have been accredited for influencing the industry in different ways, 3 of the current strongest MMORPG companies are Activision Blizzard, ArenaNet and Bioware.

1.1 Activision Blizzard - World of Warcraft6

Originally named Blizzard Entertainment, Activision Blizzard is known for top selling titles including the Starcraft, Warcraft and Diablo series. It's products have "earned several consecutive Game of the Year awards," and have resulted in a an online-game service, Battle.net, that has become one of the most successful in world. World of Warcraft, Activision Blizzard's best-selling product with over 10 million active subscribers7, launched across North America in November 2004. Within 24 hours of its release, the game had sold 240,000 copies and grew to 1 million active subscribers by early 2005.8 The game was later released in Europe in February 2005, following with its China release in 2005 and finally Russia and Latin America in 2008. World of Warcraft is a subscription based game requiring an initial purchase followed by monthly payments of $14.99 USD for access to game servers. With 8 years of activity and approaching a 4th expansion pack, World of Warcraft has been polished to meet needs of many types of MMORPG players. This product offers
5 6 7 8

http://en.wikipedia.org/wiki/EverQuest http://us.blizzard.com/en-us/ "Subscriptions (SS) and Active Accounts (AA) with a peak above 1m ." 2012. "World of Warcraft Shatters Day-One Sales Records." 2004.

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players the choice to focus on either player-versus-player (PvP) or player-versusenvironment (PvE) progression, earn achievements based on different in-game actions (collecting pets, finishing quest lines or dungeons, etc) , participate in the virtual economy or even just role-play with other players. Progression through the game is much like the basic MMORPG model, in which the game requires the players' avatar to acquire new items that enhance capabilities such as armor and weapons. Level progression occurs through the earning of experience points that are awarded for completing quests and dispatching enemies. In 2012, despite having fallen from 12 to 10 million active subscriptions over the last two years, Activision Blizzard remains the leader in the MMORPG industry. World of Warcraft continues to generate record-breaking sales and revenue, with Activision Blizzard expecting yet another successful title launch for its upcoming 2012 title World of Warcraft: Mists of Pandaria.

1.2 ArenaNet - Guild Wars 29

ArenaNet was formed in 2000 in Bellevue, Washington, as a subsidiary of Korean-based NC Soft Corporation. It is primarily recognized for its 2005 release of Guild Wars, a PvP-oriented game that has since seen 3 separate expansions (Factions, Nightfall, & Eye of the North). While not as successful as World of Warcraft, Guild Wars still managed to surpass 6.5 million sales as of 2010. 10 This success can be partially attributed to its unique marketing strategy which revolves around an initial purchase of the game with no following subscription fees (F2P - free-to-play MMORPG). In addition, it was one of the first titles to adhere to casual players rather than requiring tremendous hours of investment before completing tasks. In 2007, only 2 years after the release of Guild Wars, ArenaNet announced a sequel named Guild Wars 2. Though set in the same universe and using a similar title, Guild Wars 2 is far different from its predecessor. Now, in 2012, ArenaNet has announced its
9

http://www.arena.net/

10

Sliwinski, Alexander. "Guild Wars surpasses 6.5 million sales, sequel will be released "when it's done." 2010.

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intention to release this new title within the calendar year and has already built a solid following. Guild Wars 2 is built around the same general marketing and sales strategy originally used for its predecessor, requiring an initial purchase with no required subscription costs. ArenaNet has focused heavily on marketing Guild Wars 2 not only in North America, but also in Europe, where it has developed a heavy German fan base. As for content, Guild Wars 2 offers unique selling points that are not found in most other titles. While most MMORPGs require players to accept and complete quests that are given to them by in-game characters, Guild Wars 2 works on a "dynamic event" system in which quests occur spontaneously in areas across the game world and give the player the option to participate or not. This has been implemented primarily to remove the "grinding", or repetition of a single task, aspect that most MMORPG players dread. In addition, the dynamic event system allows players to come together to defeat worldbosses without requiring premeditated organized groups. With this new project, ArenaNet has focused on implementing aspects that adhere to both casual and hardcore gamers. ArenaNet continues to grow in popularity with its goal to provide quality and innovation to consumers world-wide. Guild Wars 2 will release during the 2012 calendar year, which will provide deeper insight on the success of this new title.

1.3 Bioware - Star Wars: The Old Republic11

Since 1995, Bioware has produced some of the most successful RPG titles to date including the Neverwinter Nights, Mass Effect and Dragon Age series. Acquired by Electronic Arts in 2008, Bioware has since produced its new critically acclaimed MMORPG title Star Wars: The Old Republic. Bioware aims to "create, deliver, and evolve the most emotionally engaging games in the world." Recently, with the growth of the MMORPG industry, Electronic Arts has brought Mythic Entertainment and Bioware together to form Bioware Group. Star Wars: The Old Republic debuted in late December 2011, reaching 1 million registered users shortly after. The success of this recent title is seen by many analysts as
11

http://www.bioware.com

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"a viable market for multiple million-user MMOs in the US and Europe". 12 Sales are expected to reach 3 million by late Spring 2012 and an active million players by the end of the calendar year. While this is not the first MMORPG based on the Star Wars universe (Star Wars Galaxies13), it is the first MMORPG to offer a unique personal story-line questing system that can be found in many of Bioware's single-player titles such as Mass Effect and Dragon Age. Bioware's main marketing campaign revolved around how their product allows the player to personalize the story and follow the paths chosen by the player rather than assigned by the game. In addition, players can come together and share their experiences all while preserving their personal story. While this title follows many of the same building blocks that other titles including World of Warcraft follow, it is a sign of progression in the MMORPG industry, giving both casual and hardcore gamers freedom of choice and more polished story lines. Though it is still too early to determine how successful Bioware's new title will be on the long run, early signs show that Star Wars: The Old Republic has the potential to be a key product on the MMORPG market.

