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GameDAILY BIZ: The MMO market has obviously experienced a good deal of growth in recent years. How would you describe its current state?
John Smedley: The MMO market is currently experiencing its greatest upswing since SOE helped to define the genre in the late 90s. Games like WoW, EverQuest II, Star Wars Galaxies and City of Villains are bringing in more new players to the space every day in North America. In Asia, where there really is no console penetration outside of Japan, online gaming is what the audience is growing up with, and millions of people are playing hundreds of different games. We are in the early stages of the online renaissance that we helped to start.
BIZ: Is the subscription-based MMO market being limited by monthly fees? Is this turning people away?
JS: Subscriptions are one way to go and it's currently the biggest revenue driver in online gaming. I believe you will see upsell models (i.e. buying items, character appearance upgrades) begin to grow in a big way. Imagine being able to have a completely non-subscription based MMO that makes its money only from these upsells. We're already working on a game with that model that's going to release next year.
BIZ: Do you believe that offering a "free" MMO is something that SOE needs to do to broaden the market or is it more that you just wanted to test the waters?
JS: Absolutely. We think online gaming is a major new form of entertainment, and for now the most important thing is going to be to get as broad an audience as possible. This means trying new business models to attract people that are nervous about paying a monthly subscription. After they try this style of gaming even for a little while, we're convinced we can overcome that initial resistance.
BIZ: Obviously the "free" model has been tried before with games like Guild Wars. How is SOE going to make this model even more efficient?
JS: We do like Guild Wars at SOE -- there are a lot of people playing it here -- but we don't technically consider that game an MMO. What they've done is great, but it's much closer to a game like Diablo II than to EverQuest (which makes sense, when you consider the team's background). For us, we're exploring the concept of a truly free game, a game without a retail component at all, that would have an executable small enough for people to literally email to each other.
BIZ: If this business plan is a big success, will SOE make the switch to providing nothing but "free" MMOs or do you believe that you'll always offer both subscription-based and "free" games?
JS: You will see both types of games -- and more -- from SOE in the future. The right way to go is to offer our players as many choices as possible.
BIZ: Will selling in-game items in the "free" MMOs really be enough to make up for the loss of the subscription revenue?
JS: Yes. In fact, we've seen evidence of this already in different things we're already offering. Over 33% of our audience for EverQuest II signs up for Station Players (web based services like character profiles, guild forms, guild chat). We charge $.99 per feature or $2.99 for bundle of all the services. We also see a high dollar average from our Station Exchange (player-to-player auction service) for EverQuest II. We strongly believe we could potentially make more money and offer the core game for free.
BIZ: The MMO business model you described sounds perfect for the console world, especially on Xbox Live with Marketplace. Is this something that SOE is considering, and do you believe that MMOs in general will be successful on consoles?
JS: Yes, we think that ultimately the MMO business will come to be a major part of the console gaming world. We tried it first in North America with EverQuest Online Adventures for the PS2, which is still running and being played. We were a bit ahead of our time, but we've learned some very valuable lessons about designing online games for consoles that we will be applying to future titles. In particular we saw that how people paid for this game was quite a bit different than our PC based games. At one point over 40% of the audience was using game cards (purchase of gametime from stores) as opposed to 15% for our PC based games.
BIZ: Besides wrestling with the idea of eliminating subscriptions, what else do you think needs to change to attract more people to the MMO sector?
JS: The games themselves need to become much more diverse. At the moment there are a lot of RPGs in the market, and I think we're quickly getting to the saturation point. We strongly believe in the model of many different types of online games (Action and Strategy are two genres we believe strongly in for the online gaming market).
BIZ: SOE recently announced some pretty sweeping changes to Star Wars Galaxies (revised character classes, streamlined interface & more). Can you explain the thinking (from a business perspective) behind making major changes to a game from 2003?
JS: We're very proud of the work that we did on Star Wars Galaxies, but it never hit the really massive audience that a game with the Star Wars brand behind it should have. I think we didn't deliver enough of the Star Wars heroic experience. In conjunction with LucasArts, we embarked on a very intensive campaign to research the issues with the game and to make something that we were really proud of. This revamp is the culmination of that. When people give it a try, they'll be blown away by what they see! This is Star Wars the way it was meant to be played!
BIZ: Are you at all worried that the die-hard SWG players may feel alienated by these new changes to the game?
JS: At first we were concerned, but the more we played the changes ourselves, the more convinced we were that they ultimately would love the way the game is evolving. Yes, we're changing the game, but we're making it significantly more fun. By delivering on that Star Wars heroic experience I'm confident they'll agree we made the right move.
BIZ: In the update SOE has also added more encounters with Star Wars Trilogy characters like Han Solo and Chewbacca. Was this done in an effort to broaden the audience for the game?
JS: Yes, a lot of the core characters are in the revamp. In fact, within the first few minutes of the New Game Experience you run into Han and Chewbacca.
BIZ: Finally, how do you see the MMO market evolving over the next several years?
JS: I expect to see many more casual style games beginning to emerge here in the U.S. (it's already happening in Asia). Stuff like Baseball, bowling, racing games and golf will begin to grow in popularity. I also think you'll see more consolidation in our space as the cost to produce these games goes up drastically.