Dubious Practices in MMO Marketing: How Numbers Can Be Misleading

For the past few years, I’ve been suspicious of Blizzard’s grandiose claims of millions of subscribers for their World of Warcraft MMO. Those numbers have never struck me as being entirely honest. Via Tesh, this week it was revealed by Gamasutra that although Asia accounts for a paltry 6% of the total revenue from WoW, it makes up 50% of their global users.

Combine this with the report that Blizzard earns $1 billion in revenues from WoW each year and you can arrive at some interesting deductions about how MMOs are marketed and promoted if you look hard enough.

All Subscribers Are Not Equal

Blizzard’s current claim that they have 11.5 million total subscribers while technically accurate is misleading because not all subscribers are paying the same to play WoW. Some of us already familiar with the Asian pay per play scheme for MMOs but I highly doubt the average WoW gamer in the U.S. and Europe would be aware of this.

For every dollar a non-Asian WoW subscriber pays for WoW an Asian subscriber pays 6 cents. The reality is that all WoW subscribers are not equal; they do not have equal representative value for purposes of comparison. Yet for purposes of marketing and to the untrained eye: a subscriber is a subscriber.

Korean Internet Cafe

If there are 5.75 million WoW subscribers in Asia only bringing in 6% of the total worldwide WoW revenue then I have calculated that in terms of “real” subscribers the Asian market is the equivalent of approximately 370, 000 U.S. and European subscribers who pay to play by the month. Combine this with the actual numbers of U.S. and European subscribers and you’d have an adjusted total of approximately 6.12 million subscribers playing WoW — not the 11.5 subscribers that they claimed in their last press release.

The resulting 6.12 million subscribers is a bit more than half the number that they claim that WoW actually has. Suddenly WoW doesn’t look like a social and cultural juggernaut.

Are Westerners Subsidizing Asian MMO Gamers?

Given the puny amount of revenue that Blizzard is generating from WoW in Asia, why aren’t they charging Asians more and the rest of us less? Fair is fair.

Another issue worth bringing up is because of the millions of Asian gamers with access to WoW we now have the scourge of gold farmers with ties to organized crime syndicates. Player accounts are hacked, stolen and used to farm gold. They also disrupt gameplay within WoW with their spam. Blizzard spends a considerable amount of time and resources dealing with compromised accounts.

Given all of these problems and inequities, why are western subscribers still subsidizing Asian gamers?

I agree with Tesh, we are being soaked by Blizzard:

…the $15/month bears little relation to the real costs of making the game function. It’s likely an order of magnitude larger than necessary to even be profitable.

What’s adds insult to injury, is that precious little of the $1 billion in revenues goes back into the WoW.

Millions of Elvis Fans Can’t Be Wrong

Claiming that millions and millions of people are playing WoW has been always a big part of Blizzard’s marketing and promotion strategy. Blizzard never seems to miss an opportunity to release self-congratulatory press releases claiming even more millions of people are playing their MMO. It’s often been argued that they are the McDonald’s of the MMO world in more ways than one.

I remember growing up as a kid and seeing that kind of Madison Avenue spin used on one of Elvis Presley’s records entitled “50 Million Elvis Fans Can’t Be Wrong”. Even fast food giant MacDonald’s has used this motto for years with their “billions served” plastered on their brightly colored signs.

50 Million Elvis Fans Can't Be Wrong

This kind of marketing strategy plays on the tendency of most people to follow popular trends. It’s an appeal to consensus where we put aside our own feelings about something and instead trust in the judgment and wisdom of the “group”. Ergo, if something is popular and has mass acceptance then it must be worthwhile. This is exactly the part of the human psyche that the Blizzard marketeers are tapping into.

I remember seeing an interview with a lady in the former Soviet Union many years ago. On her way home from work she saw a big line forming. She didn’t know what they were lining up for but figured it must be something important and took her place at the end of the line. It turned out there were lining up for cabbage.

The Wall Street Connection

Another reason why Blizzard may be combining subscribers from both markets is to look good to investors in the stock market. Good performance for traded stocks is predicated on favorable news. I doubt the typical Wall Street investor understands the subtleties of the Asian MMO pricing model versus the U.S. and European pricing model.

