Tuesday, June 28, 2011

Business Strategies

Alternative Title

Some people have asked if this is an Eden Eternal flame blog.

I don't particularly hate EE. I don't like MMO's in general, so you can expect me to rant about other games I've touched in Aeria's arsenal, and games in general. I might even rant about shit that has nothing to do with games.

No, you can't have my IGN.

Today, I'm going to address something else I've seen in the GFO forums, specifically, the threat EE poses to GFO.

The threat EE poses to GFO is not developer oversight. It's intentional and a well-known consequence of the f2p model.

To understand this, we must first look at the revenue generator.

In F2P, the formula looks something like this:

Revenue = integrate (accounts * spender rate * (1 + novelty + necessity + competition) * satisfaction * average item price * dt) from 0 to infinity.

What does this mean?

Spender rate:

In all F2P games, you will never reach 100% paying base. So already, you need to attract an account count larger than a similar p2p operation.

However, on the other hand, since playing is free, the attraction of accounts is higher than P2P, this is important later.

Novelty:

Novelty is the additional value an item presents for being new. Humans, through some sort of weird psychology, places value on having something first. This is part of the premium that applies to all items.

Necessity:
Some items are the virtual equivalence of gas. Items such as repair hammers are in constant demand. This is also part of your revenue.

Competition:
Some items have intrinsic value just because it drives some kind of competition. Things like fortification, pots, and whatnot will often give players an edge in PvP.

Satisfaction:
This is a difference between P2P and F2P. In F2P, there is the option to stop spending and continue to play. In P2P, stopping means you lose access to your account, and all progress you've made on that account that you perceive to be yours and valuable will be gone. This alone compels people to stay playing. In F2P, there is no such thing. People can stop spending, or even take long breaks, without worrying about the loss of their character or items, (for the most part). Thus, lower satisfaction will signficantly lower revenue.

Now, here's the problem with this formula, they're not independent variables.

The change of accounts more or less directly varies with satisfaction. Players satisfied with the game will invite their family and friends. People dissatisfied will not only leave, they often take their friends and family with them. The more satisfied, the more zealous they will be in recruiting, and vice versa.

So d(accounts)/dt = c1 * satisfaction where c1 is some constant. Integrating both sides.

Accounts = c1 * (int (satisfaction dt). Let's stop here for a second.

The spender rate directly varies with satisfaction. The more satisfied, the more people will spend. However, they're less likely to convince other people to spend or not spend, hence this is a direct relationship.

Spender rate = c2 * satisfaction

Now we have item price. Item price varies inversely with satisfaction. This shouldn't be difficult to understand. More expensive things = less happy people.

Item price = c3 / satisfaction

So now we have the formula

Revenue = int( (1 + novelty + necessity + competition) * c1 * c2 * c3 [ int(satisfaction dt) * satisfaction * 1/ satisfaction)]  dt)

Removing the constants (we're only interested in the trend here, not the actual values).

Revenue = int [novelty * int (satisfaction dt) dt]

Novelty is always going to go downwards. This is obvious.

Necessity, by definition, is constant, and thus removed.

Competition is directly related to novelty, because only new content, new changes, and whatnot will generate new competition. As competitive people get more and more ahead, they'll be more and more entrenched, making newer people less inclined to compete due to having access to a lot less resources.

Lastly, we have the relationship between novelty and satisfaction.

Novelty and satisfaction are directly related in a fundamental level, because novelty, or freshness, ultimately keeps interest in the game high.

So, novelty = c4 * competitiveness = c5 * satisfaction.

Stripping out the constants, we have

Revenue = int [novelty * (int (novelty dt) dt]

We already know that novelty is more or less decreasing constantly, so novelty is some first-order polynomial of t, or novi (initial novelty) - c1 * t. Since in calculus, constants are factored out, we take it to be novelty =  c1(novi/c1 - t), since both novi and c1 are constants, we represent it as nov.