12 13

Makuch, Eddie. "Star Wars: The Old Republic peak concurrent users top 350,000 - Analyst."2012. http://en.wikipedia.org/wiki/Star_Wars_Galaxies

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2. P.E.S.T. Analysis of the Video Game Industry

The purpose of this P.E.S.T. analysis is to clarify the different environmental elements of the interactive entertainment industry and to look at the role that these elements play in the success of an MMORPG. Regulations controlling the content released by games, the economic health of the industry, the qualities of the consumer and their habits, and advances in technology all affect how MMORPGs perform against other parts of the entertainment industry. A proper P.E.S.T. analysis shows the impact each element of the industry has had on companies such as Activision Blizzard, ArenaNet, and Bioware. These companies, despite economic troubles over the recent years, have managed to continue growth and success.

2.1 Political
An important element to consider as an MMORPG developer company is whether or not the product respects the regulations put forth by local regulating bodies. This can prove to be complicated for main stream companies as laws differ from one market to another. Factors ranging from cultural differences to simply regulating the market share companies have in specific markets contribute to this. While some may see these differences as minimal, they can also prove to be quite costly. In addition, major titles often face smaller, independent companies that attempt to imitate MMORPG products, largely due to the success that these video games have. In North America, games undergo strict tests to ensure they are adequate for public use. Though all games must respect universal law, they must also be filtered and rated through entities such as the Entertainment Software Rating Board (ESRB). Such organizations assign age and content ratings to video games based on several factors including violence, sexual situations and language among others. Other countries, such as China, fall under much stricter regulated bodies. These are often government bodies rather than independent organizations. "The operation and production of video games is highly regulated by the state through various authorities of the central PRC government, such as
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the Ministry of Information Industry, the State Administration of Industry and Commerce, the Ministry of Culture, the State Press and Publication Administration, and the Ministry of Public Security."14

The Bill 70 passed in 2005 in Canada requires all new MMORPG products introduced to the market to be rated through the ESRB by the Ontario Film Review Board (OFRB). This means that MMORPGs are subject to the OFRBs approval before being released on the Canadian market. For larger titles like World of Warcraft, such regulations are usually of little to no concern. However, for companies looking to release smaller titles, such ratings which are enforceable by law may prove to be an obstacle when trying to introduce a new product, especially for those targeting specific demographics such as games oriented towards adults only. For Activision Blizzard, the introduction of their expansion titled Wrath of the Lich King for their world-wide success World of Warcraft proved to be more complicated than expected in China. The lore for their release revolved largely around the raising of an undead army that is led by a Death Knight named Arthas. The Chinese regulatory body The9, which handles licensing and distributing successful MMO titles in China, declined the release of Wrath of the Lich King under the precept that the use of skeleton models in an online game was unfit for the Chinese market, which makes up for the majority of the World of Warcraft playerbase.15 For Activision Blizzard, this meant their product had to undergo major, costly cosmetic changes.

2.2 Economic
It is universally thought that the economic health of a market has a direct effect on the retail industry. Such economic conditions, like the ones found in North America during the world economic crisis from 2008 to 2012, have not had as dramatic of an impact on the gaming and entertainment industry as they did on other sectors. 16 In fact, several statistics hint that the economic difficulty faced by the population may have boosted the
14

Cao, Yong. "Advertising a Virtual World: Content Analysis of Chinese and U.S. Video Game Advertisements." 2010. 15 Funk, John. "China Blocks WoW: Lich King Release." 2009. 16 Anonymous. "World Economic Situation and Prospects 2012 ." 2011

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sale of video games, and MMORPGs in particular. One statistic to observe would be the $25.1 billion spent on video games in North America in 2010 alone. The U.S. interactive entertainment software industry has been the fastest growing industry in North America.17 The statistics that have been recorded by the ESA show staggering results, with annual growth rates between 2005 and 2009 averaging at 10.6% per year. In comparison to the slow growth (1.4% annually) of the overall economy during the world economic crisis, one can take into account the impressive resistance this part1cular industry holds. When taking into account that 72% of American households play video games 18 , it is to no surprise that the potential for success in this industry exists.19 MMORPGs, compared to the overall gaming industry, participated considerably to the growth of the entertainment industry. This boost in MMORPG demand during the 2008 to 2012 period can be attributed to several factors. The economic slow-down lead to an increase in unemployment20 rates across North America (approximately 3% mid-2008 to mid-2009). This meant that unemployed individuals were spending more time at home in need of activities. MMORPGs offer the most cost-effective form of entertainment, providing endless hours of game play to any individual in search of an activity in the form of social gaming in exchange for an initial payment plus any additional subscription fees that may apply. A noticeably influential trend in the MMORPG industry is that there is a shift from pay-to-play* to free-to-play games. This eliminates either the monthly payments and/or the initial down payment for the games, making them accessible to those who are either against paying long term fees for server access or simply cannot financially absorb subscription costs. In addition, the increasing accessibility of performance technology and the growth on online purchasing and downloading of video games made it easier for the population to access MMORPGs. The RPG genre has experience greater success on the computer scene at 13.9% of game purchases for PC being of this genre, while only 5.8% of purchases for consoles were
17 18

Refer to Annex 1 & 2 & 3 Anonymous. "Essential Facts About The Computer And Video Game Industry." 2011. 19 Refer to Annex 3 20 Refer to Annex 4

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RPG-style games. For industry champion Activision Blizzard, digital online channels of revenue went from a 1.27% increase in 2009 to a 1.56% increase in 2011 (1% increase), while retail sales fell from 3.08% in 2009 to 2.51% in 2011 (13% decrease). The video game industry is not only recognizable for the growth it has experienced in overall sales. Increased interest in this particular industry has attributed to the creation of thousands of jobs for Americans. ESA statistics show that from 2005 to 2009, employment in the U.S. computer and video game software publishing sector grew from 22,986 to 32,031 (almost 40% increase over 4 years). Overall compensation for the sector hit an impressive $2.876 billion in 2009, with the salary of employment averaging at $89,000. With the North American market steadily recovering from recent years of recession and the success of the online gaming industry, the outlook for MMORPGs is positive. Rising online sales, availability of technology, awareness of return on investment and the overall shift towards interactive entertainment are all contributing factors in the MMORPGs rise to the throne.