The Downside of Dubious Marketing Practices

Comparing Asian subscribers to US and European subscribers is comparing apples to oranges. The problem here is that all things are not equal. At first it may seem like clever marketing on the part of Blizzard to lump them all together to make their numbers look good but one wonders about some of the possible negative ramifications of this practice:

  • It reflects poorly on Blizzard that they must resort to mixing subscribers from different pricing models and different cultures in order to create good copy for their press releases and marketing campaigns
  • How many people didn’t bother to play other MMOs and instead chose to follow everyone else and play WoW because this particular marketing sleight of hand?
  • How many good and unique MMOs didn’t get enough subscribers and lost precious potential revenues because of the pervasiveness of WoW in the public consciousness?
  • I worry about the future development of MMOs when one company who has 62.2% of the worldwide MMO market share puts very little of those profits back into their MMO

Conclusion

The Gamasutra article has revealed some eye opening facts regarding Blizzard and their involvement in the Asian market. There are certain inequities such as the subsidization of Asian gamers that are troubling. As to why they are doing this I can only speculate that they are using WoW as a beachhead to establish future profitability there in the future and using Western gamers to fund it.

I don’t fault Blizzard for their unparalleled success with WoW. They should be commended for taking a fringe demographic of the video game market and propelled it to new levels of popularity via innovation and polish. What I object to is their insatiable need to dominate the market even further by using this questionable millions served marketing approach to convince people on the sidelines to subscribe to their MMO.

We’re all proud of what Blizzard has accomplished but could we please see a little less avarice? Having 5.75 million non-Asian subscribers is very respectable — there’s no need to inflate those numbers with Asian subscribers who happen sit down for a one hour session of WoW in an Internet cafe.

They also need to stop issuing those bravado laden press releases. You’ve made your point Blizzard. We get it. And after all, they have an excellent product that doesn’t require this kind of dubious hype. Instead of using misleading numbers, they should let WoW stand on its own merits and be content with its undisputed market dominance.

-Wolfshead

Update: I just came upon the following WoW add on Google today…

WoW Google Ad

36 thoughts on “Dubious Practices in MMO Marketing: How Numbers Can Be Misleading

  1. It is not only Blizzard that is being vague about subscriber numbers, profits and real player numbers.

    Guild Wars always reports “numbers sold” instead of players playing, John Smedley also counts every registered e-Mail address as player of Free Realms ( https://twitter.com/j_smedley – he found no other use for Twitter besides posting every next million of registered Free Realms accounts yet ;) ) and Turbine’s LOTRO follows an interesting strategy, they just say nothing and apparently let their Tolkien IP do the work.

    I am a bit sceptical about market analyst Colin Sebastian and his results. According to MY results, Asia accounts for 15,7% of the revenue contribution. Erm… I just made these numbers up. I just want to point out that we have no clue how Sebastian came to this conclusions and numbers.

    I doubt marketing babble will ever stop in our times, and be honest, it works – especially Blizzard perfected marketing their products that the others look like freshmen students.

    • Indeed, that’s a caveat of the article that I posted; it’s a market analyst, not a Blizzard mole posting numbers. That said, the analyst seems friendly to Blizzard if anything, and doesn’t seem likely to be spinning Asian numbers downward. And it’s still profitable for WoW to be in Asia. That’s critical here, he’s not saying that Blizzard is losing money in Asia, just that they aren’t making as much per “subscriber” as they do off of Western players.

  2. I agree with the general sentiment about deceptive marketing practices, but would like to correct some facts:

    “Blizzard earns $1 billion in profits from WoW each year” and “$15 is likely an order of magnitude larger than necessary to even be profitable.”

    Wrong! Blizzard earns $1 billion REVENUE from WoW each year, of which around $500 million is profit. Thus to just be profitable they’d need $7.50 per month, not $1.50. You can verify these numbers in the Activision Blizzard annual reports publicly available via the SEC.

    Given the puny amount of revenue that Blizzard is generating from WoW in Asia, why aren’t they charging Asians more and the rest of us less? Fair is fair. Another issue worth bringing up is because of the millions of Asian gamers with access to WoW we now have the scourge of gold farmers with ties to organized crime syndicates.

