The Funeral of WoW Gold

Flagship Studios was one of the most ambitious game development studios started in recent years. It launched a critically acclaimed game, Hellgate:
London, in November, 2007 that had garnered more than 60 game review magazine covers.

The game sold more than 450,000 copies (at $50 each, that’s $22.5 million at retail) But by August, 2008, it was out of business.

Stephen Goldstein, former director of business development and general counsel of Flagship, said in a talk at the Game Developers Conference that the lessons learned in Flagship’s fall are useful for all entrepreneurs. They’re particularly relevant, even at a time when the game industry is still growing, since there are numerous losers in the game business who have been hit with layoffs and studio closings.

Flagship was founded in 2005 by Bill Roper, a veteran game developer who worked on Blizzard’s smash hits such as Diablo. He was joined by other former Blizzard team members, many of whom were frustrated with their parent company, which had told them their game Diablo III wasn’t ready to ship. This team was seasoned, with sales of more than 17 million games behind them. They quit and started Flagship in San Francisco to make the high-end sci-fi/fantasy game Hellgate: London, which would break new ground.

The vision was to create a 3-D first-person game with high-quality graphics. It had all sorts of demons to kill and levels that you could explore in a faithful reproduction of London, albeit in a ruined state. You could also go online and play in groups, much like in the mega-hit World of Warcraft. But WoW was one of Flagship’s problems, because it was so successful that it was drowning out other titles (right now, WoW has more than 12 million subscribers worldwide).

Goldstein didn’t go into financial details. But some public information is available. Flagship raised tens of millions of dollars, both through its U.S. publisher Namco and Korean online publisher Hanbitsoft. The reputation of the team was so solid that six publishers lined up to launch the game worldwide. Co-marketers signed up to do merchandise and comic books ahead of the game launch. There were 11 partners whose names went on the box. But then things went wrong.

“We made a series of mistakes that every entrepreneur may make,” said Goldstein.

The ambition was part of the problem. The company was swinging for the fences, trying to hit a home run with both a single-player game and a subscription online multiplayer experience. It was trying to do a lot of things its team members hadn’t done before, such as making a high-end 3-D game, doing an online game, and other things. There were so many partners, and they all wanted something in return, which took up a lot of staff time. If something went wrong, the company didn’t really have a backup plan, Goldstein said. It wasn’t built on a strategy that allowed it to either delay the game or scale it back.

Another problem was how long it took for the team to get money. It received its money from the publishers as an advance. So it had to sell a certain number of copies before any new royalty revenue could come in. Players could play the game for free online. But to get new levels, they would have to pay. The subscription revenues would go into Flagship’s pocket, but the money was coming in really late.

Goldstein said the company should have just skipped the free multiplayer play and done what others, such as WoW, had done: give players 30 days of free multiplayer play and then charge them a subscription fee after that.

Initial sales might have been lower, but subscriptions would have come in faster that way, he said. The company also had complicated tasks that it put off for too long, such as building the online infrastructure and setting up a billing system. It tried to launch worldwide all at once, but that meant doing 17 different versions for 17 languages. The company believed a little too much of its own hype.

Flagship could have raised $20 to $30 million from venture capitalists. In 2006, VCs had funded big online game companies such as Red5, Slipgate Ironworks, Trion World Network and Perpetual Entertainment. Goldstein said that raising money from VCs would have given Flagship the cushion to delay its launch. The game ran off schedule, and the company needed four or five months to complete it. But it had to launch in November, 2007, anyway. As a result, players complained it was buggy.

“This was the company-killing moment,” Goldstein said. “If somebody offers you money, take it.”

That money could have come with some rich advice from outsiders on how to run the company. Flagship didn’t have the benefit of people from outside who could give it a reality check. The game didn’t meet expectations, and so sales just didn’t materialize.

In July, 2008, the company laid off all of its 100-plus employees. Creditors claimed its game rights. And the employees said they’d been “Flagshipped,” or basically screwed over.

“This was one of the most painful times in my career,” Goldstein said. “Unfortunately, I think we’re going to see a lot more of it happen.”

Long before World of Warcraft, a game called Everquest introduced hundreds of thousands of players to the wonders of massively multiplayer online worlds.