2.3 Social
The demographic overview of the gaming community is important to consider when analyzing the industry. By understanding who plays video games, their gaming habits and their preferences, among other factors, companies can develop products that are oriented towards the largest number of consumers. Specific details that are taken into account include the consumer age, gender and preference of game genre. The demographic information presented by ESA with personal observation is as follows: The average American gamer is 37 years of age at 53% of the gaming population falling within the 18 to 49 years of age range. Despite common belief, only 18% of the gaming population is under the age of 18. This observation can help determine that video games can be easily oriented towards a mature audience, provided that it remains limited in terms of explicit and violent content. More mature consumers often consider games to be

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stimulating, allowing the brain to adopt creative thinking and giving consumers the ability to adapt to situations through prolific solutions.

Of those who purchase video games most frequently, 52% are male and 48% are female. While the large majority assume that playing video games is reserved almost solely to males, the facts show that the community is split approximately evenly between male and female. This means that it may be preferable for companies that produce video games to feature content that appeases to both sexes. As recent trends show, "quality of game graphics, an interesting storyline, a sequel to a favorite game, (and) word of mouth" are all important, sought-out features in computer games, making it important that content be attractive for both the male and female community.

When observing the social habits of the average gamer, 33% admit that playing games ranks as their favorite form of entertainment. This helps determine that a large portion of regular gamers have chosen gaming as their top activity and are likely to remain loyal to the industry over time.21

Significant information to consider, especially as an MMORPG production company, is that 19% of frequent game players are willing to spend money to play online games. This is crucial for MMORPGs as most require either an initial down payment and possibly additional monthly fees for server access. The knowledge that players are willing to provide the currency in exchange for access to this form of entertainment means that there is a potential for MMORPG consumers.

In regards to game genre, of all computer games sold in 2010, role-playing games were the second most appreciated genre in the industry. For MMORPG companies, this represents the potential for their products to succeed on the market. A benefit that is provided by MMORPGs in particular is that unlike single-player RPGs, there is a persistent world with, up to, millions of active players. This allows for consumers to go

21

Yee, Nick. "The Proteus Effect: The Effect of Transformed Self-Representation on Behavior."

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through the content of their choice, whether it is player-versus-player or player-versusenvironment, all while socializing with other players via an internet connection.22

As for social interaction between family members, 45% of parents admit to playing video games with their children at least once a week, with 81% admitting that it is "a good opportunity to socialize with the child." By understanding this behavior, MMORPG products can be adapted to create situations that allow consumers of all ages to participate in the same content while socializing with one another. The information provided by the 2011 ESA report "Essential Facts About the Computer and Video Game Industry" provides data that can help develop MMORPG products that are satisfactory for different consumer types. As MMORPGs are open to varying content, different aspects may interest specific tastes and can be adapted over time as trends change. It can also be assumed that since the majority of video game consumers are over the age of 18, the financial back-bone is more likely to be present for possible subscription fees. In addition, real-time social interaction through MMORPGs, taking into account the variety of active gamers (age, sex, etc) allows for a diverse community, potentially under the same MMORPG title.

2.4 Technological
Modern technological advancements have a direct effect on the interactive entertainment industry. Video games in particular rely on innovation for purposes such as graphic animation, accessibility and performance of system hardware for consumers, offering better connections to servers via internet, among other purposes. Driven by the growing demand for innovative products, technological advancements are impacting our day to day lives. The last decade alone has brought us closer to realizing a Star Trek-like future, with smaller, more portable communication devices, improvements in processing speed and graphic potential on laptops and personal tablet computers. For MMORPGs, advances in technology means more than just offering better visual representations of

22

Refer to Annex 5 & 6

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avatars and the environment; it means offering new experiences and quality content at a completely new level. What types of advances are we seeing? A company named Emotiv Systems, a leader in neuro-technology and designer of the Emotiv EPOC, has moved forward into new technological horizons.23 The EPOC is a brain computer interface (BCI) designed for the gaming market. Though a series of 14 saline sensors, the EPOC detects electrical brain activity and can be used to play games that are specifically designed. While this technology remains limited in regards to its application to many daily uses, it is the initial step towards video games controlled through thoughts, feelings and expressions.24 "Experience the fantasy of controlling and influencing the virtual environment with your mind." - Emotiv Systems Advancements in technology are not limited to the hardware that video games run on, but also extend to the non-tangible aspects of gaming such as visual representations, physics engines, and other aspects related to programming. Havok, a leading developer of game technologies, has impacted the industry tremendously. One of the major products offered by Havok is the Havok Physics engine. This engine "offers the fastest , most robust collision detection and physical simulation technology available" 25 for the gaming industry. This scales from simulating the destruction of a building in detail down to sheets of stray paper being thrown around by the wind in an alleyway. What engines such as this one strive for is integrating as much realism into the gaming environment as possible to give the player the ultimate gaming experience. An important aspect to understand about the video game industry is the division between the products open to regular technological updates and those limited by generation. This means that video games offered on consoles are limited in regards to certain aspect updates (graphics, physics engine) while those offered on the PC are, for the most part, much more flexible. For example, previous generations of the Playstation and Xbox have been replaced over the last decade in order to offer consumers better entertainment
23 24

http://www.emotiv.com/ Steere, Mike. "The future of gaming is all in the mind." 2010. 25 http://www.havok.com/products/physics

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through updated visuals and content features. This means that consumers of these products often need to buy new console generations in order to run new games and are sometimes left without the ability to run older video games on the newer consoles. On the other hand, PC gamers have the option to upgrade hardware on a need-basis depending on the games they choose to play. Those who play World of Warcraft have had little need to upgrade hardware in the 8 years it has been on the market and have received regular updates to the game such as new visuals for water, dynamic lighting, etc. In the meantime, those who are looking towards purchasing Guild Wars 2 or Star Wars: The Old Republic, may be required to upgrade certain hardware features such as the graphics card or processor in order to meet the performance necessary to run these newer games. In relation to technology, the success of MMORPGs is partially accredited to their ability to follow innovations through regular updates (patches) and expansions. This means that while console video games often require buying brand new systems in order to run, PC gamers can simply upgrade the video game via internet and then upgrade only the specific piece of hardware needed to achieve proper performance rather than replacing the entire computer.

