A major flaw in the businessmodel

Discussion in 'General Discussion' started by BurnPyro, Jul 19, 2015.

  1. BurnPyro

    BurnPyro Forum Royalty

    @Sokolov

    I knew you'd bring up the big vs small game thing, I should have anticipated.

    The reason why I think cosmetics or extras like namechanges would work for Pox is that you've got a dedicated playerbase.

    I mean, in an ideal world everyone has every rune and all revenue is made of extras. That way I believe your playerbase would increase (at this point the few collectors left dont outweigh the entry barrier for new players). The problem is that full free to play will never work for Pox and its difficult to implement the sort of "pay X and get all runes of a faction for Y time" in the current model.

    I truly believe that the collectors aspect is holding Pox back in terms of growth and player activity. I'm not saying go full free to play, I'm saying introduce some pretty things and watch the community react. At the very least you should make some money off it. If it takes off, decrease rune prices or throw some packs our way. If you can somehow make some money off non-runes, you're well on the way of improving this game.
     
  2. Sokolov

    Sokolov The One True Cactuar Octopi

    First, let's deal with the revenue side of things.

    I am going to make up some numbers here for the sake of illustrating my point:
    • Let's say a piece of content (a rune) costs $500 to produce
    • There are 50 pieces of content in an expansion
    • This means it costs $25,000 to produce said expansion
    • If the playerbase is 1000 users and 50% are paying users of expansion based content and ARPPU (Average Revenue Per Paying User) is $50, then this equals $25,000 in revenue or $25 ARPU (Average Revenue Per User)
    • If we released 3 "expansions" a year, this'd be $75 ARPU
    Net result is that you break even on the initial investment.

    Now, let's consider spending that same $500 on cosmetic content:
    • In theory, cosmetic content costs less, so let's say that it produces 2 pieces of cosmetic content
    • This means that a $25,000 spend on cosmetic content would yield 200 pieces of cosmetic content
    • Assume each piece of cosmetic content is $10, for a maximum spend of $2,000
    • If the player is 1000 users and 5% of users are paying users of cosmetic content and ARPPU is $50, you have $2,500, or $2.5 ARPU
    • If we released 3 "expansions" a year, this'd be $7.5 ARPU
    Net result is you just lost $22,500 on the $25,000 invested.

    You may not like the numbers I chose, but they are within the realm of the kinds of numbers you see in the industry. In fact, for cosmetic content, ARPPU is typically much lower than progression content, but I was very generous here in letting both types of content use the same ARPPU. Even if we doubled conversion rate to 10% and ARPPU to $100, you are still only making $10,000.

    EDIT: For reference, it is difficult to find ARPPU numbers for major games, but League's ARPU was reported as $1.32 in 2014, significantly less than the $7.5 for our "fake" Pox cosmetic content.

    So what if the player-base increased significantly due to other changes that come along with the cosmetic content? Well, you'd have to increase the playerbase by 10 times in order to achieve the same ROI given the assumptions made above.

    ~

    Is it theoretically possible shifting PoxNora to this model, making runes easier to access, etc. could increase the playerbase? Absolutely. Is it possible that it'd increase it by the 10 (or more) times to make it work financially? That seems much less likely.

    As I mentioned in my previous post, a lot of ideas often sound good and are logical, but people overestimate their impacts.

    In regards to retention of new players and rune access, this is an area where you can basically argue endlessly for "cheaper", "easier", and "faster" until everything is free immediately. But ultimately, you would find retention is not impacted by as much as you think. Pox has gradually made it easier to access runes over its lifetime - and there's no compelling evidence that it has had any retention impacts whatsoever. In fact, at some point, the LACK of progression (accessing everything at once or very quickly) actually HURTS retention. Progression mechanics (play to get stuff/access content) is one of the biggest drivers of retention. So while the idea of "more runes for new players" seems to be logical from the outset, it isn't necessary going to do what you think. It doesn't mean it isn't a good idea still, or that it has ZERO impact, but expecting anything more than 10% short-term retention impact would be outrageous.

    EDIT: Short of things like fixing a massive bug that causes crashes among a good portion of the playerbase, you don't see double digit impacts with most updates/features.

    What about advertising? Well, even when Pox had a lot of advertising dollars, concurrent users never broke 1000 (except when SOE did a company wide announcement after the FB launch).

    There are a few problems with advertising:
    • Advertising in general is far more competitive than it was back when Pox first launched
    • Competition for Pox's demographic far more fierce than when Pox first launched
    • Most of the demographic for Pox has already been reached in previous advertising efforts
      • This type of "diminishing returns" is one of the biggest cost driver for advertising
    • Pox is a niche game
    • The game is old, and looks old, and doesn't "sell" very well in today's market
    EDIT: So even in terms of advertising, there is a fairly visible ceiling for PoxNora.

