Light topic: Speculating about DBG and EQ as a business

Discussion in 'The Veterans' Lounge' started by IblisTheMage, Oct 20, 2016.

  1. IblisTheMage Augur

    So, I am no expert in neither games nor business, but I dabble a bit in the latter, and have a bit of understanding of overall digital trends. However, I do like a good puzzle, and with so many people trying to guess the intentions of DBG, I will come with my own attempt. I hope others with a few minutes to spare much will critique my bullets :).
    · Statement: “EQ is dying”.
    I don’t believe this, not for a moment.
    It is very hard to get facts about the actual numbers of active players, but my gut feeling is the following

    · EQ is a very strong brand. It has been diluted a bit by making new games (EQ2, Landmark, Next), which now seems as a somewhat bad idea, splitting online communities is risking throwing away social capital. We know that now, in 2016, but at the time it seemed like sound business.
    However, gamers worldwide know about EQ, even to some extent in the younger generations. The value of such a brand is quite big, and just keeping the brand alive is sound business.
    · DBG has been trimming cost on a number of areas, which I applaud. DBG is a business, and getting rid of code complexity (for example removing the in-game card game Norrath something) not only makes it easier to maintain the code, it also lowers the cost of adding content. I think they should continue to chop off parts of the game engine that goes unused.
    · Hosting costs are continuously dropping, driven by Moore’s Law, Cloud, and higher performing hardware for a given cost. Having players in instanced zones supports load balancing and virtualization. This also means that it is continuously feasible to join realms (called servers, but I no longer think this is an accurate term). I find it likely that EQ share hardware/cloud capacity/private cloud capacity with the other games in DBG.
    · I think that a DBG game have domain specialists (Like Aristo for Spells & AA, Absor for raids, etc), that work on a script level, and generic developers for more hard core code development (C++?), that can work on any of the DBG games. This will drive down overhead costs, and allow for a matrix organization, with expansion releases being a project.
    · Would the game be better with a lot more resources? I have my doubts. Feature inflation is hell for software, and it can very rapidly take focus away from a lot of core elements that can easily provide for a rich experience. For example, the 10.000 AA that were designed for EoK, are possible to make with relatively low effort due tothe AA consolidation efforts. If only 4.000 AA of these are valuable for a given class/player/play-style, that is 4.000 good AA (or around +25% on top of the ballpark 16k that appears to be current relevant maximum for most classes), from a single expansion, in year 17.
    Darn, that is a lot more than I could have hoped for.
    I do _not_ get annoyed by the rest of the AA that are not really worth it. Call it a spin if you may, but actually having to navigate which AA to take is a game related challenge that I welcome. If this was the brain child of Aristo, and I was his boss, I would make sure to give him a nice Holidays bonus J.
    · DBG is continuously developing revenue streams, at a relatively low cost. This is a good thing, and I strongly disagree when people see this as bad.
    · People spend money on the game. I am a middle class family father of 47, and spending 1000+ USD a year on my hobby seems like a perfectly natural thing for me to do. I don’t buy shoes like my wife (I really hope she does not read this!), I don’t need anything around the house, the kids have what they need, so I am perfectly comfortable with spending a bit on EQ. If EQ players are like my Pen & Paper group, we are 1/3 IT-type geeks in cargo-shorts, 1/3 IT-type geeks dressed up as corporate employees, and 1/3 diverse geeks, with less steady income resources. At least the two first groups can afford something along the lines of me, and the third group (of which many of my friends are, I am in no way speaking badly of them) should be able to either pay the All Access, or buy Krono with PP. In the latter case, the Krono-based player is actually driving a pr. account revenue stream that is higher than All Access ;-).
    Again being highly speculative here, let us assume that an average player spends 500 USD, including expansions, etc. pr year. (And most likely with an 20/80 distribution)
    · Player erosion? What player erosion? As mentioned, realm consolidation is made possible by technology, so taking it as a sign of player erosion is not a sure thing. We are clearly in the long tail of EQ, but that has been true for more than a decade. I suspect that a lot of players leave and come back, driven by for example expansions. I believe to recall that the highest amount of concurrent players for EQ was 600.000, probably around 2004-ish. To drive that, I would guess that you need 5x – 10x as many active accounts, again, back in 2004ish. I would speculate that EQ has been fluctuating somewhere between 10.000 and 100.000 active accounts for the last 5 years. I would also say that the last 5 years of dumbing down of most other games (driven in part by Mobile), was a factor for me to come back. And WoW sucks. Badly. I have a couple of hundred days played in WoW, came back last x-mas, made max level in 3 days, and started getting the same old feeling of WoW = Work.
    · So, how many players does it take to run a business? 10.000 players will, given above speculative assumption of an average of 500 USD pr year pr player, drive a revenue of 5 MUSD; at 100.000 players, drive a revenue of 50 MUSD. If I had to guess, I would say that running EQ, including expansions, in an optimized way, would be less than 5 MDKK USD per year. I guess that the dedicated crew is around 10, matrix crew around 10, including shared manpower of running DBG, management, shared services, etc. I do not know the salary levels in US, but I would speculate that salary budget for EQ related activities would be less than 2.5 MUSD. I would expect that hosting of EQ would be around 0.5 MUSD. Private Equity Funds asks for a minimum 12.5% yield on the invested capital. Throw all these into your mental spreadsheet, and the viability of EQ as a business no longer seems like a stretch, even if my speculative figures are way off.
    · Note that the allegedly much smaller game EQ2 is still alive and kicking, and also producing expansions. I think that game is profitable as well. Even Landmark is operating…(!), Landmark was a beta for Next…
    ·
    Statement: “EQ needs better graphics”
    · EQ already got better graphics. I have been to EoK, and I think it looks beautiful, at least according to EQ standards.
    · If enough EQ players wanted better gfx, someone would have made a skin mod, and there would be a sub culture around it.