Revenue = int [ (-t + nov) * int (-t + novdt)dt]

Revenue = int [((-t + nov) * (-1/2t^2 + novt + c )dt] c = 0, there's no accounts at t = 0.
Revenue = int (1/2t^3 - 3/2novt^2 +nov^2t)dt

Derivative of revenue = 1/2t^3 -3/2novt^2 + nov^2t = 1/2t (t^2-3nov+2nov^2) = 1/2t (t - nov) (t - 2nov), which has a zero at 0, nov and 2nov. We discard 2nov, however, because novelty = nov - t, and 2nov, novelty would be negative, which makes no sense.

Take second derivative of revenue.

Revenue''(t) = 3/2t^2 - 3novt + nov^2

At nov, t = 1.5nov^2 - 3nov^2 + nov2 = -0.5 nov2, which is assuredly negative. By the second derivative law, there exists a maximum at t = nov.

At that point in time, the game would have reached its maximum revenue potential. In other words, there's no more money to be made from it. It is inevitable that F2P games, as a novelty-based, novelty-driven model, die.

Some people at this point might think "What about longevity?"

If a F2P game has novelty, it has implied longevity. QED.

Now, you might ask, "isn't P2P also novelty-driven?"

Yes.

The P2P model is as such:

Revenue = accounts * fee. Fee is constant

So Revenue = int(accounts dt)

Accounts, as we know, is int (satisfaction dt), which is int (novelty dt)

So Revenue = double integral of novelty * d^2t.

Having said that. Developers who want to delay this inevitable death will inject novelty into the game. This is why developers make patches and new content.This, however, is where developers diverge.

P2P has two features F2P doesn't have. P2P's account numbers is much less sensitive to change than F2P. The monthly fee precludes frequent player influxes, and the time-money investment per p2p player is much greater, making player exoduses much less likely. Thus, fluctuations in P2P's revenue is a lot smaller than F2P's, which is often very volatile.

In other words, developers have a lot longer to prepare game patches, which inject novelty into the game, than F2P. Developers also have practically no tools to generate bursts of revenue. In other words, they'll be working on the long-term aspect of the game constantly.

F2P on the other hand, is the opposite. Player influxes and exoduses are much more common, which means content must be frequent to keep the players engaged. The existence of the item mall is also prime material for direct revenue stimulation, which is why costume recolors are so frequently done. This is all done at the expense of long-term aspects, because those content are much less likely to generate revenue, as by the time you're done developing it, impatient players may have already left and are never coming back.

This instability makes developers (especially the likes of EF/x-legend) turn to another form of novelty. They make clones of their older games and release them frequently. A new game provides several advantages:

1. It is the largest form of novelty you can offer to players for the least amount of effort. I will quote Joel on Software again: To the layman, the UI and appearances constitute of 90% of their impression on the program, but to the programmer, that's usually only 1-5% of the work. As game death happens at t = nov, the higher the initial novelty, the longer it will live.

2. It double-charges the players, as the money they have spent on the older game is now worthless. Few games offer character movement, and even fewer offer refunds. They are of course completely not obligated to do either, as you're paying for a service rendered. To a player, however, to reach what they reached in the earlier game, they need to invest their time and money again.

3. Similar to the first two points, it keeps the developer fresh. For some reason, even though starting from scratch is the most economically disadvantageous thing to do for many things, humanity seems to prefer that "squeaky-clean, brand new" feel, which they believe is worth sacrificing old code for. This even happens in computing development, as Joel on Software notes here.

4. It keeps the developer in the spotlight. Announcements for a new game invariably will be carried by game news sites, but patches won't. By making new games instead of patches, they stay in the public eye, and are much more likely to attract players.

By doing this, they're getting the maximum bang for their buck (developer hours).

You, the player, however, just get screwed.

This is why they don't care about Grand Fantasia players migrating to Eden. This is why they keep making clones year after year, and don't believe for a second that other companies don't also do this.

After all, it only costs 4 mana.

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