Not surprisingly, a number of companies have lined up behind the subscription model to sell their games. A quick visit to Bruce Woodcock's website and his MMOG Active Subscriptions chart which tracks the popularity of MMOGs (massively multiplayer online games) confirms this trend.

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.