    You link two things here which are invalid. Blizzard doesn’t “charge Asians less” thus subsidizing gold farmers. They charge people less to play on Asian servers, true. But the gold farmers that are bothering you are not playing on those. Gold farmers play on European and US servers, because that is where their customers are, and there is no way to transfer gold from a Chinese server to a US one. Thus gold farmers pay $15 per month like you and me. And every time Blizzard bans 100,000 of them, they open another 100,000 accounts, and Blizzard makes millions from selling them fresh copies of the game.

    Agreed that Blizzard is trying to look better by bundling all subscribers together. Which becomes especially embarrassing right now, because as you can see in the Gamasutra article the Chinese servers are still down, for two months now, and probably will be for at least one more month. And Blizzard never published a press release with the new subscription numbers.

    On the other hand the number inflation is even worse with the games without monthly subscriptions. Free Realms is boasting millions of players, Second Life claims to have more residents than WoW has players, and so on. But if you look closely, they count everyone who ever made an account, in some cases even counting number of characters created, not number of players. Even if somebody just played for 5 minutes and then uninstalled the game, he’ll still be presented as a “player”, although in that case the revenue is zero.

    • Tobold, I’m talking about WoW itself being profitable. Are you asserting that running WoW takes up half of their *company’s* profits each year? If anything, I suspect that the vast majority of that money isn’t being folded back into WoW, and of what money is being spent in WoW, it’s not all maintenance. Some of it has to be development, which they wind up charging a box price for.

      Also, my point is that WoW is profitable in Asia, despite costing the player far less than it does to Western players. If it wasn’t, Blizzard wouldn’t bother.

      • No, revenue and profit are clearly defined in an annual report. World of Warcraft is making $1 billion in revenue, that is box sales and monthly fee. Then there is $500 million per year of cost, that is operating cost, servers, salaries, development of expansions, quality control, customer service, and everything. The remaining $500 million per year is WoW profit for Activision Blizzard, and makes up a large portion of Activision Blizzard’s totally company profit.

        I’d guess most of the cost of running WoW in Asia is carried by the operator, Netease, and the license fees they pay to Blizzard is pretty much pure profit for Activition Blizzard. That is because all the development of the game is already paid for by the US / European customers.

        • Revenue and profit *company wide*, not per title. That’s my point. Sure, they are spending half of their money, but on what, exactly? Is that itemized in an annual report, with 500 million clearly being folded *back into WoW*?

          • Interesting. I still say we’re not getting anywhere near enough for $580 million a year. I have a hard time believing that’s going back into WoW. *shrug*

          • Interesting and fun numbers to glean, the Blizzard Activision Stock report filing for Q1 2009.

            Again, its a lot of guessing, because they don’t break down things ALL the time from MMORPG to Standard. But here are some interesting numbers. (all in millions)

            -‘MMORPG’ Costs of Sales were 52 million.
            -Net Revenue by platform ‘MMORPG': 314 million (35% of total)
            -Net Revenue (Total) by geographic location: NA 524, EU 307, Asia 64
            – Net Revenue Blizzard : 291 (happens to be the same as subscription, licencing, and other revenues total) – where are the box sales?
            -ah, Box sales must be wrapped into ‘Product Sales’ – 690 (that is total, not just WoW)
            -Sales and Marketing: 83 Million
            -Product Development: 117 Million (nice ratio =)
            -Segment Income from Operations Blizzard: 143

            Again, fun information to look at, but seriously there is nothing concrete we can clean as fact as they are careful not to segment the books to give clear answers.

  3. A few thoughts.

    First, even if WoW “only” has 6 million or so equivalent subscribers, that’s still pretty impressive for a western company. Not to say we should all just worship WoW, but let’s keep things in some perspective here.

    But, yeah, they’ve definitely been using the Chinese subscribers to puff up those numbers for a while. Given the protectionism of the Chinese government, too, it’s unlikely another western company is going to be able to duplicate that feat. Even WoW is having trouble getting their game running again in China due to bureaucracy.

    Tobold wrote:
    Thus gold farmers pay $15 per month like you and me.

