DICE Fight Club: Industry Vets Debate Retail Vs. Microtransations

In the second of a pair of Fight Club-inspired debates at the DICE Summit, Sony and THQ vet Kelly Flock went up against Nexon director Min Kim to exchange views on traditional publishing models versus free distribution.
In the second of a pair of Fight Club-inspired debates at the 2008 DICE Summit in Las Vegas, Sony and THQ vet Kelly Flock went up against Min Kim, director of operations for Nexon America (MapleStory, KartRider) to exchange views on the issue of traditional publishing models versus free distribution. Kim pointed out that the Korea market began with subscription models -- then moved almost entirely to free to play. "I think there'll be a place for that, but retail will still be the dominant model," said Flock. Kim replied with one of the benefits for free to play MMO development. "We don't have to meet deadlines as much," he said, arguing that it's less expensive and on a smaller scale. "Does anyone think we can get around deadlines here?" retorted Flock, joking, "Anyone from Take-Two in here?" Flock pointed out that Korea quickly moved away from the retail model primarily because of rampant piracy. "We still have that in certain sectors," he said, "but we still have strong retail." Flock noted that the retail market is driven by new sales. "Believe me," he said, "I hate the 60 dollar price point. I'd be happy to sell them for 35, 45 dollars. $60 is just going to keep us in the niche market." "That's why I like the free to play market," Kim replied. "If you don't have a lot of time, you want to try something out for free instead of paying lots of money." Kim admitted that there's a lot of push-back against current pricing models. "You're not seeing a lot of blockbusters - it's really hard to make the model work." By contrast, Kim points out Nexon's seen global revenues for MapleStory that have reached $16 million for a month in the past. So what do the duelers think will be the first game to break the retail model open? Of course, Kim thinks it'll be Nexon's MapleStory. "We haven't marketed it like we should, but there's lots more to do," he said. Kim went on to describe how when Neowiz began doing microtransactions and offering prepaid cards, the Korean base was upset at the company's collaboration with EA. "They felt like we gave up the secret sauce [to North America]," he said. "Once people start playing games for free, I don't know why they're going to start paying for one." So could a high-budget game, like World of Warcraft, be made as a microtransactions-driven game, then? Said Kim, "I don't think games necessarily have to be made at [high] cost... I'm guessing 5 years down the line, it's going to be a multi-billion dollar industry in the US, and I think at those numbers people will be pouring in more resources." Flock noted that one of the problems with microtransactions is that it ruins the suspension of disbelief. But Kim feels that too many people are considering the issue from the perspective of core gamers. "Microtransactions are much more casual and about social players," he said. "The mass market is way bigger than the core market... I think the vast majority of humanity wants casual social games." So can retail bounce back in Korea? "I think it's dead," Flock said succinctly. Kim said it could come back a little bit. "Japan is a console market, and Nintendo is making a big push into Korea with the DS," he noted. What about a console that's built from the ground up to be free to play? "What value does that have over PC?" asked Flock. "The console market is the software-subsidized hardware market. It becomes difficult when you're talking about the kinds of games you want to talk about." It wouldn't grow the more hardcore market, then? "I think you can grow that, sure but I think PC will be the platform," Flock said. Kim agreed: "There are a lot of PCs out there -- there aren't as many Wiis out there," he said. Added Flock, "I tend not to be a fan of the consolidation model. For a developer, though, it's a good exit strategy. In the old days, people would say if you've got a hit, close the studio down and go to the bank, because you'll probably never have another one." The conclusion? There may be potential in new models, but until publishers can figure out a model that gives game developers the same kind of deal that Steven Spielberg gets to do films, it will continue to be problematic.

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