January 21, 2009

In WoW we trust....

World of Warcraft have been the biggest success of all MMORPG ever released, by far. When thinking of Blizzard’s blockbuster World of Warcraft, or WoW as often referred to, it’s easy to see an interesting market. From my perspective it gets even more interesting since it is completly built upon intangibles.

Some general MMO market figures from:

As the charts show it has been a booming niche in video games. The second graph shows WoW's superiority compared to the other existing MMO's available. WoW had a market share of 62% in April 2008.

Some quick facts about WoW:
• Blizzard announced 11.5 million WoW subscribers in January 2009.
• World of Warcraft has been available for the Mac and PC since 2004, and has spawned two expansion packs.
• The latest extension pack sold 2.8 million copies in the first 24 hours of availability, according to Blizzard.

So my question is: How are Blizzard going to manage the development of WoW in the future?

I perceive the existing model of computer game creation to often build upon a concept, and to release disruptive games around that concept. An example of a very successful series is Grand Theft Auto where the basic concept is similar even though the game engines evolve and provides a richer computer environment. But they have not over 11 million active subscribers that pay to access and play.

So is it really possible for Blizzard to disruptively replace WoW and continue the Warcraft series in the same way they do with Starcraft and Diablo? I would argue that it is not possible; instead an incremental change of WoW is the only way.

The main reasons for this statement are the following:
WoW enjoys an extremely large user base that continuously pay subscription fees. This introduces a rather complex second best economic analysis when launching a game to replace WoW (Yearly average subscription fee X user base = ~$1.7 billion).

Users have created and institutionalized virtual property and created a market place for the transaction of virtual property into money (Google returns over 10 million hits on "wow gold"). If the virtual property (the accounts) won’t be transferred into the new game, there is kind of a lock-in and the games will cannibalize on each other.

Following this path of deconstructive thinking of the problem many more obstacles arises concerning the user base and lock-in effects. However, this arguments rests on the assumption that there another WoW-like-MMORPG will compete about the current WoW user base.

Instead, the incremental change of WoW seems to be the only way and the path chosen by Blizzard as well. When taking a closer look at the latest expansion they claim to improved graphics and details with real-time shadows, better models, and bigger draw distance. So not only expand the story and the characters.

So will we see an organic, incremental development of WoW until the day of photorealism? I guess the market and the consumer power will have to rule this one.

Mathias Hellman

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