    Not quite. They often use stolen credit card information to sign up, which sell for much less than $15. The owners of said stolen credit cards usually don’t let the charges stick, and Blizzard could have to pay for chargebacks. So, they really have no reason to like gold farmers.

    But, you are right that the gold farmers aren’t paying pennies per hour to farm gold.

  4. I no longer play WoW, and get routinely slagged on my site for bashing the game…. but I really need to speak out here.

    The resulting 6.12 million subscribers is a bit more than half the number that they claim that WoW actually has. Suddenly WoW doesn’t look like a social and cultural juggernaut.

    If you’re going to complain about marketing spin, then try to be accurate and straightforward yourself. You arrived at that 6.12 million number by changing the definition of “subscriber” from the traditional “person paying to play a game” into “units of people paying $15USD/month to play a game”.

    While that number is valid, it is NOT a “subscriber” in the sense that ANYONE uses the word. You then go on to use this new metric to spin your conception of WoW’s success under the guise of a lower number of players in the game. (And don’t get me started on the folly of equating financial success to social success.)

    The marketing gurus at Blizzard would be proud indeed.

    A second point I cannot let stand is in your “Downside” section:

    How many people didn’t bother to play other MMOs and instead chose to follow everyone else and play WoW because this particular marketing sleight of hand?

    Let me turn that around for you:
    How many people got into the MMO genre because of the amazing success of WoW, and then branched out to play different MMOs once they grew tired of Blizzard’s mega-hit?

    • If you’re going to complain about marketing spin, then try to be accurate and straightforward yourself. You arrived at that 6.12 million number by changing the definition of “subscriber” from the traditional “person paying to play a game” into “units of people paying $15USD/month to play a game”.

      That’s exactly what I did and stated so upfront. My calculations illustrate the point that all subscribers are not equal which I clearly stated *is* the problem for establishing a fair metric for comparison.

      Blizzard would not be so quick to lump in all 11.5 million “subscribers” together in deceptive press releases if the public truly understood that someone paying a small fraction of what they pay to play is also considered a subscriber.

      While that number is valid, it is NOT a “subscriber” in the sense that ANYONE uses the word. You then go on to use this new metric to spin your conception of WoW’s success under the guise of a lower number of players in the game. (And don’t get me started on the folly of equating financial success to social success.)

      Blizzard doesn’t need to inflate their subscription numbers by including the Asian market. They are clearly head and shoulders above any other MMO.

  5. “World of Warcraft’s Subscriber Definition

    World of Warcraft subscribers include individuals who have paid a subscription fee or have an active prepaid card to play World of Warcraft, as well as those who have purchased the game and are within their free month of access. Internet Game Room players who have accessed the game over the last thirty days are also counted as subscribers. The above definition excludes all players under free promotional subscriptions, expired or cancelled subscriptions, and expired prepaid cards. Subscribers in licensees’ territories are defined along the same rules.” (from the Blizzard press release linked in the original post).

    A few notes:

    1) If you bought the game in 2004 and never install it you count as one current subscriber.

    2) If you don’t play but own a prepaid card that hasn’t gone past its Sell By date you count as one current subscriber.

    3) If you play having bought the original game then picked up the two expansions in the form of collected editions you count as three subscribers.

    4) If a copy is used for an internet game room that has a hundred people playing in a month that copy counts as a hundred subscribers.

    There’s probably other loopholes too.

    Lies, damn lies and statistics!

    • 1) No, you only count as a subscriber once the free month starts, i.e. you install and activate the copy.
      2) Traditionally, MMO companies make a substantial amount of money off of people who don’t play, but have failed to cancel their accounts. (They are known as “ideal customers.”) This is no different.
      3) Er, why? Nothing in their definition indicates this would be the case. If you buy any number of expansions, you’re still one individual with a subscription.
      4) If each of those patrons is paying (per hour) to play WoW, then they _should_ be counted as subscribers, as they are such by local standards.
      There are enough shenanigans being played with subscriber numbers, no need to muddy the waters.

  6. PS the only company who seems reasonably open is CCP. When you log into Eve it says how many people are online.

    The number varies between about 20k and 48k people worldwide. Eve is believed to be the second biggest MMO suggesting that the large numbers talked about by all the other companies really don’t reflect their usual concurrent user figures at all.

