How Understanding Network Effects is Saving World of Warcraft
http://wow.joystiq.com/2012/02/09/world-of-warcraft-subscriber-numbers/
http://wow.joystiq.com/2012/02/09/1-million-people-signed-up-for-the-wow-annual-pass/
http://inanage.com/2012/03/09/scroll-of-ridiculous-value/
World of Warcraft is a popular massive multi-player online role playing game (MMORPG) which boasts over 10 millions players. Since it’s inception in 2004 it has grown into the most played MMORPG in the world with the number of subscribers reaching an all time high in 2010 at 12 million. But since that time numbers have been slowly falling. I believe we can understand what is happening to World of Warcraft by applying the model if a market with network effects.
A large part of playing an MMORPG is immersing yourself into a society of real people, grouping up to accomplish hard tasks, and fighting against player controlled enemies. There are portions of the game which you can do alone, but the experience would be greatly diminished. For this reason network effects are clearly applicable. In the same regard there will always be people who would love the game no matter what happened to it. In a similar vein there will always be people who think the game isn’t for them despite it’s popularity. Using this facts we can set up a network effect similar to the examples presented in class. One where we would solve that there is a high equilibrium, a low equilibrium, and a zero equilibrium.
The World of Warcraft had initial success borrowed from the popularity of it’s predecessor, Warcraft 3, and that original popularity I believe pushed it into the region of upward pressure. From there the game increased in popularity until it reached it’s upper equilibrium. Now it seems it has fallen back behind into a region of downward pressure.
Not content to lose subscribers Blizzard realized this and introduced multiple incentives to return players to the game (Scroll of Ressurection, Annual Pass, etc.). As described in the articles cited these actions were very valuable, possibly costing Blizzard hundreds of dollars per person who used them. This would seem counter-intuitive to those people who don’t understand the network marketing goal of the program. Once players return to the game, the company can remove these programs and continue to make profit off the monthly subscriptions, surely enough to recoup any losses.
-TheRealHumanzeell