Screen Play only very briefly dabbled in Everquest’s fantasy worlds, but a visit to Sony Online Entertainment in
San Diego during the game’s heyday made a big impression - the resources necessary to keep Everquest and other online communities active were astonishing.

Earlier this month Everquest celebrated its 10th anniversary, and longtime player and regular Your Turn columnist Anthony Murphy decided to mark the occasion by writing a piece for Screen Play on his early experiences with the game.

Click below for his latest blog, which is in the running for a PlayStation 3 console.

Happy Birthday!

On March 16, 1999, Verant Interactive launched Everquest. Along with Ultima Online it was
one of the very first attempts to create a massively multiplayer online game from the same structure that defined MUDS since the late 1970’s.

Players would log into the game and play a character in a large world that persisted between play sessions. You could meet up with hundreds of other players, trade with them, enter into alliances or simply go exploring together. For the privilege the developer asked a monthly fee to support the game and pay for the network resources it used.

This period between the release of Ultima Online and World of Warcraft is considered the Wild West days of the massively multiplayer online role playing game (MMORPG) genre - projects of this type and scale had not been attempted before. Despite all the uncertainty, Everquest must have done something right because it’s still running today, ten years later.

The game systems were primitive and even brutal towards a player on occasions, the death of a player resulted in that character moving backwards along their advancement path; something unthinkable in today’s online games. If the character died their body would lay where fell until they could get close enough to recover it. If the character died in a particularly dangerous area it could take the efforts of many allies to get to it, who in the process may also be killed. If a player did not retrieve their body in a certain amount of time it would be destroyed along with all of the equipment on it.

The developers placed the tools to ease these burdens in the hands of the players. Necromancers and Rogues could aid in recovering your corpse; whilst Wizards and Druids could facilitate crossing the vast lands of Everquest very quickly. This demonstrated a common thread running throughout the early years of the game; rather than fix a problem by removing it, the developers would build a solution into one of the character classes. This meant that the players looked to other players to help solve their problems which fostered a sense of community. Everyone helped everyone else because you didn’t know when you were going to be the one in need.

There was no in-game auction house: players sold their wares by meeting in a common location and advertising their wares to the local area. On my server this was the tunnel in the East Commonlands, it was convenient for all players to get to. No one was rude or attempted to rip anyone off, the server population was too small and a bad name was something you could not afford.

I came by Everquest in a roundabout way. I was a fan of the Ultima series of games from my youth and I was playing Ultima Online at the time. Everyone was talking about the impending release of Everquest, which was considered “the competition”. When the game was released I sat on the fence for a little while before purchasing it from an online store. At the time no games store in Australia had ever heard of it.

Once the software had arrived I created my character, the look and feel of the game was a little primitive, the graphics could be compared to Quake which was then three years old. I quickly came to understand that the game traded graphical quality of large open playable areas. The game had no in game map so I quickly became lost, I wandered out of my starting area into the hills where night had fallen and was attacked by a wolf. I barely managed to kill it and struggled to the top of a hill where I saw my first real time 3D sunrise.

At the time I was playing Dungeons and Dragons with a group of friends, including Cameron
and Chris who also played a MUD called Medievia. One weekend I lugged my Pentium PC over to West Heidelberg in my HQ Kingswood and let them have a go of it. Within a week they’d both bought the game and their first 3D accelerator cards.

This was the start of a journey for the three of us that would continue across many worlds and as many characters. My most enduring memory? Sitting on the beach in South Ro fishing whilst Cameron and Chris jumped in and out of the water trying to scare the fish away. In the end it’s not the awesome loot or the character leveling that you take away from the game, it’s the people you meet along the way.

Happy 10th Birthday Everquest!

GDC 2009: We sit down with the upcoming online strategy game League of Legends and come away feeling like we just found a diamond in a coal pile.

Stepping into my hands-on with Riot Games’ League of Legends, I wasn’t entirely sure what to expect. I hadn’t really heard much about it other than that it was an RTS/RPG game that started out as the popular Warcraft 3 mod Defense of the Ancients. When I sat down and actually played with the game for a while, I quickly realized that this was one of the coolest games on display at this year’s Game Developers Conference.