    · Statement: “Mages’ pets need some love from DBG”

    · Obviously true. Jobaber needs luve, Baby…
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  2. Vdidar Augur

    Cliffs?
    IblisTheMage likes this.
  3. IblisTheMage Augur

    ?? :)
  4. Tucoh Augur

    Cliffnotes aka Cliffs: Iblis believes that DBG is acting in a way to ensure long-term survival of EQ, and based on the current costs and player-base should be able to do so for the indefinite future.


    I generally agree with everything Iblis said here with the caveat that while feature inflation is a serious concern (and one that hasn't been managed in EQ), content inflation is much less so. TBM was more or less designed when DBG purchased EQ and it had a single new zone, a formulaic group loot system and only a handful of new raids. DBG had an opportunity with EoK to demonstrate that they're interested in improving upon what SoE did by hiring more designers, artists and writers to produce content and come out with a tremendous wealth of content that rivals Ruins of Kunark. I don't believe they went this route.
    IblisTheMage likes this.
  5. Cactuszach Elder

  6. IblisTheMage Augur

    Great, just learned what Cliffs is :). We don't have that here.

    I agree that DBG has not yet demonstrated the commitment to improve _significantly_ on SoE, with respect of growing the game. I do believe the improvement is significant with regards to what DBG have done so far, within the executed scope.

    I am however happy that it appears that they are willing to do good work. Also, I think that the team had to demonstrate that it was free of the moonshot/overreach that Next was, and has the capability to produce content. Building up a big expansion, just after the company has been sold and reorganized, and after TBM and Next was problematic, is not something that I believe would be easy to get approved. If this line of thought is true, and we add a bit of optimism on top, a succesful EoK could pave the way for either more small-ish expansions, or bigger ones, especially if bigger expansions means bigger player base boosts. I tend to think that perceived quality is more important than size right now, and quality is easier to manage in smaller expansions.
  7. Geroblue Augur

    I think they mean your first post needed to be Cliffnotes, rather than the long piece it is.
  8. IblisTheMage Augur

    Yeah. I know, I am sorry. I had a bit too much time on my hands, obviously...
  9. Geroblue Augur

    No problem. I can be verbose to. It just irritates some of the folks in here.
    IblisTheMage likes this.
  10. snailish Augur

    I've said it elsewhere, EoK being a Kunark revisit, will have a burden of expectation on it that cannot possibly be met with the size of a modern era expac (which is what, 1/5 the size of the original Kunark?). However, an EoK part 2 (and even 3) can complete that dream nicely.