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P.E.S.T. Conclusion
An analysis of the political, economic, social and technological qualities of the interactive entertainment industry clarifies how the MMORPG, as opposed to other genres of video games, has succeeded to grow despite economic recession. Politically, despite requiring approval from organizations such as the ESA, MMORPG products are designed to be suitable for players of most ages. Companies, including Activision Blizzard, ArenaNet, and Bioware, ensure that the content they provide is adequate for as large a public as possible. This leads to MMORPG games that are accessible to a broad demographic as well as interesting for the companies from a business point of view by providing a larger potential playerbase. When looking at the industry's performance, in simplest terms, business is good. Through the last four years, even with a slight decline in growth, sales of video games have grown. To see this growth, it is important to look at the sales of MMORPGs through both the physical and digital channels of distribution. Overall, while physical sales have dropped almost 11% in 2011, digital sales have compensated for this drop by providing easier accessibility to consumers. In addition, MMORPGs are providing the public with a consumer good that has a high return-on-investment in terms of money spend compared to the experience that the consumer gets out of the product. Bioware's Star Wars: The Old Republic, as of February 2012, has reached more than 1.5 million sales. Taking into consideration it's active competitor Activision Blizzard and the upcoming titles Guild Wars 2 from ArenaNet, analysts are optimistic for the future of this product based on initial sales. The social quality of the industry makes for a rather optimistic lead for MMORPG developers. With RPGs being a top selling genre in the US video game industry, MMORPGs have seen growing interest in the unique selling points they offer. In addition to offering the consumer a fantastic experience, they also provide the ability to progress through content while socializing with other players with similar or different interests. MMORPGs have been experiencing changes in the way they are designed over the last decade and are no longer oriented strictly towards the hardcore gamer public. Activision
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Blizzard, ArenaNet, and Bioware are striving to make their products interesting for gamers of all types, whether it be a hardcore gamer in high school or a casual gamer who has a day job and fathers children. Reaching out to such a broad public has helped MMORPGs resist to the effects of recession. The ability for MMORPGs to synergize with technological advancements is another strength they've had over the years. They provide gamers with a product that is consistently updated without requiring completely new platforms. With mind-blowing innovations, such as the EPOC, continuing to emerge, one can only imagine the potential that the MMORPG market has for the not-so-distant future. During PAX 2010, ArenaNet presented their title Guild Wars 2, showing off new Apple apps and a 3D version of the game. ArenaNet aims at synchronizing their new titles with already successful technology such as smart phones and personal touch pads. The success of the MMORPG comes as no surprise once one understands the qualities of the environment and the benefits that are provided. As one of the few recession-resistant industries, MMORPGs are expected to continue to grow, offering video gamers around the world experiences that will, eventually, no longer be limited to the visual and audible senses.

23

3. Marketing Mix: The Success of MMORPGs

The following marketing mix aims at analyzing the strategies employed by Activision Blizzard, ArenaNet, and Bioware. This serves to better understand how they were able to resist to the economic decline of 2008 to 2012 by remaining competitive in their industry and how they are building towards securing their place in the entertainment and media sector.

3.1 Target Market

Most modern MMORPG titles, including World of Warcraft, Guild Wars 2, and Star Wars: The Old Republic are developed around the idea that they should have enough content to appeal to each type of MMORPG player. Trends over the last decade have shown that companies have turned away from focusing on the hardcore gamer demographic and have shifted towards appealing mass number of casual gamers. This trend makes sense financially, as these companies are essentially seeking the most efficient revenue stream while providing their products and services to the maximum number of gamers. While these companies are oriented towards the same aspects of game content, they do differ noticeably in their methods of approaching the issue. These methods are affected directly by the type of player the company is primarily focused on. Activision Blizzard, leader in the industry,26 has had 8 years to polish their current title World of Warcraft. This time, with experience in the industry and continuous player feedback has allowed Activision Blizzard to orient it's product towards almost any type of player. Initially, like most MMORPGs in the early 2000s, World of Warcraft was released and designed primarily for players who could dedicate hundreds of hours of progression on a single avatar. The majority of late-game content would require players to rely on each other to form groups anywhere from 5 to 40 players and spend multiple hours attempting to achieve a common goal. While this was quite appealing to the hardcore gamer market segment, it was a turnoff for most casual gamers who did not have the time or motivation to dedicate to these tasks. Thus, developers have opened their
26

Refer to Annex 7

24

doors to the casual market, offering more content that does not require players to work together in order to achieve goals, only offering the option to do so.

3.2 Product
At its core, a massively multiplayer online role playing game is a video game where clients access developer company servers via an internet connection through software installed on a computer. Each player controls an avatar, which is a visual representation of the character they choose to play in said universe, and interacts with the in-game universe. As time passes, the avatar progresses in capability and in level as the player explores the game world, completes quests, and slays enemies, among other options. The unique difference between a single player role playing game and an MMORPG comes down to the interaction between the player, the environment, and the ever persistent progression of the universe through a stream of numerous active players. This "persistent" world means that even while a player has been absent from the universe, the game world continue to evolve through the actions of others, whether by events triggered by player achievements or through developer updates.27 3.2.1 MMORPG Genre While referring to the products at hand as MMORPGs, it must be noted that there are core differences between them, each attracting players through different game features. The MMORPG, being by definition a role-playing game, attract players that seek to assume the role of a character in a universe often unlike our own. Other genres in the MMOG market exist as well. Live-action games (first-person shooters) require players to participate in events that are typically faster-paced and more reliant on reaction-time than RPGs. Racing games allow players to control a vehicle and to race other players in a variety of styles and tracks. In addition, players may choose to play puzzle solving games that fall within the Adventure category. Statistics for 2010, presented by ESA, show that RPGs are part of the top selling genres in North America, falling just behind strategy-type games. Activision Blizzard,

27

Sharaput, Markus. "What Counts As Work? Gear, Grinding, and Gold Farming in MMORPGs." 2011