    This doesn't mean you can't do effective advertising, or that you shouldn't do it at all. We are ramping up advertising, in fact. But we have to be careful with how we spend those dollars so they aren't wasted, and also temper our expectations.

    ~

    EDIT: Also, we introduced "pretty things" with the current mid-terms and are currently evaluating it to see if it's viable to continue doing. The skins with the mid-terms seems to have been a hit with the players and we'd like to continue doing them as long as it is viable and would certainly be open to trying different ways of selling them in the future.

    ~

    Lastly, your ideas aren't wrong conceptually; and obviously you do have to spend money to make money, and I mentioned some ways Pox is working towards that. I simply disagree with the optimism displayed about the potential impacts or the ease with which it can be done.

    Also, I am not saying stop making suggestions either. I wouldn't be replying if I thought player suggestions were dumb or not useful. But hopefully by explaining our position and some of the facts surrounding these issues, it improves the quality of your suggestions and also gives you a better understanding of our position and why some things that seem "obvious" to you might not actually be so easy to pull off successfully.
     
    Last edited: Jul 20, 2015
  3. BurnPyro

    BurnPyro Forum Royalty

    @Sokolov

    I see your point, thanks for illustrating. It was most helpful.

    What would your stance be on the likes of namechanges, ingame incons, taunts etc. Just extras that tickle peoples fancy AND can/will be purchased multiple times by the same people. Would you not get more out of it even though you have smaller nulbers to work with?
     
  4. Sokolov

    Sokolov The One True Cactuar Octopi

    Edited my post a bit and added a few sentences if you feel like re-reading. Marked my edits.

    ~

    I think a lot of that stuff, especially stuff like Taunts, should be done for Pox. The cost is relatively small for those features, and while potential revenues aren't high, they should yield positive ROI. But I would also never expect them to become a significant part of the revenue stream either.

    What you'd expect from such a feature in terms of a revenue curve is a fairly large spike right after launch (typically amounting to 50 to 75% of life-time total revenue), and then periodic smaller spikes if new Taunts are added. Tails are typically long, but thin, with these kinds of things.

    The problem is largely just a matter of priority, we've had Taunts and Name Changes on the future features for awhile, but various things get higher priority during planning. For example, fixing Tournaments and Drafts is considered a higher priority than Taunts. And I am currently pushing for things like Heroic Achievements, Level Progression Revamp, and Editable Earned Theme Decks as higher priority.

    Also, as moles and wraiths get more familiar with the Pox infrastructure, you'll likely more of those (taunts/name change, etc.) sort of things come online.

    Oh, and while they already exist in some ways, things have changed since they were removed during SOE so it's not as easy as just turning them on (programmers will sympathize).
     
    Ozariig likes this.
  5. Sokolov

    Sokolov The One True Cactuar Octopi

    For additional reference.

    World of Tanks' ARPU is reported as $4.5 in 2014 and has a variety of ways you can spend money, this is roughly the %s they make from each of these sources:
    • Premium Tanks (earns currency faster and other progression based bonuses) - 25% of revenue
    • Gold Ammo and Silver (in-game bonus and progression helper) - 8% of revenue
    • Premium Account (progression helper) - 25% of revenue
    • Badges/Banners/Flags (cosmetic only) - <1% of revenue
    • Skins (largely cosmetic, very slightly in-game bonus) - 2% of revenue
    • XP Conversion (orogression helper, allows you to use upgraded tanks to upgrade other tanks, basically) - 40% of revenue
    Note: The game is super grindy and you basically will not ever have all the tanks even if you spent thousands of dollars. People who play have played for thousands of hours still won't have 50% of the content. The entire model is based on gated progression.
     
  6. BurnPyro

    BurnPyro Forum Royalty

    @Sokolov

    Do you not think that it would fair to speculate that the ARPU in Pox would be a lot higher? I don't know the numbers and you probably have a lot more info regarding this, but as a huge portion of people who are playing the game (save PvE players, but do they spend much/contribute anyway?) are people who are investing quite a bit in this game. The big question would be: though they spend much on runes, how much would they spend on cosmetics or extras? Do you reckon a sort of poll would be useful?
     
  7. Sokolov

    Sokolov The One True Cactuar Octopi

    The point of my illustration is that people spend far less when they don't have to. Most F2P games selling cosmetics only have less than 5% conversion rates, and games that have cosmetic side-by-side with non-cosmetic make very little of their income via cosmetics.