The basic premise of the game is that players play the role of a summoner who enters into battles with other summoners: each summoner chooses a champion to fight on his behalf, and then players control the avatars in battle. Each avatar possesses totally different abilities and combat styles: Nuna the Yeti-Rider is effectively a tank unit, Master Yi is a sneaky swordsman, and Alistar the Minotaur is a brawler. The match I participated in had me playing as a healer/priest, but I learned that it was possible to use my champion as both a support and attack class once I learned her strengths and limitations. Learning to control—and eventually mastering—any of these characters will take some time to learn, but once you’ve got the basics down, they’re a ton of fun to play.

The game is built on the idea of creating an RPG/RTS title that utilizes the same concept of multiplayer matches in the way that games like Counterstrike and Team Fortress 2 do. Players will choose their avatars and level them up during matches as they gain experience. However, the avatars’ abilities will reset at the beginning of each match. Meanwhile, as summoners earn experience points, they will earn new abilities and spells that won’t reset at the end of a match.

When I first saw League of Legends, I was convinced that the developer had actually managed to adapt the World of Warcraft graphics engine to work with RTS gameplay. The graphics feature the same cartoony style that dominates Blizzard’s games, but closer inspection revealed that the game featured differences in environment and character models. I was informed that Riot had developed their own internal graphics engine and Hokyo Lim (the man behind the graphics of the Sly Cooper games) was League of Legends’ art director. The game really looks great, featuring dynamic colors and an animation-like style.

Overall, I found League of Legends to be fast, fun, and stylish; aspects that are lacking in many of the games that I’ve seen on display during the week so far. The game is tentatively scheduled for a release later on this year, and since it will provide fast-paced RTS/RPG action online (sadly, no single-player campaign is scheduled) with no subscription costs, it seems safe to say that anyone interested in games like Warcraft or Starcraft should definitely keep their eyes on this title.

It wasn’t all mistakes and regrets for former World of Warcraft director Jeffery Kaplan during his Game Developers Conference lecture, “”The Cruise Director of Azeroth.”

The jam-packed presentation also saw the release of many World of Warcraft statistics, including the average number of quests completed daily, and the circumstances that led to the extremely popular MMO sporting, at last count, some 7650 different quests.

Between
6/30/2007 and 3/5/2009, some 8,570,222,436 quests were completed in the World of Warcraft.

Daily average of quests completed: 16,641,209

Kaplan, now working on Blizzard’s next MMO, talked about designing the original release of World of Warcraft, saying that the first total quest target was 600. This number was a result of needing to compete with EverQuest’s estimated 1200 quests–a total that he and others estimated by looking at EverQuest “spoiler sites.”

The team designed a game with enough quests to keep players busy, but not so many that they didn’t run out occasionally–which turned out to be a contentious issue within the studio.

Said Kaplan: “And then we went into alpha, [and testers were] going, ‘What the fuck?’ Because we focused so hard on the newbie experience, you’re going to have a totally quest-driven game… and we did that, and we had the internal alpha, I think it ended around level 10.”

While players of other MMOs might be used to running out of quests, the other Blizzard designers “wouldn’t stand for it.”

“All of the other teams were coming to the WoW team and saying, ‘This is BS, my quest log is broken.’”

“We were comparing ourselves to other games, and we found that WoW had evolved into its own thing that felt really broken any time you had an empty quest log.”

As a result, the following statistics were presented:

Target total quests for original WoW release: 600

Original WoW total quests: 2600

Burning Crusade: 5300

Wrath of the Lich King: 7650

“We felt like discovery and exploration are really cool, valuable things, but not when it comes to your core game experience,” added Kaplan.

Each Wednesday will be news day. I’ll cover the top PC gaming stories of the week and offer any thoughts I may have on a particular story.

MMO subscription revenue to hit $2 billion by 2013 according to media analyst Screen Digest, which says it will remain the key method of monetizing virtual worlds. The report, entitled Subscription MMOGs: Life beyond World of Warcraft, shows that the MMO market grew by 22 per cent in 2008, with consumer spending levels of USD 1.4 billion in North America and
Europe. World of Warcraft accounted for 58% share of Western consumer spending on subscription MMOs. However, spending on other subscription titles was also strong in 2008, growing 27%. (I guess it’s safe to say MMOs are definitely recession-proof!)