25

ArenaNet, and Bioware all provide MMORPG products that not only adhere to this genre preference but also offer the massively multiplayer aspects as well. 3.2.2 Unique Selling Proposition What truly differentiates an MMORPG from another type of video game in the industry is the unique benefits that are offered. Most noticeably, an MMORPG provides the player with an ever-interactive world with the option to either play solo or to group up with fellow players in order to complete tasks. However, each individual MMORPG offers much more than just this option, which can be observed with the differences in features between the products offered by Activision Blizzard, ArenaNet ,and Bioware. Determining the unique selling points of an MMORPG helps understand what makes said product sell over another in the same industry or another sector of the entertainment market. With the recent world economic recession, it was vital for developers to offer the public something unique that would incite the purchase of the game despite a decline in household spending. Over the 8 years since its release, World of Warcraft has developed the most impressive online gaming community and for good reason. The variety of content that Activision Blizzard offers its customers will leave any player with endless hours of game play. The product is largely based around the idea that players pay their subscription in exchange for content that is regularly released in forms of patches that will provide a continuation of the storyline. For the consumer, this means, despite requiring a monthly subscription, that the game will give them a long term return on investment by providing entertainment, social interaction with other players, and a story that will last multiple months to multiple years. ArenaNet's Guild Wars 2 has worked on building a consumer following based on unique features that are rarely offered in other MMORPGs. The introduction of new combat mechanics, dynamic events, level balancing, and personal story lines has been a heavy proposition for the developer. While traditional MMORPGs have modeled themselves off of successful titles such as World of Warcraft, ArenaNet's Guild Wars 2 is built off of the idea that there is no obligatory form for an MMORPG and that different in-game
26

mechanics and a free-to-play business model can provide players with just as much quality entertainment.

27

3.3 Price
The price of a video game often reflects the profit margins necessary to make up for development costs, the need to remain competitive against similar products, and for the product to remain financially accessible by the masses. While trends have shown that brand-named MMORPGs are initially priced at $49.99 USD, the costs for subscriptions and expansion pack often differ from company to company. The most delicate issue for MMORPG developers is being able to see returns on the budget put into designing, programming, producing, and marketing their products. Development for larger titles will usually last between 3 to 5 years on average, with companies seeing little to no profit during this period. That is why MMORPG developers rely heavily on offering quality products that are priced adequately to see returns and yet remain available to as many consumers as possible. 3.3.1 Development Costs While the exact development costs for MMORPG titles are often undisclosed, they are able to range from almost nothing to the multi-million dollar projects. These development costs take into account the making of the game, marketing, infrastructure (server hardware and support), infrastructure maintenance (electricity, rent, cost of employment), and operating expenses (software updates, regular security and performance programming, moderating). While the budget invested in an MMORPG does not decide the success it will have on the market, it does highly affect the potential quality that consumers can expect. Activision's World of Warcraft is believed to have reached an initial development cost of $30 million USD upon its 2004 release. Since then, the game has seen 3 expansion packs, multiple patches that expanded on in-game content, and had graphic improvements. The total cost for development is unknown but is assumed to rise as high as $150 million. For Bioware's Star Wars: The Old Republic, "based on discussions with industry executives and financial analysts...BioWare and Electronic Arts have spent somewhere between $125 million and $200 million"28 (USD) in development costs, which sets the current
28

Schiesel, Seth. "Lightsaber Rattling in the Online Galaxy." 2011.

28

record for an MMORPG development budget. This can be partially attributed to the "1600 hours of story and 1000 voice actors"29 implemented in the questing system, a feat only accomplished thus far by Bioware. ArenaNet and its upcoming title Guild Wars 2 have yet to disclose development details. 3.3.2 Purchase Price & Bundles Just as in any other entertainment sector, consumers are required to purchase MMORPG product keys via retail stores or by buying digital packs online. Once purchased, players obtain the product key allowing them to create an online account, giving them access to video game content. The initial purchase price for an average MMORPG is about $49.99 USD. However, the aforementioned products vary in purchase price, primarily due to changes in product life cycle, consumer demand and changes in market trends. While players have the option of purchasing MMORPGs for the necessary software only, they are also able to purchase "editions" that may include in-game commodities or physical incentives such as posters, art work, figurines, or soundtrack CDs, among others. World of Warcraft debuted on the market at a purchase price of $49.99 which included installation CDs, a single registration key, and one month of free play time. The game remained at this price for almost 2 years until the release of the first expansion World of Warcraft: The Burning Crusade. On average, expansion packs released by Activision Blizzard are priced at $29.99 USD. As time progressed, Activision Blizzard adapted the purchase price of the game to meet consumer interest, making the game available at discounted prices when purchased in "bundles." Purchase bundles included the original version of the game and x number of additional expansion packs for a price of $39.99. The bundles offered by Activision Blizzard are referred to as "Battle Chests." In addition to the actual game, Battle Chests offered guides that would help new players progress faster. Newly released Star Wars: The Old Republic and soon-to-be released Guild Wars 2 are available through major video game retailers and online via their websites. Purchase

29

Schiesel, Seth. "Lightsaber Rattling in the Online Galaxy." 2011.

29

offers include 3 different options: the Standard Edition at $59.99, the Digital Deluxe Edition at $79.99, and the Collector's Edition at $149.99. The initial purchase price of the products mentioned above has a significant impact on whether or not existing or potential consumers are willing to continue purchasing such products. MMORPG developers must orient prices so that consumers feel their investment is worth the quality and experience. 3.3.3 Subscription Fee Subscription fees have been a characteristic of the MMORPG industry since their rise over a decade ago. The idea behind a subscription fee is that once a player has purchased an MMORPG for its initial purchase price, they are then required to pay monthly fees in order to access the host servers. While there are debates over ethical business practices when applying subscription fees, they are essentially present to help developers cover costs related to server maintenance, customer service, live team support, patches, and additional improvement fees. World of Warcraft has had a continual subscription fee since its release priced at $14.99 USD. Though certain promotional offers allow players some free play time, the subscription fee has been a fundamental part of Activision Blizzard's revenue stream. Bioware has set Star Wars: The Old Republic to follow the same mainstream business model, requiring an identical subscription cost in addition to its purchase. These monthly subscription fees can be satisfied through several proposed payment methods: online by credit card or banking information or by purchasing a prepaid time-card at retail stores. Payments online allow players to either pay per month, per 3 or 6 months or one lump, yearly subscription. Payments ahead of time give players discounted monthly rates. Prepaid game cards come in 60 day purchases and have a registration key that is then entered online via the developers website. Guild Wars 2, unlike its competitors, is based on a Free-to-Play system. This means that players purchase the game once and are not required to make monthly payments in order to connect to developer servers. There has been a recent shift to this type of business model with several key players including Everquest series which went free -to-play last
30

year. These models often seek profit through optional services referred to as micro transactions. These are commonly found in the form of online stores where players can purchase cosmetic in-game items that rarely affect the avatars strength. These items are purchased in order to give players different visual representations of their avatar among other features. By giving players the option of micro transactions rather than requiring them, developers reach out to a larger player base. 30