    • I’m not sure how useful concurrent numbers are, though. It’s nice to know from a tech standpoint, but it doesn’t necessarily correlate well to how many people are paying a monthly fee.

      I’m idly reminded of a billboard that I see on occasion in my valley. It claims that 20 million cars pass it each year, which seems like a lot of eyeballs… until you start breaking it down into commuters that see it twice a day, 300 or so days a year.

      It’s just that sort of numerical hokey pokery that makes me look as close to the bottom line as I can: the cost to the consumer vs. the cost to the producer. *That* pair of metrics has influenced a lot of my thoughts on the matter.

    • Stabs, FFXI has more people than that concurrently, at about 20 servers with an average of 2-5k population. and 500k+ subs. FFXI is one of the hidden successes of the MMO world.

  7. “For every dollar a non-Asian WoW subscriber pays for WoW an Asian subscriber pays 6 cents.”

    Can you explain the math behind these figures? I don’t know WoW pricing model currently used in China, but it is common in Asia to charge the players not for monthly subscription, but on per hour basis. If that’s the case, you should first assume amount of hours that a player pays for every month to compare one kind of subscribers to the other.

    “Suddenly WoW doesn’t look like a social and cultural juggernaut.”

    No matter how much they pay, these 11 million people still play WoW regularly, and it is part of their lives.

    “Given all of these problems and inequities, why are western subscribers still subsidizing Asian gamers?”

    May be Blizzard can get maximum profit with such pricing? It is still a commercial company – if it was non-profit charity organization, of course, then I’d ask the same question myself.

    “It turned out there were lining up for cabbage.”

    Btw, I still remember times when you had to stay in line for hours even for cabbage (I’m a russian citizen). So the story probably isn’t as funny as it seems. :)

    “I worry about the future development of MMOs when one company who has 62.2% of the worldwide MMO market share puts very little of those profits back into their MMO”

    This chart shows only subscription-based MMO, which are minor part of today’s MMO market. And more than that, number of subcrition doesn’t necessarily correspond to revenue, as you previously stated.

    On another hand – yes, blizzard doesn’t concentrate it’s profits on developing WoW. But may it’s because all WoW “star” developers are now working on unannounced MMO title?

    I think that comment got a little offensive :). In fact, I think you have a good point – WoW isn’t biggest MMO title. Far from it – there are Kart Rider, Mafia Wars and other kinds of games with tens of millions of regular players that don’t get that amount of western gaming media attention.

  8. In September 2008 at an Analysts call, Blizzard revealed that their total cost of running the game, entire payroll, Customer Service, hardware, etc since 2004 was only 200 Million. Or 50 million a year (if you break it down clean). That was when they had 10 million users. Surely it hasn’t stretched past that.

    I wonder if they have somehow included costs of acquiring Blizzard into those figures. Typically they could include the interest as an Operating line expense (What did it sell for 5 Billion? What is the interest rate value on 5 Billion?)

    What really brings things to light is this. At 6 cents an hour they are still profitable in Asia. If they weren’t, there wouldn’t be much point in operating there. If they can be profitable at 6 cents an hour there, why not do that here?

    Development costs, as we all know, are covered fully by the box sale. Especially in Blizzards case where the box sale of one expansion probably pays for the development of the next two. (using EU/NA numbers only, 6 million boxes at 50 bucks, 300 million dollars. Good luck justifying their expansions cost half of that to make, considering the quest hub style gameplay)

    The $15 is just a magical made up number, not tied to any sort of projection or expense. Good on them for getting it, shame on us for paying it.

    I’ve said it before, I’ll say it again. Blizzard poohs profit. Good for them as a business (honestly, its very impressive), but players who think their sub fees are somehow tied to development costs or maintenance have the wool pulled over their brains.

    • “At 6 cents an hour they are still profitable in Asia. If they weren’t, there wouldn’t be much point in operating there. If they can be profitable at 6 cents an hour there, why not do that here?”

      Exactly.

      Although, I should note that some quick calculations suggest to me that someone playing 8 hours a day every single day would wind up paying about $15/month at that rate. Playing more than that does indeed make a flat subscription a better deal for the user.