    This is why World of Tank's ARPU is 3 times that of League of Legends.

    So yes, Pox's ARPU is currently high, but that this is typically a function of business model, conversion rate, etc.
     
    Last edited: Jul 20, 2015
  8. BigToastie

    BigToastie The King of Potatoes

    Got to say, thanks for BP bringing this up and Sok for the detailed replies, very interesting thread.

    Just a side note, I am sucker for cosmetics in general (I know I am only one person) but the fact I have 250+ skins on League means I am a chump for this stuff, take advantage of me please Owls <3
     
    DarkJello likes this.
  9. Sokolov

    Sokolov The One True Cactuar Octopi

    Oh, I should be clear too.

    If we were talking about a new game with mass market appeal, the full F2P with cosmetics model would certainly be the top business model on the table. Because at that point, we'd have the other pieces to potentially make it work and that is certainly the model to build a game with a larger playerbase. Though I would still be cautious and also warn you that most games who have followed that path have failed and that games like League is actually an anomaly (despite their success) and something like Smite wasn't particularly successful before they were bought/backed by Tencent (who also bought Riot).

    But trying to make the Pox of today reach critical mass to be profitable in that model is a difficult, if not impossible, task. It's just not that kind of game, especially with its age.

    ~

    In short: your business model has to suit the game you have or are trying to make. A small market-game will generally find it hard to make a F2P model work (which is why most niche titles aren't F2P at all).

    Business models, F2P or not, cosmetics or not, aren't one-size fits all.

    This is also true of general design stuff. Mechanics and features in of themselves aren't good or bad - it depends on what they are being used for and why.
     
    Last edited: Jul 20, 2015
  10. Ragic

    Ragic I need me some PIE!

    I guess I must be tired but I interpret all of that as 'it's hard to get new users so we have to gouge the old ones'. I'll go have coffee then give it another read.
     
  11. Leogratz

    Leogratz Devotee of the Blood Owl

    Good point here being - with a low playerbase it will not be hard to reach higher %s of increase. @Sokolov I have a question: Would it help you in any way if the players did a focused research? I have some friends that are strategy afficcionados and I would gladly for the sake of PN force them... uh... convince them to play or at least watch me play, and ask them why would/wouldn't they consider playing PN.
     
  12. Netherzen

    Netherzen I need me some PIE!

    Lets say you want a meta bg or a theme bg for a faction you like and you are a new player.
    To make it work,you are looking to get 4 legs,about 6 expensive exos and the rest are cheap commons/uncommon/rares.
    The amount of money you need to spend to get that is not worth it because you can buy a actual proper game for the same amount of money.
    The fact that everything you buy is more or less random and that you need to use either trade sharks or shark sites which take about 20 percent of the value of any trade from you just makes it worse.
    Also even if you do spend that money,you just got one bg from one faction,there are literally thousands of other runes which you dont have and need to invest again and again and again to get.
    You could spend thousands of dollars and still not have every rune.
    This is a game with business model for collectors.No matter how many balancing patches,quality of life changes,events,fixes and polish you add,the core issue is still there.
    This game is kept on life support because of remaining collectors,addicts and people with too much hope and enthusiasm.
    I have no idea how the people in charge of this think they can make it work,or even grow the game(while there have been improvments,the game is still ghost town and has a tiny playerbase).

    TL;DR: poxnora is a failed project of the canadian devil
     
  13. Baskitkase

    Baskitkase Forum Royalty

    I've leaned in swtor that people are willing to spend money on completely unrelated inane things. Lots of money.

    People spend millions of credits (game currency) on strongholds (houses), outfits, pets and mounts which all have zero direct bearing on the game.

    So, yes, sell some fluff.
     
  14. Kaziken

    Kaziken I need me some PIE!

    I'd personally invest in name change tokens for my units at something around a dollar a pop. It seems like something that'd be simple to implement and definitely makes your decks a lot more personalized. I could see something like this taking off quickly with the players we do have.
     
  15. Pedeguerra

    Pedeguerra I need me some PIE!

    I doubt selling cosmetics at this point would have such an impact that it would outcome major flaws at the game atm.
    I mean, sure Pox playerbase is loyal, as BP stated, but it is composed atm of what, 50 people?
    Honestly, just think about it - do you guys KNOW for sure 50 players that have been buying expansions/packs and are overall active enough that you would expect them to buy cosmetic stuff? I don't, but I could be off.
    Either way, my vote is for a Pox 2.0.
     