3.4 Place
Video game distribution is no longer limited to physical retail stores. In recent years, with easier internet accessibility and affordable technology,31 digital distribution of consumer products has started to become a major channel for publishers. As for MMROPG developers, who's consumers are usually already a part of the online community and familiar with online purchasing, digital channels offer a cost effective method of selling their products. The shift from retail to digital channels for MMORPGs means that companies such as Activison Blizzard, Bioware, and ArenaNet have had to focus more on online advertising and making consumers aware of the digital purchasing options they offer. 3.4.1 Retail Distrbution Based on the 2011 ESA report, retail channels for MMORPGs continue to continue to contribute considerably to the overall video games.32 Though this particular channel has experienced a decline since 2008, it continues to provide ways for industry competitors to promote their products through physical appeal of product packaging and a familiar method of purchasing. "But the decline of physical game sales will likely be slow and steady, not drastic, as users have to become accustomed to new ways of paying such as subscriptions or virtual item sales."33

30 31

Nojima, Miho. "Pricing models and Motivations for MMO play." 2008 Shin, Tony. "1996 vs. 2011 - The Internet, Yesterday & Today [Infographic] ." 2011 32 Anonymous. "Essential Facts About The Computer And Video Game Industry ." 2011. 33 Takahashi, Dean. "With online sales growing, video game market to hit $81B by 2016 (exclusive)." 2011.

31

North American video game retailers such as GameStop give consumers the appeal of purchasing the tangible product directly in-store rather than spending money through digital disruption channels, which may feel less like a purchase to some buyers. 3.4.2 Digital Distribution For video game developers of any genre, retail distribution allowed for them to advertise products directly on store floors, giving consumers the ability to test them prior to purchase. By giving the consumers a chance to involve themselves in the story, interest can be obtained, thus provoking the sale. However, as the digital sales increase, these companies must find new ways to promote their games. A major issue during the recent economic crisis for developers was to continue offering consumers the same quality of products while reducing manufacturing costs. Online sales meant little to no need for physical CDs and a reduction in logistics budgeting such as shipping products to retail stores. In order to counter the limited advertising methods offered through online sales in comparison to retail channels, developers release limited day trial versions of their products. This means the consumers can download a limited version of the game, with access to game servers for x number of days. Once the trial is over, the player than has the option to stop playing or to activate their product online through purchase. Other methods to counter this issue include passes that allow players to invite friends for extended trial periods in order to discover the game and offering special promotions that give players avatars that are boosted in-game to allow for faster progression.

3.5 Promotion
The issue for developers in the MMORPG market is being able to continually attract new players to the MMOG universe and to capture the interest of casual and hardcore gamers alike. This means that they need to offer content that varies in terms of difficulty and time consumption in order to meet the lifestyle of a variety of players. For companies in the MMORPG industry, this can prove difficult without proper promotional strategies.

32

Activision Blizzard, ArenaNet, and Bioware have all developed their own ways of promoting the benefits of their games to the public. 3.5.1 Advertising Advertising for MMORPGs takes place on both above and below the line forms. In the gaming industry, the ability of make a product look more attractive and innovating often makes the difference between success and complete failure upon release. Though developers choose different advertising channels as their primary focus, companies such as Activision Blizzard spread their advertisements among the different channels to reach as many casual gamers as possible. Whether it is through television, the internet, magazines or through kiosks at conventions, MMORPG developers have succeeded in creating advertising campaigns for their products that played a major role in their financial success. In addition, the North American market is subject to advertisements that are oriented towards the tangible products rather than the services provided by said developer.34 Activision Blizzard's World of Warcraft has been recognized for several remarkable television advertisements that include celebrities including Chuck Norris, Laurence Tureaud (Mr. T), Aubrey Plaza, and Verne Troyer, among others. Rather than focusing on informing the viewer of features that the game offers, the advertisements aim at provoking humor and imprinting the viewer. This has become a signature for Activision Blizzard in regards to advertising strategies. Developers Bioware and ArenaNet, though not recognized for their television advertisements, are focused primarily on spreading awareness through the online community and promoting at expositions such as PAX and E3. By focusing on online advertisements, developers are able to directly reach the primary target market that MMORPG products are intended for. The use of mainstream websites including those of YouTube, GameSpot, and G4TV gives developers access to the community and provides a communication channel that is more effective.

34

Cao, Yong. "Advertising a Virtual World: Content Analysis of Chinese and U.S. Video Game Advertisements." 2010.

33

3.5.2 Early Access A new trend in the MMORPG promotional strategies is to take pre-release events such as "beta" tests and to turn them into a form of incentive for players who purchase the game ahead of release. This means for titles such as Guild Wars 2 and Activision's Diablo 3, that players who purchase the product months ahead of its release have guaranteed access to the pre-release test servers. While these events come in different forms, such as weekends or week-long access servers, they provide a method for developers to attain consumer interest prior to the release. This method, which serves to both test developer servers for their ability to handle connection traffic and to boost consumer attraction to the features of the game, have helped the MMORPG genre continue to flourish despite economic difficulty.

