However, closer inspection of the chart reveals that not
all of the lines go up. Some games seem to be adding
subscribers like crazy and others seem barely able to
maintain their small subscriber base, or are even in
decline. What’s the difference? Certainly there are many
factors that influence the success of any game. First of
all, if you don’t have a compelling game, then no sales
model is going to make it work. However, there are also
other factors that have nothing to do with the game that
may determine success or failure. The subscription model
has unique elements that gaming companies are just now
beginning to understand.
Subscribers are more than customers
A one-time sale, such as a game off the shelf at
CompUSA, is notably different than a subscription. Much
effort and expense is spent getting customers to make
one-time purchases, but subscribers must also to make
the decision to continue purchasing. This ongoing
commitment can make getting subscribers more difficult.
The subscribers must be convinced that in exchange for
the subscription fee, there will be ongoing value. In
short, subscribers must trust you before they will buy.
Once subscribers sign up, they tend to stay with the
relationship until something changes. This explains the
industry’s current 72%+ renewal rates (Online Publishers
Association) And what some gaming companies seem to be
missing is the fact that while it may be more difficult
to get subscribers to make the first purchase, it is a
much easier task to get future sales (renewals). Not
only does it take a lot less effort to keep an existing
subscriber, but subscribers tend to buy other products
in addition to their original subscription.
Gaming company, Wild Tangent, for example, recently
rolled out an online baseball game called Hit the
Pros. They began by offering a simple flat-fee per
month to play the game. They soon discovered that when
people were ready to sign up for the game, they were
also ready to purchase some other games as well. In
fact, 20% of those willing to subscribe to Hit the
Pros, also signed up for additional products offered
spontaneously at the time of purchase.
Magazine publishers have known this for a long time.
In fact, many people in the magazine industry say that
they are not in the content business, they are in the
subscriber business. The name of the game is getting and
keeping subscribers. Most publishers also realize that
in order to get and keep a subscription active requires
multiple and often personal offers to the subscriber.
Anyone who subscribes to a magazine knows that they can
expect not just one, but many renewal offers in the
mailbox.
Offer, Offer, Offer
Because a subscription is a relationship,
subscribers like to be treated in a personal way. Don’t
assume that one offer will work for everyone. Peter
Lamb, a retired Senior Partner at Accenture, spoke last
year at the Global eSubscription Symposium. He said,
"You also need to control one of the potential pitfalls
of a subscription model—that is average pricing. You can
change it, but by definition, if you have a subscription
model with one price point, you are over-pricing half
the audience and under-pricing half the audience."
This is one aspect that the current crop of online
games needs to improve. Taking another look at the MMOG
chart above, you find that most of the games listed are
offering a fairly static fee-per-month price model. Some
of the games let the subscriber sign up for multiple
month packages (i.e. one, three or six month terms), but
this is not really a different offer. Getting more of
something is not necessarily personalized. However, if
the way I buy allows me to use the product the way I
want, then I, as a subscriber, feel I am getting more
from the subscription.
A deeper look at the MMOG chart shows that while many
of the games at the lower end of the chart seem to be
offering fairly limited offers, two at the top have
branched out with more personalized and varied offers
and promotions. Ultima Online, for example, has a
bring-a-friend program (in exchange for discounts and
free time), as well as pre-order specials, an "early
settler" bonus, and various account upgrades and
add-ons. Everquest has expanded even more to
include services such as transferring characters or
changing names, ring tones for mobile phones, a
newsletter, and enough additional materials such as
maps, guides, and expansion packs to keep subscribers
coming back for a long time to come.
Is it merely coincidence that these two games are
currently at the top of the pack? Probably not. More
subscribers are likely to find something that suits them
if there are multiple offers. What would happen if some
of the games that seem to be struggling were to offer
multiple kinds of plans? What if a subscriber could
choose to purchase a game by time (monthly access), or
by units (character level points for example), or even
by sections of the game (like a particular quest)? What
about a combination with unlimited access for one month
while on a certain island that includes 1 free weapon
upgrade and 3 tech support messages? ("And we would be
happy to sell you an upgraded package with access to
more islands. And since you’re a pro, you won’t need the
tech support.")