Today, Ubisoft announced the launch of R.U.S.E., a new intellectual property developed by Eugen Systems, creators of the critically acclaimed strategy title Act of War: Direct Action. R.U.S.E. is scheduled for release on Windows PC for fiscal year 2009/2010. R.U.S.E. is a one-of-a-kind real-time strategy game that allows players to bluff their enemies to lead their nation to victory, controlling the action using views that range seamlessly from the heart of the battlefield to the full theatre of war. Players will be plunged into the action thanks to the exclusive IRISZOOMTM Engine which offers an intuitive interface that allows for smooth, rapid transitions from a birds-eye view of the entire conflict, down into the heat of the battle and vice versa. (This should be interesting. The RTS genre needs to be revitalized.)

On March 24, Valve announced a new set of advanced features delivered in Steamworks, a complete suite of publishing and development tools that are available free of charge to developers and publishers worldwide. Headlining the new feature set is the Custom Executable Generation (CEG) technology that compliments the already existing anti-piracy solution offered in Steamworks. A customer friendly approach to anti-piracy, CEG makes unique copies of games for each user allowing them to access the application on multiple machines without install limits and without having to install root kits on their PC.

And…

Microsoft has unveiled the latest features and upgrades making their way to its Games for Windows Live platform, with a focus on increasing anti-piracy efforts. Games for Windows will now offer “zero day piracy protection”, including server side authentication on top of a further layer of authentication required for online play. In addition, sellers on the platform’s market place will now be able to design their own storefronts, while the “roaming” function will allow consumers to save their personal settings and have access to them on any other compatible Windows PC. “This update and other features currently in development represent a tipping point in the evolution of Games for Windows Live as a leading online PC gaming network,” said Ron Pessner, general manager of Games for Windows Live. “In the coming months, we will continue to deliver on our promise to provide gamers and publishers with the industry’s best connected gaming experiences through the Live service.” Dave Luehmann, general manager of Window games for Microsoft Game Studios, added: “As a publisher, no one is more excited to see the continued growth and evolution of Games for Windows Live than Microsoft Game Studios.” “We have several projects underway which will incorporate the Live service, and we’re continuing to build new developer relationships here at GDC to bring the best in the industry to Games for Windows Live.”

And again…

Stardock announced today that the forthcoming update to its digital distribution platform, Impulse, will include a new technology aimed to pave the way to solving some of the common complaints of digital distribution. The new technology, known as Game Object Obfuscation (Goo), is a tool that allows developers to encapsulate their game executable into a container that includes the original executable plus Impulse Reactor, Stardock’s virtual platform, into a single encrypted file. When a player runs the game for the first time, the Goo’d program lets the user enter in their email address and serial number which associates their game to that person as opposed to a piece of hardware like most activation systems do. Once validated, the game never needs to connect to the Internet again. (All of these articles prove that piracy is rapidly becoming a threat of the past. As digital delivery gets pushed to the forefront, I expect we’ll see more publishers using similar methods to protect their games.)

According to GamesIndustry.biz, The Game Developers Conference has been voted the most important event on the busy industry calendar, with over 40 per cent of those surveyed labeling the San Francisco show as essential. The annual developers conference beat E3, the show once considered the industry’s glitzy showcase, but which has spent the past two year’s struggling with an identity crisis that left it down-sized and lacking inspiration. GDC09 runs from March 23-27 this year. (It’s nice to see GDC get some love this year. E3 has become an embarrasment with its emphasis on sizzle over steak!)