    The Live server game needs the world to skew much heavier 85+. This means revamps/replacing zones and making content obsolete.* The live game only needs a few leveling paths 1-85, and there's lots of great lore to continue and extend.


    *and then selling that obsolete content access on future progression servers. Nostalgia sells. The more things you can only do "at a certain era" on progression servers (especially if this extends deeper to at least the TSS era) the more replayability you bring to things people have otherwise done a thousand times. Progression servers = a lot of paying subs. With all the work done up to Phinny, there's a lot of money to be made with minimal new effort on Phinny 2.0 in a couple of years. That profit can fuel the cycle of redeveloping the live game 85+.
    IblisTheMage likes this.
  11. Rumstil Lorekeeper

    I don't know if things are going so well financially. Look at their recent claim that they can't add levels because it takes 1 dev year of time -- that was the only reason given. Now the game industry is notorious for exploiting employees (because of an over supply of gamers who want to go make games when they grow up) so lets say they would have to pay 60k - 80k to add another dev (not programmer).

    They made a business decision because they could not hope to recoup 80k by adding levels.

    That's revealing because think of how little it takes for them to make 80k. We're talking about 800 people who buy the expansion and pay $15 for 4 months. Adding another employee was deemed too risky given their revenue projections if they were to add levels.
    IblisTheMage likes this.
  12. Drusi Augur

    Iblis, do not delude yourself that EQ is this huge brand. Ask 100 random people on the street what Everquest is and you will be lucky to get 1 guy asking "is that game still around?".

    There has been near zero marketing spent to attract new customers in the last 10 years. It has certain nostalgic niche value for those of us who joined during the golden age.

    EQ has to produce cash flow to Columbus Nova or it is firing time for the few devs that are left there.

    If CN paid $50mi for the whole of the Sony gaming unit then they expect to receive 3-5M yearly from their investment.

    I think EQ is meeting their cash flow goals but that's about it, there is no extra left over for additional development.

    I would not be shocked to see only TLP servers left standing and in the best case regular servers being run without any expansions. It really is not that different from now. ;(

    Each of the last 3 expansions has been produced with the bare minimum of resources.
    IblisTheMage likes this.
  13. Ryanxp Augur

    I find it funny, almost absurd, of the audacity these gaming businesses have, or lack thereof. Warhammer is a prime example of the extent of their insincerity.
    Honestly,
    What does it really take, financially, to keep a game like this running? Omit all expendable costs like staffing..

    I can't tell you the extent of Free To Play games there are out there (MMO, mind you), with the only source of income being purchasable in-game items. And they're still up and running (Flyff, A Perfect World, Aion, etc)! ...Games even like Diablo with a server-base; buy the game and wipe your hands clean of any further occuring costs.

    I think the only plausible reason EverQuest would ever shut down their servers for good would be due to their net income not meeting the standards of their current owner (currently: DBG)
    IblisTheMage likes this.
  14. IblisTheMage Augur


    I read about the "a developer for a year" argument, but I am not trusting it as the real reason behind the decision. I can't imagine that the strategic choice on the power point slide at some meeting was "80k USD -> new levels -> delta revenue > 80K vs saving 80k" . 80k USD is not a lot in IT projects, at least not if my speculative assumptions hold. Also, "a year" is a long time. I suspect that they spent less than a year actually developing this small expansion, especially if we do not count the time DBG spent removing complexity. If that is the case, I am closer to 5-6 months of development time, until Beta-launch

    I would speculate that the choice was: "new levels in a small expansion vs delay new levels to a larger expansion". pro for new levels is that it attracts a marginal amount of retired players more than an expansion without new levels would. The con is that it makes a _LOT_ of content obsolete. It is not smart to make a lot of content obsolete, especially if you are only releasing 8 new zones. You are literally shrinking the game.