      …how many players play that much?

    • If I can nitpick (and I think I can, since that’s what is thread is about), Blizzard doesn’t technically have *any* subscribers in China. Non-Chinese MMO companies can not operate there. Blizzard has to license their games to a local company, which being Chinese has far lower marketing and maintenance costs. No one in China could afford to pay $15 a month to play the game; they’re going to charge what locals can afford. So here Blizzard is, making a game for the western market, and they have a choice: do they license it in China, for what will have to be a small extra profit, or do they not release it there at all, and get nothing. The answer is obvious, and China then becomes the (profit) icing on the cake. The Chinese players *are not funding the game,* nor is Blizzard tailoring development of the game to that market, they’re thinking of the Western gamers. To say that we’re subsidizing those players, or to otherwise equate the Chinese and western players is to turn the situation on its head. “Why not do that here?” makes no sense as a question.

      So there are two valid questions here- why do they charge $15 a month, and what are they doing with that money (why aren’t they spending it on development)?
      As for where the money is going? More than half of the expenses goes to marketing. (Games traditionally spend more on advertising than they do on development.) The development costs are also huge- the WoW dev team is larger than many game companies, and they’re getting a fat paycheck (Blizzard pays bonus checks based on profits). [I’d actually be surprised if box sales covered all the costs of the game, as I think most people didn’t pay $50 for the boxes.] WoW is also supporting the development of three other games, at least. This is how the game business works- the profits from game X support the development of subsequent game Y. No reason why this would be different for MMOs. In fact, any MMO company out there taking all their profits from their established MMO and putting it back into that game aren’t going to last very long. MMOs have a limited lifespan; developers have to start working on a new project or they’ll go down when the game subscriber numbers start dropping off.
      As for the $15 a month? This is a bit of an MMO tradition. The very first online games actually failed because the subscribers played too much, and the cost per player exceeded the subscription fee. You see, the dirty secret of the MMO business is that MMO companies don’t actually want you to play their games. What I mean by that is that they want you to pay a subscription fee, but every time you access the game you cost them in server demands and network bandwidth fees. The more you play, the more it costs them. Early companies realized that when they doubled the subscriber numbers, the costs more than doubled. They came up with the $15 price as a way of discouraging would-be players from joining- it was balanced such that the money gained from the increased fee was more than what was lost in extra subscriber revenue, once cost-per-player was considered. Of course, that was a while ago, now costs are different, and costs-per-player vary hugely from one game to another, so the actual $15 number is more tradition than anything, I suspect.

  9. Many years ago I had an opportunity to see some of SOE’s numbers around the time EQ1 and PS were “newish.” Even back then when they charged a $9.99 a month they were still making a great profit margin.

    MMOs most certainly cost a lot of money to create but box sales do recoup an acceptable percentage of that and maintenance costs are are lower than most companies let on.

    In all honesty though I am okay with big margins if the company is going to reinvest in the product earning those margins. These days that just doesn’t seem to happen. It goes to “the next big project” or inflates the value of the stock. MMO teams are kept unnecessarily small and money is diverted. That seems to be WoW’s problem lately.

    • I believe the EQ team mentioned afterwards that they considered the $10 sub fee a mistake, and were sorry they hadn’t gone with $15.
      Maintenance costs, in my experience, are often *more* than is let on. Companies publicly want to talk about how much money they’re *making,* and so underplay costs. I was rather shocked to hear some of the maintenance costs from some MMO veterans. At least one big budget MMO was finished, but never got released when they realized that the operations cost-per-player could never be recouped by any reasonable subscription fee.

  10. Very good article, i was aware of this for a long time now and tried to explain that to several friends without much luck. Anyway another thing i might add the “62.2% of the worldwide MMO market share” is NOT worldwide. Worldwide would include asia and asia is kinda the hollywood of the mmo market with millions of players more than the western market has. While WoW is performing very well in that market and is approximately on place 5 or 6 it is nowhere near the most played mmo in asia. (however actual acurate numbers are hard to get from the asian market) Another thing is that The9´s subscriber numbers some months ago (press release) actualy speak about 9 million players. Again this is makeing the official Blizzard numbers look “wrong” again. I guess i will be always very suspicious about their numbers, with all that and some other facts one can hardly believe what they are claiming in their press releases.