34

Marketing Mix Conclusion

The resistance of the MMORPG genre to the decline in household spending during the 2008 to 2012 economic recession is no paranormal phenomena. By developing products that are oriented more towards the casual player and ensuring service goes above and beyond expectations, the developers of this industry have been able to continue fueling public interest. Over the last decade, developers have shifted their efforts from products designed for hardcore gamers to MMORPGs that appeal to hardcore and casual gamers alike. This has opened new doors for developers as it provides new revenue streams and the ability to design content in various ways which makes for strong promotional value. The casual gamer, which makes up for the largest part of the gaming community, is the key target market for the MMORPG to resist recession and to ensure a position in the coming years. While subscription-based business models such as the one employed by Activision Blizzard have been a popular method for many larger titles, the recent shifts from pay-toplay to free-to-play have provided the necessary boost that MMORPG titles needed during the decline in consumer spending. This allowed this particular niche industry to continue growing while most other sectors of the entertainment industry saw a decrease in revenue streams. Providing the option for players to purchase More than just offering consumers the right product at the right quality and price, the MMORPGs success can be attributed to the developers ability to promote the video games adequately and to the right public. Knowing when and how to promote the features of each individual product has given strength for intra-industry competition and resistance to the decline in household spending. Not only did the shift from hardcore to casual gamers help boost sales, so did the developers focus on providing players with content that met the entertainment needs of each type of player rather than offering concrete selections that had little flexibility. The MMORPGs success has been due to the contribution of various factors that have allowed it to grow into the entertainment giant that it is today. Now, it is for the

35

developers to continue improving their marketing strategies and designing quality products that continue bringing players knocking on the doors.

36

4. The Future
Though the economic recession which started in 2008 is just now starting to loosen its grasp on most industries, the interactive entertainment industry's resistance has allowed developers to focus less on the present and more on the future. As market trends change and consumers search for newer, more innovative products, industry competitors are striving to offer products that are both desirable and profitable. What exactly are developers planning for the years to come? Developers are envisioning changes ranging from revamping the way games are played to new business models that will adhere to a larger consumer base. If the interactive entertainment industry continues to grow at the same momentum, it will be no surprise if only a decade from today online game shifts from the use of keyboard and mouse to sensors that react to thoughts and emotions. As seen earlier in section 3.4 of this report, technological advances such as the EPOC are bringing about breakthroughs that will change the way players interact with video games. Moreover, recent findings at UC Berkley have shown that it is possible to decode brain activity and reconstruct motion pictures in a computer screen. 35 This very trend has not gone unseen by industry developers, including Activision Blizzard, ArenaNet, and Bioware. Many developers such as Activision Blizzard and ArenaNet already provide MMORPG products that allow players the option of playing in 3D. This means that, given said player has the proper hardware, 3D can be turned on and off as decided by the player. This is but a small step in innovation for the MMORPG genre. Smaller developers, primarily found in Japan and Korea, are investing in research to determine whether or not the application of 4D (use of touch, taste, smell) in online gaming is a viable option. A major goal that has been stated by multiple industry competitors is the need to establish the MMORPG genre as a globally recognized player in the entertainment industry. The genre has been recognized for its great resistance to economic downfalls but has yet to attain the same level of appreciation as it's industry counterparts such as first-person

35

Diaz, Jesus. "Scientists Reconstruct Brains Visions Into Digital Video In Historic Experiment. " 2011.

37

shooters on console systems. It is for this reason that developers plan to maintain and build upon their leadership position in the MMORPG genre by regularly providing new content and game features to further solidify the loyalty of subscriber bases, as well as to expand the global game footprint to new markets. In regards to the MMORPG products themselves, developers who are reaching out to the casual gamer public have started rethinking the way they let players interact with the virtual environment and control their avatar. "Everywhere one looks, simplicity and easeof-use are triumphing over depth and complexity." 36 A shift from complex to simple controls has been a large influential factor in the future of MMORPG gaming. In Guild Wars 2, ArenaNet gives players the option to set up 10 different skills that are used as opposed to World of Warcraft in which players can place up 30 or more skills on a single user-interface. In addition to their products, the leaders of this industry continue to improve their day-today business models as well. As mentioned, though developers such as Activision Blizzard and Bioware maintain the subscription-based business model, the shift from pay-to-play to free-to-play is considerable. ArenaNet's Guild Wars 2 aims at offering the consumer public the same level of quality without requiring players to pay more than the initial purchase price. Whether or not this trend becomes an industry norm is something that the public will see in the coming years. Despite having taken its place on the entertainment market in the last decade, the MMORPG continues to grow in both quality and service provided to consumers and in the innovations that are applied to their use. The future of the MMORPG holds much more in stock than many may realize.

36

Wesley, David & Barczak, Gloria. "Innovation and Marketing in the Video Game Industry: Avoiding the Performance Trap." 2009

38

Conclusion
The ability for the massively multiplayer online gaming industry and its key developers to resist the economic recession of 2008 to 2012 has shown the world the potential that the market truly holds. Despite the decline in household spending and sales in retail channels, competitors in the industry have achieved record sales and continued developing new products with higher levels of quality and service. The massively multiplayer online role playing game genre has become an important contributor to the success of the video game industry, growing from only a few million strong in the late 1990's to hundreds of millions of players world-wide in 2012. In regards to the reasons behind this success, the business models and strategies applied by competitors, in their various forms, have proven that the market strength is present and the potential for growth is ever present. The characteristics of the average video game player have changed dramatically over the first decade of the 21st century, going from the younger, hardcore gamer to the middleaged casual gamer, offering new target markets for developers. The shift from hardcoreonly games to products that appeal to the larger public has allowed competitors in the industry to reach out to a greater population, in turn giving the public a greater appreciation for the MMORPG genre. The recent recession period has resulted in a higher percentage of stay-at-home individuals who, despite efforts in finding employment, are also in need of forms of entertainment that are both adequate in regards to quality and affordable. MMORPGs provide a consistent means to seek entertainment, provide forms of social interaction through the use of video games, and, on a mid to long term basis, offer a high return-on-investment value. Developers Activision Blizzard, ArenaNet, and Bioware have each adapted new business models and marketing strategies in order to provide the highest quality products that are flexible for both hardcore and casual gamers alike. This adaption has brought about improvements in in-game content, such as a larger variety of tasks available, from those requiring individual efforts to those requiring larger groups of players working together. The synergy of MMORPG product designs has synergized well with innovative
39