    Combine this with the hypothesis that the post-transition organization has to proove to management that they can produce high quality content that can actually add to the EQ brand, then there is a scenario where this can be true.

    Of course, EQ could be at the verge of closing down, and the expansion are just the capitalization of previously developed content. I don't buy this. DBG is in the business of running MMOs, and they are good at it. A LOT better than Sony was. It is about focus, understanding how to build up business models, protecting and developing brands, and giving the player base what it wants, in order to keep being customers.

    I will repeat an earlier argument: DBG can keep Landmark and EQ2 running, both are a fraction of EQ. EQ is not only fine, is is building momentum. Rule of thumb is: look at the player = DBG.
  15. IblisTheMage Augur


    And I might be doing just that, deluding myself. However, if 50 MUSD is a confirmed price, then I would be even less inclined to believe that I am wrong with this overall hypothesis.

    The rule of thumb for Private Equity Funds is 12.5%. If they payed 50 MUSD, they need to get a little over 6 MUSD out a year, within 1-3 years. That would in my model above put subs over 10.000. No one pays 50 MUSD for something with 10.000 subs, it has to be significantly larger.

    Can you confirm the 50 MUSD?


    Damm, now my mind is racing again (I am on vacation, and it is raining...) :)

    We might all agree that expansions are revenue pumps, pumping up subs via returning players.

    The cost of making an expansion could be speculated upon. In the speculative model, the costs for the entire team was set at less than 2.5 MUSD/year. I will assume that making an expansion will be 1.5 MUSD. (an FMA-analysis, for people who enjoy House of Lies comedy series ;-) ). Rumstill had an assumption of an expansion driving 4 months extra of subscription, plus the cost of the expansion. Let us make it easy for our selves, and say 100 USD. For an expansion to break even, there has to be a delta of 1.5 MUSD/100 = 15.000 added players, that buys the expansion, and plays for an average of 4 months OR equivalent, like 15.000 players buying the expansion, and staying for 4 months more than they would have, OR, the more likely, a mix of the two.

    If I where to advice the EQ business, I would advice to delay level increase as much as possible, putting out as many small (like EoK) expansions pr year as possible, make sure that they where _really good quality_, thereby increasing the game's reputation, enhance on the visuals, like they did already in EoK, and somehow explore how to capitalize on the existing IP, like they are doing on EoK.
    Ohh well, it is so easy to convince one self :) *back to coffey and browsing news*
  16. IblisTheMage Augur


    Ups, forgot to reply to this.

    If I ask a 100 people on the street, they do not know what EQ is. If I ask a 100 gamers above 25, I guess 75% will at least know that it is some "old" game. I bought a new gaming mouse with one of the kids the other day (my sons are all good gamers! :-D ), and the guy vending the mouse was a gamer of about 25. He knew of EQ.

    If I ask 100 gamers above 40, I would guess that the ratio goes up to 90%. Darn, I know a lot of people my age, that are not gamers, who knows what EQ is.

    It is not Star Wars huge. But it is a globally recognized brand (I live in Scandinavia btw).
  17. IblisTheMage Augur


    I agree on an implication of what you are saying. There is a very strong strategic fit with DBG.
  18. IblisTheMage Augur


    I think that what we are seeing is similar to at least some of your proposals. EoK is indeed building on old IP with a high recognition factor.

    I don't think DBG will focus on revamping the old zones. With a minimal extra effort, they can build new versions of the old zones, revamp the related IP (like they are doing with say for example Gorenaire...), and sell it as a revenue pumping expansion. Frontier Mountains is a great example. I had a really "EQ classic" feeling running through the EoK (Beta) Frontier Mountains, with a lot of nostalgia, mixed with the aestatics of the new zone. That is worth the effort.
  19. Coppercoz Augur

    Wow, father of 47? You'be been busy!

    Yeah, Yeah...I know what you meant, but just found it amusing.

    Carry on.
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