Are Subscription Based MMO's Dead?

With World of Warcraft losing 800K subs the last quarter and over 1.3M the last 2 quarters, a lot of people are writing that subscription based MMO's are dead.  Some are touting that Star Wars:  The Old Republic will be the last large subscription based MMO.

Warhammer 40K: The Dark Millennium noted that they will be using different business models based on the region but will still use subscription in the west.  Blizzard's next MMO, Titan, and Elder Scrolls Online may still be subscription based.  These games may switch to a Free2Play model but as I noted earlier there are a lot of factors that must be considered.

A good case study would for the possible direction of the market is the Korean Online market.  Over 10 years ago, Korea was only dominated by subscription games such as Legend of Mir, Mu, Lineage, and Ragnarok.  Because of the highly competitive nature of the market and the extreme costs of development, new MMORPGs were unable to gain any traction.  In order to survive, publishers started created extended open beta programs.  These are different than US beta programs in that these games were basically live versus just restricted to a select number of customers.  These allowed Publishers to showcase their game and try to make users tied to their game before they started charging a subscription.  Players were not wiped, but to continue playing their character they had to pay a subscription.  Soon all publishers adopted this strategy, but this actually hurt the overall market.  Players started just moving from beta to beta now that they constantly got free access to new games every couple months.

Soon the Free2Play market developed as game companies turned to Free2Play models to monetize and retain players.  The market started to divide as between Free2Play games and MMORPGs which is what is happening in the US.  Free2Play game have different cost dynamics that Subscription based MMOs so both have their own niche and continue today.  Korea's top 20 game list is always dominated by Free2Play games but LineageII, World of Warcraft, and Tera are still strong subscription based games.  Rift also just got a publishing deal in Korea showing how subscription based models are still doing well in Korea.  I believe this will be the case in the West for a few more years.

Subscription based models will eventually fade if the following factors occur:

• Free2Play MMORPG content is just as good as Subscription MMORPG content.  Subscription based MMORPG content costs more than 50M-150M to develop.  The PC hardware requirements and online service requirements are also very high which make the audience limited and the costs of hosting Free players too expensive.  A lot of successful Free2Play converted MMORPG games that have profitable operation models but will take a long time to recoup their original development and investment costs.
• The barriers to playing premium subscription based MMORPGs disappear.  By barriers, I am referring to any fiction that prevents players from entering the game.  This includes costs of a box.  Either, players pay $20-50 to be able to access the game early or downloading the game is just free.   The other major barrier is the time and effort it takes to download a premium MMORPG.  With the lowering costs of bandwidth and the increasing speeds of bandwidth, this may be a mute point in 1-2 years.   For a Free2Play game to succeed, the hurdles to trying it must be close to zero.
• Free2Play monetization strategies are adopted by designers of Premium MMORPG games.  Current, Premium MMORPG games are not normally designed to maximize the monetization of Free Players as most designers believe that buying gold or selling items that effect gameplay will ruin the game.  These are actually some of the best selling items in some Free2Play games.

Subscription based models will continue to be viable for the next few years but as the market evolves and technology changes. Subscription based models may become obsolete but that will not be for a few more years.