technologies as well, keeping products, even those dating to the early 2000's, up-to-date and synchronized with consumer needs. In addition, it has brought about changes in game-play mechanics and the way that players are able to interact with one another such as implementation of additional user-interface programs that make social interaction easier. The adaptation of new business models by industry competitors also played a major role in opening the market doors to new consumers. Though many successful titles such as World of Warcraft and newly released Star Wars: The Old Republic continue to require subscription fees, many key players including ArenaNet are shifting to the subscription free model, while others are offering their products for no cost at all to the public.37 The ability to offer free products has come hand-in-hand with the use of micro-transaction shops, which give players the option to purchase cosmetic changes for avatars, among other services. This means companies under the free-to-play business model, often backed by impressive promotional efforts, continue to generate adequate revenue streams despite the lack of a purchase or subscription fee. This particular strategy has helped provide a means for players who are less capable of affording purchase and subscription fees access to the MMORPG genre, contributing considerably to industry growth. The gradual use of digital distribution channels, as opposed to the traditional retail methods, has also made accessibly of such products greater than ever. In addition to efforts employed during the recession, the success of the genre has allowed for developers to focus on the future of their industry. Companies, including those aforementioned, are finding innovative ways to implement new features in and out of the virtual world to facilitate the access to content and improve the over consumer experience. Efforts such as these include the development of mobile applications, third party user-interface programs, use of 3D hardware features, and the recognition of new hardware designs for future projects. In all, the interactive gaming industry has evolved into an impressive force in the world economy, with the sub-markets such as the MMORPG providing a solid backbone. As

37

Refer to Annex 8

40

expected revenue streams are expected to continue on the same path, and competitive forces have shown clear signs for future developments to change the way the public sees online gaming. In regards to the actual presence of the MMORPG in the future, only an optimistic outlook can be implied.

41

Table of Contents
BIBLIOGRAPHY

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ONLINE SOURCES .................................................................................................................................... 43 THESES & PRINTED ARTICLES ............................................................................................................. 47 ANNEXES

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ANNEX 1 ..................................................................................................................................................... 50 ANNEX 2 ..................................................................................................................................................... 50 ANNEX 3 ..................................................................................................................................................... 51 ANNEX 4 ..................................................................................................................................................... 51 ANNEX 5 ..................................................................................................................................................... 52 ANNEX 6 ..................................................................................................................................................... 52 ANNEX 7 ..................................................................................................................................................... 53 ANNEX 8 ..................................................................................................................................................... 54 ANNEX 9 ..................................................................................................................................................... 55 ANNEX 10 ................................................................................................................................................... 56 ANNEX 11 ................................................................................................................................................... 57

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Roquilly, Christophe. "Control Over Virtual Worlds by Game Companies: Issues and Recommendations." Business. Lille, France: EDHEC Business School, 2011, Vol. 35, p. 653-671

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Wesley, David & Barczak, Gloria. "Innovation and Marketing in the Video Game Industry: Avoiding the Performance Trap." Business. Boston, USA: Northeastern University, 2009, 7 p.

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Yee, Nick. "The Proteus Effect: The Effect of Transformed Self-Representation on Behavior." Human Communication. Stanford University, 38 p.

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Annexes

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Annex 1

Annex 2

Source: ESA Statistics, 2011

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Annex 3

Annex 4

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Annex 5

Annex 6

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Annex 7

Source: www.MMOData.net

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Annex 8

Source: NCsoft's Global Success and Future Challenges

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Annex 9
Popular MMORPGs: A list of in-game features

Source: www.wikipedia.com

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Annex 10
Popular MMORPGs: Statistics

Source: www.wikipedia.com

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Annex 11
General Definitions *MMORPG - Massively Multiplayer Online Role Playing Game; is a multiplayer video game which is capable of supporting hundreds or thousands of players simultaneously. By necessity, they are played on the Internet, and usually feature at least one persistent world. *RP - Role Playing; assume the roles of characters and collaboratively create stories. Participants determine the actions of their characters based on their characterization, and the actions succeed or fail according to a formal system of rules and guidelines. Within the rules, they may improvise freely; their choices shape the direction and outcome of the games. *PVP - Player Versus Player; a type of multiplayer interactive conflict within a game between two or more live participants. *PVE - Player Versus Environment; environment where the game-play is more focused on defeating monsters and completing quests. FTP (F2P) - Free To Play; refers to the business model employed by MMORPG developers in which no initial purchase fee or subsequent subscription fee is required to access game servers. PTP (P2P) - Pay To Play; refers to the business model employed by MMORPG developers in which, in addition to a purchase price, a subsequent monthly subscription fee is required to access servers.
*Definitions are directly from Wikipedia

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escembachelor
Name: Alexis Kissan Jason Barth Title of Thesis: The Massively Multiplayer Online Role Playing Game: Resistance & Competition Question: Despite the recent economic recession and decline in household spending, the entertainment industry has continued to experience growth in popularity and stability, primarily the video game sector. How have companies that focus on MMORPGs competed against each other and other sectors of the entertainment industry and how do they plan on remaining as viable competitors on the market in the years to come? Summary: The interactive entertainment industry has become a major economic player over the last decade. Over the years, industry competitors have had to developed new business models and strategies in order to insure revenue streams despite economic hardships. In particular, developers in the MMORPG industry have seen great success despite a decline in household spending. The objective of this thesis is to study the factors that have contributed to the growth of the MMORPG industry and how key competitors have adapted to the new market. We seek to understand the methods employed First, we seek to have a better recognition of the focus groups used in this report and their relation to the industry. The companies chosen vary in terms of product and service, each having their own methods to reach video game consumers. Next, with the use of P.E.S.T. analysis, we will observe the environment in which the MMORPG industry is present and how factors of each element have contributed to the success of this market.

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A marketing mix analysis will then serve to clarify the exact methods employed that have allowed the competitors of the MMORPG industry to continue generating profits and attracting a larger consumer base despite recession. This analysis will vary from the products offered to the distribution channels chosen to ensure adequate sales. The report will close with an outlook on the future of the MMORPG market and the plans that competitors have in store. This will give us a better idea of the direction the industry will take in the coming years and how competitors are striving to remain as viable options for consumers on a long-term basis.

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