  16. Ragic

    Ragic I need me some PIE!

    even if the game could survive selling bling to the existing playerbase, that's only a solution for the devs (it keeps them in business). It is NOT a solution for the players who want/need a larger playerbase

    that's assuming of course that a larger playerbase IS what these guys want. honestly I cant be sure. some days it seems like they are just fine being a tiny niche group with a dev team that sells them the same crap over and over.

    I guess that's your market. well keep up the walls of text and promises for the future Sok. it seems to be all these guys need.
     
  17. Pedeguerra

    Pedeguerra I need me some PIE!

    I agree with this 100%, even though I think that if it was up to Sok there would be no "promises for the future". Sok is a "get things done" type of guy, empty promises and whatnot are probably coming from Gedden and the heads of the company.
     
  18. Ragic

    Ragic I need me some PIE!

    Sok's hands are tied by this business model which in turn is justified by the spending behavior of this playerbase. both sides need to change or they will just keep feeding off each other.
     
  19. bambino

    bambino I need me some PIE!

    as far as new players and keeping them, I would suggest setting up rooms with rarity limits,
    for instance .....
    novice rooms =com through rare,
    experienced=com through exo, etc
    ,, each room giving better rewards, ,exp,rank, etc.
    this would allow new/"novice" players to gain cards without breaking there bank and a reasonable grind, since they would be in a novice room which only allows upto rares, they can feel as if they have all the cards available within this parameter to build any bg they want without saying I need more $$$ to be better, as far as vets (im here 7yrs, medicore at best, but I love PN) , I would be more then willing to play "down" in these rooms, having to make new bg for such parameters, ,.that would be interesting, ,,
    so while a "novice" player is playing ranked, pve, ,tourney etc he/she is gaining gold, cards,shards, rank and personal experience.
    getting them ready for the scary exotic rooms where your opponents are vicious and clever, or maybe even legendary room , ooooh, where bosses named devilswrath and the tiniest of dragons lurk!!:)
    and of course the prizes would be much higher in these rooms (reletaive to novice rewards of course)...this way people can play within there budget and not feel at a disadvantage. ..

    as far as all the skins convo,, I guess its time to feel a little dumb,, good post
    ,,, sok is good..period...
    if this stuff was so easy ,, it would be done..
     
    Last edited: Jul 20, 2015
  20. DaisyDukeNukem

    DaisyDukeNukem I need me some PIE!

    @Sokolov, as always you put the points into very logical analysis; and having worked on Pox in the past can definitely agree with your analysis regarding profit/loss ARPU.

    However, the issue I have is with your breakdown of the content example. Your example breaks down significantly when you breakdown where the costs are incurred (you present a very drastic loss when that can be mitigated greatly). To continue with your new example lets say that it does cost 500 dollars to add a piece of content. From scratch your cost breaks down to something roughly on par with this:
    • 350 dollars to get the art made.
    • 75 dollars for the designer to spend the time describing and designing the rune.
    • 50 dollars for the programmer to implement said rune.
    • 25 dollars for covering the time to test and evaluate the rune in terms of the expansion.
    There are other costs associated but on a per rune basis they are likey negligible (server costs, database entry/maintenance costs, etc). However, when you have a recolor/reskin your costs are significantly less:
    • 50 dollars for that art to be modified (maybe a hundred if you need a new visual sprite) <-- this is likely a lot less since a recolor can be usually be done in an hour if that.
    • 10 dollars for the designer to come up with slightly different ability tree/defined color and rarity values.
    • 10 dollars for the programmer to implement (most work is done might need an ability).
    • 15 dollars to test it for evaluation for release.
    So your 500 dollar investment for a single content becomes 5 new distinct ways to sell. Now your numbers aren't as significant, because 500 items at 2.5 is 14,500. I am going on the conservative side of things. The more you can decrease the art cost, the more you gain on the number of pieces that you can create per cycle.

    The biggest problem though with this example is that it presumes an intention to build and sell all of this in a single return. The real way you would do this is to make the recolor/reskins as part of the core 500 dollar asset process; so that it is inherent into the cost of the expansion. Then you roll out the recolor/reskins on a regular basis with various releases or as specials. This allows you to recoup the costs that you initially lose (although minimized by the return of investment from the expansion) while also decreasing costs across the expansions.

    Time however is the biggest hurdle, and every hour given to one thing means less time on another.

    EDIT: Sorry meant to add this as well.
    The advantage to cosmetics is the ROI. Your expansion main money is made in generally a very specific time period. You recoup no real additional costs past the next expansion. However with reskin/recolors there is no need for them to continue making money between expansions. They are speciality and those who want them will spend the money to get them.
     
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