Careful what you wish for
Now, while all of this may be very satisfying for
the subscriber, it can be a challenge to manage all of
those diverse offers. While most billing systems handle
a one-time purchase, they do not handle multiple
variations of time, units, and other measurements, let
alone the recurring and often irregular nature of a
subscription. Companies new to subscriptions tend to
think that they can either develop a system themselves
or modify their existing billing, accounting and CRM
infrastructure. This generally leads to trouble.
A consultant who helps companies market subscriptions
describes an experience he had while working with a
group that had a homegrown subscription management
system in place. Each time they wanted to make a
different offer, they had to sit down with the
development team, and request changes to the system to
support the offer. By the time the changes to the system
had been implemented, they had already moved on to a
different offer. He also tells of another company that
wanted to change their billing to support continuous
service (automatic renewals charged to a credit card).
According to him, this turned into a "massive task."
The other challenge of a subscription management
system is that it affects other parts of the business in
ways you might not expect. Do all of your subscribers
get charged on the same day per month, or is it based on
when they signed up? What about credits for canceled
subscriptions? What happens if a subscriber wants to
suspend a subscription while on vacation, or transfer it
to someone else, or combine two subscriptions into one?
Will all your subscribers be using the same currency?
Are there sales or VAT taxes to think about? Just ask
your CFO about handling deferred revenue for pre-paid
subscriptions and you will start to understand how
managing a subscription business is very different.
Game producers can retain and enhance the value of
each subscriber by expanding the available offers for
products and services. Focusing on the marketing and
renewal processes helps get the most value out of the
subscription model. The last thing anyone wants is to
bring a fantastic game to market only to find out that
all the attention went into creating the game, and not
nearly enough into managing the subscribers.
Do’s and Don’ts
The following is a summary of some of the things to
pay attention to if your company wants to release a
subscription-based game.
Do: Surround the game with value
If you look at the chart at the beginning of the
article, it is missing an important piece of
information. While the chart tracks subscriber count, it
ignores the value of each subscriber. Everquest
has a full page list of add on products, upgrades and
enhancements that they market to their existing
subscriber base. This means that not only do they have
more subscribers than anyone else on the chart, but
their subscribers can buy more in addition to the game.
Their subscribers become more and more valuable as time
goes on.
Don’t: Assume one price plan or offer will suit
everyone
Remember that a subscription is a relationship and
should be tailored to the subscriber. You will satisfy
more subscribers with a variety of offers to choose
from. While some people might wear a one-size-fits-all
pair of pants, most prefer their own size.
Do: Test multiple offers
Once you have a subscriber, or a perspective
subscriber, keep trying various offers to get them to
buy. Magazines publishers try multiple efforts because
it works. Eventually, you will create an offer that
works for that subscriber (and your system will need to
keep track of what offers were made to which
subscribers). Be flexible and think of all the ways that
someone may want to have access to your game, then try
out the offer.
Don’t: Try to build this yourself
If your company is new to the subscription model,
you should look for a company or consultant with
subscription management experience. Subscriptions are
not like other sales models, and you will avoid a lot of
problems if you find a system and expertise that is
specific to subscriptions. Be an expert at games, and
use an expert for your subscription management.
Do: Use the model
While this may sound a little intimidating, don’t
worry. Companies have been using the subscription model
for over a hundred years. They continue to use it
because it brings ongoing value, predictable and
sustainable revenue, and a built-in sales channel to
their business. With the right infrastructure, the
benefits of the subscription model are attainable. After
all, someone is going to get a piece of the $600 million
dollar pie. It might as well be you.
Author Bio
Dale Munk is CEO of Sandlot Corporation. He joined the
company in February 2000 after serving as Chief
Executive Officer of ViewSoft, Inc., an Internet
application deployment company acquired by Citrix
systems. Mr. Munk began his career at Digital Equipment
Corporation in 1977 as controller of one of Digital's 22
product lines. He acquired significant subscription
management experience when he joined Bedford Computer
Corporation as Chief Financial Officer in 1981 and was
instrumental in taking the company public. Mr. Munk
holds a BS and MBA from the University of Utah.
