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The Future of SOE Business Models

Posted Tue, Feb 03, 2009 by Savanja

Sony Online Entertainment has always lead the way in MMOG trends so when President John Smedley stops to talk business, we all stop to listen.


In a recent bold move, SOE added a micro-transaction marketplace to a couple of their biggest titles and this has left many wondering what this means for future SOE games. Smedley interviewed with Virtual Goods News and had plenty to say about what this means:

VGN: Would you consider expanding virtual goods into other SOE titles?

Smedley: We have. The conclusion that we came to is that StationCash won’t go into Star Wars Galaxies, it won’t go into Vanguard, and it won’t go into future games where it doesn’t make sense. It will be in EverQuest, EverQuest 2, and some future titles like DC Universe Online, though items we sell there in upcoming games may be very different from what we're seeling now.

We’re trying to hold the line about not selling "power," but what form that takes in DCUO remains to be seen. We might sell more costumes and different sorts of customization things. We’re still learning what people like and don’t like when it comes to virtual goods.

VGN: Does bringing virtual goods into the business model change the development approach for a game?

Smedley: We have gone out of our way to make sure we’re not doing virtual goods development in addition to everything else. As a good indication of performance, we’ve added another person to each relevant team that does nothing but handle the items. Our users have signaled very strongly they don’t want existing resources that should be making dungeons or optimizing performance being used to create StationCash items.

VGN: Do you see SOE transitioning away from the subscription model for MMOs?

Smedley: I don’t. There’s not a transition there. We aren’t going away from subs, this just gives us another avenue.

The question is still open about how we’ll handle subscription in DCUO and The Agency. We’re going to see how FreeRealms goes and see how that business model works for us. We may very well end up with subs in DCUO and The Agency. If we can make enough revenue, though, we may consider going goods only.

VGN: So what’s driving the interest in virtual goods at SOE?

Smedley: We’ve been intrigued watching the Asian free-to-play model for awhile and got interested in that. The sales data we get out of the Denver studio is just shocking. People have money to spend and they want to spend it on something cool.

So, we did some surveys of our players at FanFare 2008 – we got criticized for this – but we wanted to talk to our hardest-core fans and hardest critics. We got feedback that was very strongly “Yeah, as long as you don’t sell power, I’d give it a try.” We thought that the time was right.

VGN: How do you see the traditional subscription model of generating MMO revenue? Do you see it declining?

Smedley: I don’t. I believe virtual goods sales are an ancillary revenue stream. In fact, I think in World of Warcraft and in our games, there’s a strong sense that people understand that subscription model. I don’t see it going away any time soon.

I do think, though, people aren’t looking at SOE's virtual goods with the right viewpoint, as to our real intent. Our intent, especially with FreeRealms, is to capture a market we couldn’t otherwise capture, like kids who don’t have credit cards.

If my son wants a $5 gift card for a game, I might buy it for him or he might use his allowance. To me, that’s a very powerful thing. It gives kids some ability to control their own destiny when they can buy things in a game.

VGN: A lot of SOE’s microtransaction titles have a CCG theme to them (Legends of Norrath, PoxNora). What lead to SOE’s interest in this area?

Smedley: We believe strongly in the core gameplay. Those are great games. We also wanted to get into the microtransaction space.

VGN: But why use the CCG model specifically?

Smedley: We felt the user-base was already used to it, looking at stuff like Magic: the Gathering Online. So we wanted to add that to our MMOs.

To read more of this interview with Smedley, please visit Virtual Goods News!

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