Square Enix, Inc., the publisher of Square Enix interactive entertainment products in North America, announced today that the Games for Windows® version of THE LAST REMNANT™ has shipped to North American retailers today. Brought to life by both rising stars and veteran Square Enix developers, THE LAST REMNANT is an epic RPG adventure that was released for the Xbox 360® video game and entertainment system from Microsoft last holiday season. This Games for Windows version features all-new elements not seen in the Xbox 360 version, such as a speed selection option for battle sequences and the removal of leader unit restrictions when creating unions. The Games for Windows version of THE LAST REMNANT invites a new audience of players into a lush, real-time fantasy world where they control massive cinematic battles. With a carefully crafted battle system and epic storytelling, Square Enix offers an exciting adventure for all RPG lovers. (If it’s one thing Square knows and knows well, it’s EPIC RPG!)

Aspyr Media and Activision Publishing, Inc. have teamed once again to rock the computer gaming world with the announcement of Guitar Hero World Tour for Windows PC and Mac. Transforming music gaming by expanding Guitar Hero’s signature guitar gameplay into a cooperative band experience, Guitar Hero World Tour for PC and Mac offers state-of-the-art wireless controllers to computer gamers for the first time, new online and offline gameplay modes and a Music Studio feature for composing and editing original rock and roll anthems. Guitar Hero World Tour is the most complete music game to-date with 86 on-disc tracks from music legends such as The Eagles, Van Halen, Metallica, Michael Jackson and The Doors and features in-game appearances by world famous artists such as Ozzy Osbourne, Billy Corgan and Travis Barker. (Mixed feelings here… I like the fact that the PC isn’t being ignored by one of the hottest trends in the business. But this game lends itself best to a large screen. Sitting in front of a 19″ monitor just doesn’t seem to be the best way to play Guitar Hero…)

Here are the top 10 PC game sales for the week of March 8-14 according to NPD Group:
1. Empire: Total War
2. World Of Warcraft: Wrath of the Lich King Expansion Pack
3. The Sims 2 Double Deluxe
4. Warhammer 40,000: Dawn Of War II
5. World Of Warcraft: Battle Chest
6. World Of Warcraft
7. The Sims 2 Apartment Life Expansion Pack
8. Spore
9. Mystery Case Files: Return To Ravenhearst
10. Command & Conquer: Red Alert 3

There are a few pockets of strength and one can be found in the video game industry, Activision Blizzard Inc (ATVI). The video game industry is a high-growth industry, the hardware and software industry racked up over $21 billion in hardware and software sales in
2008 in the United States alone.

And even now, video game sales are enjoying unprecedented growth. For the month of February 2009, sales of game software rose 9% to $733.5 million. The results surprised many analysts.

The lion’s share of Activision’s (ATVI) revenue comes from online games. Activision makes the World of Warcraft series. World of Warcraft is an online, multi-player video game. The series has a strong following. Players join, log in to the World of Warcraft website and embark on intricate fantasy campaigns alone or in groups formed with other players from around the world. And yes, there is a subscription fee. There is even prize money to be earned for Activision’s gamers. Right now, there’s a $200,000 top prize offered. Surprised? Well, would you be surprised that Activision currently counts its subscribers at over 10 million?

In 2007, a new installment to the World of Warcraft series, The Burning Crusade, became the fastest-selling PC game of all time. It sold 2.4 million copies in the first 24 hours. That record didn’t last long. Activision quickly followed up that success with Wrath of the Lich King in 2008. That game sold an amazing 8 million copies in 24 hours. Now that’s what we call a motivated consumer base. And that is a good reason to like ATVI. 

As a PC -based, online game, you don’t have to buy a special game console (like an Xbox, or PlayStation). You can use your computer to log on and play anytime. Provided you’ve paid the subscription fee, of course. This lowers the barriers to entry, and expands the possible pool of consumers for PC-based online games which ATVI produces. From the consumer perspective, your start-up costs are minimal.

And the consumer does not have to worry about damage to a hard copy of a purchased game. World of Warcraft is doing $1.1 billion a year in sales. That’s a third of Activision’s revenue.