  11. > What’s adds insult to injury, is that precious little of the
    > $1 billion in revenues goes back into the WoW.

    That has always been my #1 gripe with WoW. They even bragged to investors that in the 4 years (at the time) since the game was released, the total cost of operation and development of new content (down to everything including utilities, janitors, etc.) was $200 million. That’s $50 million spent per $1 billion earned.

    Spending 5% of your revenue on maintaining and improving your product is pretty despicable.

  12. Michael,

    I always thought that this $200 million number has been misrepresented. It might well be that it is the development cost, not the operating cost. As the revenue and profit numbers are from a SEC filing, where lying is a serious crime, I tend to believe those more.

    The $1 billion revenue is something which is easy to arrive at: Just take about 5 million US/Euro players times $15 per month plus one expansion, and you’re there. The $200 million TOTAL OVERALL cost in comparison is just crazy. Obviously a lot of development cost happened before 2004, so that would leave us with annual costs of how much? $20 million? Divide that by a typical cost per employee (that’s not his salary, but overall cost) of $100,000 per year, and you’d have to believe that Blizzard is running World of Warcraft with just 200 people, in spite of having nearly 500 servers, and customer service for millions of players.

    Do you know how crazy already a 50% profit margin is? The companies you think of as rich, or gouging their customers, like Exxon, have less than 20% profit margin. And you think the 50% profit number is wrong, and in reality it is 98%, with half of it smuggled past the shareholders and the SEC?

  13. Postscript: Link to the same Paul Sams revealing number of Blizzard employees being 3,000, not 200: http://games.venturebeat.com/2008/08/18/qa-with-paul-sams-blizzard-entertainments-chief-operating-officer-on-post-merger-life-2/

    Divide $200 million by 3,000, and you would need to believe that Blizzard not spent a cent on their buildings, and hundreds of servers, and cost per employee was only $7,000 per year over 10 years, including all cost for social security, healthcare, and 401(k) plans. The numbers just don’t add up.

  14. I don’t think they had 3,000 employees for the entierty of those 4-5 years.

    Also, a lot QA people make 20-30k.

    $200 million / 3000 = $67,000.

    So yes, that’s plenty of money left over for all the other costs.

    If they said $200 million on operating and developing the game for 4+ years, and they said it in a stockholder meeting, then I have to believe it is at least close to true. They would be guilty of a serious SEC violation otherwise.

    It also makes sense from what I see in game, because honestly… what costs are there?

    The amount of content they add is great for a 100k subscriber MMO. But for an 11 million subscriber MMO? It is puny.

    No housing…… still????? Seriously?

    The amount of reinvestment is evident not only from their SEC filings and stockholder meetings, but what you see in game.

    Every 3-6 months they drop another raid dungeon, a few quests, and some gear. That’s nothing.

    Content development is crazy scalable since they just copy it to every server they have.

  15. Oh, and assuming they do indeed have 3,000 employees now, the overwhelming majority of those are customer service and QA. Those people get paid very little.

    The number of highly paid programmers and artists has not really needed to increase. More players does not necessitate more programmers and artists, because everyone shares the same content on hundreds of servers.

  16. In an interview in July of 2008, Rob Pardo the VP of Design said that they have a total of 140 people working on WoW:

    http://www.computerandvideogames.com/article.php?id=193951

    Rob: It is big… Every time we go to a new tier of team size it does cause us ripples for a time. We have to come up with a new way to build a creative and organisational structure for the team. Certainly, the creative process for a 140 person team is vastly different from a 20 person team.

    A very good read and and excellent insight into the MMO development process.

  17. Yeah, and I think this is where the disparity comes from. There is a team of 140 DEVELOPERS, who cost $200 million. And then there are thousands of people more being server technicians, customer service representatives, quality control etc., doing much more mundane work which costs hundreds of millions every year.

  18. Pingback: Why is World of Warcraft Still Growing?

  19. They use this marketing scheme because they want to get lazy with content and pocket the profits rather than develop good content.

    Rather than letting the game stand on its own, they let it stand on its millions.

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