Aggro Me: Station Exchange Whitepaper
Station Exchange Whitepaper
Not the Station Exchange again. Please, Aggro, don't bore us. Oh, I'll bore you.
SOE recently released a white paper (think of it as term paper you get paid to write) on the first year of the Station Exchange service. What's more, Smed did an interview with Gamasutra about it. You can download the entire white paper for yourself on the last page of that interview.
First off, major kudos to SOE for releasing this data. Very few companies would ever do that.
And the Gamasutra interview was excellent. They nailed the first thing I thought of when I read the white paper, the "popcorn analogy," and asked some tough questions. Smed was excellent and gave some honest and thought-provoking answers.
The white paper itself was informative and readable. I don't think it was great, but it was acceptable. The writer, Noah Robischon, is actually fairly accomplished in his field. You may know him as an Editor at Gizmodo but you can see from his bio (near the end of the page) that he's done a large amount of this kind of writing. I couldn't remember where I heard the name, but then I realized he does the occasional segment for NY1 (a NY-centric cable news network).
I'm not out to knock SOE or the white paper. I just have a few points to make. There's been a lot of commentary already and I honestly haven't read all of it. I may have more to add at a later date. These are just initial impressions.
Money, Money, Money
The first point is: Everyone relax. I've seen a lot of people going wild about the amount of money involved but not one person yet distinguishing revenue from profits.
Everything seems so fabulous and massive when you see numbers like 1.87 million (cash that passed through the system). But cash that passes through the system doesn't mean a whole lot. What are the revenues? $274,803.
That may seem like a lot, but as Robischon states "Station Exchange is not a significant source of revenue for SOE, nor was it expected to be."
The number is also a little misleading to the casual reader.
Revenue, according to wikipedia (which we all know is never wrong), is "not to be confused with the terms 'profits' or 'net income' which generally mean total revenue less total expenses in a given period. "
So don't think SOE profited $274,803 from the Station Exchange in a year.
This is the point in the white paper where I would have loved further information. How much did the Exchange system cost to develop? How much was spent on marketing it? Factor in those costs and my bet is you're looking at a loss, not a profit.
But now I'm the one being unfair. Those are one-time costs, for the most part. And the Exchange will continue to bring in money. Well, I still think you have to factor in at least a portion of the initial start-up costs, but okay. What about the continuing costs? There have to be some bandwidth costs. There has to be at least one person who has to deal with Exchange related technical issues and at least a portion of his or her salary has to be considered a cost.
Let's make a random stab and say costs were $74,803 during that year (I really think I'm hitting the low end). So $200,000 in profit. At $14.99 per month over the course of that same year, one player pays $179.88 to SOE (at $14.99 per month). I'm being generous and not factoring in Station Players extras or an upgraded Total Access subscription.
So that $200,000 in profit represents 1,100 players. How much did SOE lose in terms of good will and reputation value? How many players left or stayed away because of it? What if the development money spent on the Exchange was spent on bettering the game or simply marketing it? How many players would SOE have gained? What about the costs of running two additional servers?
I honestly could be misinterpreting the numbers. I admit that. But it is also completely possible (based on my understanding of the way the word revenue is used) that the Exchange is running at a net loss.
So, again, relax about how this is the future of MMO profit until you have the full picture.
If you're going to point to something in the white paper this is the way to go:
"Prior to the introduction of Station Exchange, 40 percent of customer service time was spent on disputes over virtual item sales. Since the debut of the Exchange, the overall customer service time spent has dropped 30 percent."
That seriously is impressive. But there is no mention as to whether that is only for the Exchange servers or for the game as a whole. Oh wait:
"The remaining 28 EverQuest II servers are likely to see just as much illicit buying and selling as in the past. "
Wasn't one of the main ways the whole concept was "sold" to the players is that all the people who wanted to buy plat and all the sleazy sellers would simply move to the Exchange servers? Let's isolate all who like to use RMT and the rest of us can live happily ever after. This has clearly not happened. The activity on the remaining servers simply did not change.
But, hey, "Station Exchange was never expected to replace or eradicate the use of third party auction services."
So what did we learn? Legitimized RMT can reduce customer service costs. But it's all or nothing. All RMT on every server or none at all. I'll take none but, hey, that's me.
How about a simple: "Our customer service policy is not to get involved in disputes over virtual item sales. Period." Congratulations, you just eliminated 100 percent of the time spent in disputes over virtual item sales.
Step 3: Profit
Everyone loves to look at studies like this and wax poetic about how people can earn a living by playing a game. But let's be realistic. Yes, the Top Seller sold $37,435.47 worth of goods. But how much did he or she buy? What other costs did he or she incur? And look at the very steep drop-off point. Top Seller number 3 sold less than half of what Top Seller number 1 did. The more telling point is this:
"None of the top 20 zip codes showed a profit for the first year, although the June 2006 end date may not represent a full year of trading for these sellers." None. It's not like people are raking in the dough.
If you take the average numbers from Robischon's assertion that you can make between $200 and $500 a month spending five to six hours a night ($350/5.5 hours x 30 days) you're making $2.12 an hour.
I'm not even going to get into the fact that Mr. or Ms. $37,435.47 had better have a really good accountant if they are thinking that is tax-free pure profit. IRS: Oh sure, 37k, no we don't expect tax on that, much love - keep the change kid lol. Hey, sure, maybe that's possible.
Boredom Overtook Us
Following is my favorite part of the white paper:
"He is, in essence, getting on-demand access to the best battles and quests in the game."
"It offers a fundamentally different approach to play: a means of skipping the boring parts."
That just says it all. Here's a novel, revolutionary idea: Don't have boring parts in your game.
The early levels are boring and should be skipped? The early levels should clearly be the most exciting part of the game. They should be your best stuff. If they're not, you're doing something wrong.
As a bit of a play on Robischon's popcorn analogy: Let's pretend you go to see a movie. It's great. Only every twenty minutes there's nothing but a test pattern on the scene for a boring five minutes. As the producers of this movie do you:
A. Remove the test patterns.
B. Charge people $10 to skip each test pattern and get to the "good stuff."
Look, I'm not saying SOE agrees with Robischon's comments. I'm sure the designers who worked so hard to create the "boring parts" sure don't. And EQII's early level revamp is clear indication to me that the EQII team is hard at work making all aspects of the game exciting. I'm only pointing out what I believe to be the fallacies in the "get to the good stuff" way of thinking.
"What’s more, players enjoy strutting around and showing of their wares in front of a live audience."
What are you strutting about? No, seriously. You figured out how to enter your credit card into a computer? Congratulations.