Online multi-player games have been popular for a long time. But in only a few short years, the MMO market has changed dramatically in terms of revenue, player preferences and addressable audience. Overall, the total MMO category is on track to generate $11 billion in annual revenues by the end of this year, representing roughly 21% of the worldwide digital games market. By 2017, this number is forecast to grow to $13 billion. And so it can be no surprise that small and large publishers alike are trying to claim their share of this thriving market.
Mapping out the MMO Market
There’s plenty of random information on free-to-play MMOs floating around. And it’s fascinating how many companies make million dollar decisions based on anecdotal evidence and things they’ve overheard at a conference. What’s been missing has been a consistent, reliable source of market data that goes beyond traffic estimates and, instead, provides insight into three key components: the monthly active user base, the percentage of players that convert to spending and, finally, the average spend per paying player.
For example, if you compare a title like League of Legends with World of Tanks, you immediately notice that the former has a much, much larger audience. However, the latter monetizes at higher rate and has a higher overall lifetime value. Each in their own way, these titles evolve and develop based on the unique characteristics of their user base and content strategy.
By building a data partner network consisting of developers, publishers and payment providers, we’ve managed to accumulate a dataset that contains the actual spending of over 37 million digital gamers, going back over a decade. Consider for a moment that in the digital games market only a few percent of players actually converts to spending. This allows us to map out historical performance, read early signs of market saturation, build detailed life cycle curves, and establish title-level performance. Combined with in-depth qualitative consumer insight, we know exactly what drives the market, and it puts our publisher clients in a position to assess marketing budgets, identify major inflection points, and benchmark overall performance.
Changing consumer preferences
The success of MOBA titles indicates a subtle but important shift in the way people like to play online. Offering the same fast paced action as first-person shooter games, MOBAs have quickly become one of the most popular game genres worldwide, growing their share of the overall MMO category from 16% to 24% in just the last year.
But the popularity of the free-to-play model among consumers does not mean that traditional ways of publishing are on a decline. In fact, whenever there’s a major release on console, either via traditional retail or digital channels, we observe a dip in free-to-play spending. Gamers, the data tells us, play on multiple platforms at once and regularly shift their focus between them, expressed in both time played and money spent. Innovative game mechanics and monetization strategies, it suggests, do not exist in a vacuum, but rather expand and add to the gaming ecosystem. How publishers differentiate themselves in such a volatile market has become a key strategic component.
Changing revenue models
The recent news that World of Warcraft saw a 600,000 increase in its subscriber base in the lead-up to its new expansion, Warlords of Draenor, silenced critics of the subscription-based MMO revenue model. Generating well over $1 billion in annual revenues, the game is on track to tally 8.2 million subscribers by the end of the year. Its underlying mechanics have changed, however, as World of Warcraft now also offers microtransactions and a partial free-to-play component. It is a sign that things are changing, especially for the major publishers, when a company like Activision retires Titan and, instead, doubles down on Heroes of the Storm.
A key reason why free-to-play is so popular among publishers is its ability to distribute and monetize new markets. In the absence of an installed console base and in countries where people generally play at Internet cafés rather than at home, free-to-play games offer high-quality game play that is also accessible. Consequently, we’ve seen a spectacular adoption by gamer audiences in markets like Brazil, Russia and Turkey. But Asia remains the biggest market for free-to-play MMOs: with $4.2 billion in revenues, it looms over North America ($3.1B) and Europe ($2.1B), two markets traditionally central to any successful publishing strategy. The popularity of this model, combined with the protectionist policies of a country like China, has allowed Tencent to quickly become a dominating force in the industry. It has also, however, raised the bar for future growth, as big Asian publishers now ask themselves how to replicate their success in Western markets. Tencent’s answer so far has been to acquire and invest in companies that offer high quality game play that is also culturally relevant, like Riot Games and Epic.