As fast as Activision’s revenues are growing, it currently trades with a very attractive P/E of 14. Plus, the company has no debt and $3 billion in cash. Trading at about $10 a share, Activision is an attractive buy. Shares of Activision Blizzard have fallen with the rest of the market in 2008. But has formed a nice uptrend since the start of 2009, the stock has been showing strength and this investor enthusiasm is well deserved. Activision Blizzard operates in a high-growth consumer segment and has a terrific balance sheet to expand through acquisition. ATVI shares are trading at roughly 15 times current earnings per share and 12 times forward earnings estimate. ATVI has formed a nice uptrend channel since the start of 2009. Technically ATVI looks solid trading above its 20 & 50 day moving averages. Beyond the March high of $10.60 the next area of resistance will come in at the 38.2% ($12.40) and 50% ($13.75) Fibonacci retracement levels from the July 08 high of $19.28 to the Jan 09 low of $8.24.The stock probably has room to move up to the $12.50-13.75 level in the next 3 to 6 months. Possible entry points to buy ATVI would be a pull back to the 20 day moving average or when ATVI moves to the bottom of the up trending channel. I would stop out on a close below $9.50.

Microsoft is apparently working on the next version of the Xbox.

No surprise perhaps, but that little nugget of information emerged from the “luminaries lunch” held at the Game Developers Conference.

For the second year in a row, a select number of journalists were allowed to come and eavesdrop on half a dozen industry players over sandwiches and wraps at the W Hotel in
San Francisco, which has become a sort of semi-official hang out during the week long event.

News of the successor to the Xbox 360 was dropped by Rob Pardo of Blizzard Entertainment, the company behind World of Warcraft and Diablo. He said that he had been in talks with Microsoft and seems to be the only developer that has so far been approached.

The issue came up when David Perry, a 25-year-old veteran who started in the industry aged 15, posed the question “What direction would you take Microsoft or Sony to ensure they lead and not follow in the console business?”

At first pass, Will Wright, the creator of the Sims and Spore, said he would like to “decline the job” while Warren Spector of Deus Ex fame and boss of Disney’s Junction Point Studios, indulged in a little mischief.

“I want to see what you guys are going to do with the Wii,” he quipped to Mr Pardo.

The Blizzard boss merely raised his eyebrows and kept his own counsel on that one.

To spice things up Mr Perry announced that “on the record the PSP is going to be a digital device. I know that for a fact.”

The discussion for a while rotated around content with Mr Spector saying too much of it is knuckle-headed.

“What we need to do is change the content. Am I going to get an axe in the head, or is it going to be a club? Which car or truck is going to be rolling down the street?” he asked.

“We don’t need another game about space marines saving the world, we don’t need another game about elves and orcs,” he concluded.

The discussion then took a decidedly weird turn when Mr Wright said “I’m sure half the people in this room have played the urinal game.”

As the room erupted into laughter, he tried to explain the premise of the game and went on to say “we need to make games about the world that are interesting, surprising and illuminating.

“We can make games much more relevant even across cultures and demographics.”

That comment came amid a conversation about social gaming which was sparked by a remark made at the recent BAFTA awards by Nolan Bushnell, who is considered the father of electronic gaming and is the inventor of Pong and founder of Atari.

He said that going to a bar is social, but that sitting in a darkened room communicating with thousands of people virtually, isn’t social.

A 40-minute discussion among these luminaries ensued.

“Social gaming is becoming cool,” said Mr Pardo who also paid reference to the World of Warcraft community and pointed out that “many of them have jobs, and kids”.

But Mr Perry questioned whether hanging out online playing games constituted a “real relationship”.

“Is it the same as having a beer,” he pondered.

“Who cares,” replied Mr Wright “If it’s real. If it has value that’s all that matters.”

Brian Fargo, who founded Interplay productions, said that all this “socialising online” has had a negative effect on his behaviour.

“I’ve become more antisocial as time goes on. I have a Blackberry and I have all these friends.I can’t tell you how many times I think I wish they would just e-mail me.

“This is a great philosophical issue. Are we becoming more antisocial? I probably spend more time e-mailing, text messaging than talking,” he said.

Neil Young the founder of Ngmoco, which makes games for the iPhone, noted that this “august” group of people were beginning to sound old.

“People who instinticlvely understand multi-tasking as a way of life and grew up with our medium are more willing to fully explore it.

“I would argue next year none of us should be here (at the luminaries lunch). We should figure out who the top six freshest game makers are. I bet you will have different talk and they won’t talk about fantasy games or sci-fi.”