Massively Multiplayer Online Game (MMOG) Hosting Market Opportunity Analysis

MARKET OPPORTUNITY

The MMOG market is expected to double in the next five years. MMOGs differ from typical computer games because they are perpetual virtual worlds, meaning that users can continue to play forever building on previous play. New players are constantly starting to play these game and continue playing them, creating a snowballing user base.

Traditional game developers are beginning to discover a new sources of revenue from MMOGs. The developers typically offer a free version or trial period to attract users, and then a subscription-based version (typically $10-$20/month) to keep the on going revenue stream. In the future, MMOGs are likely to generate additional revenue through advertising and non-traditional revenue sources such as virtual sale items.

Overall, DFC Intelligence estimates the market will double by 2012, reaching $13B worldwide. Half the revenue will come from East Asia, 25% from North America, and the remainder from Europe and Japan.

MAJOR GAME OPERATORS

The 15 largest MMO Games are as follows:

MMOG List

Of these fifteen MMOGs, the fastest growing (based on 2006-2007 subscribers) are:

  • World of Warcraft
  • Second Life
  • Guild Wars
  • Dofus
  • Runescape

Additionally, the following venture-backed MMOG developers are likely to launch in the next 1-2 years:

  • Real Time Worlds will be launching “APB” in 2008
  • Red 5 Studios is developing an as-yet unnamed MMOG
  • Areae is developing an as-yet unnamed MMOG

MMOG HOSTING and IT REQUIREMENTS

Leading MMOG Hosting companies:

  • AT&T
  • Online Game Services (OGSi)
  • Hypernia
  • Valve Software

Additional hosting companies used by MMOGs:

  • APIServers (www.apiservers.com)
  • Go Daddy (www.godaddy.com)
  • JHServers (www.jhservers.com)
  • ServePath (www.servepath.com)

Most game developers do not have the capabilities to host games themselves. Rather, they rely on outsourced MMOG hosting services. Even the largest MMOG developers such as Blizzard, Activision and Electronic Arts use third party MMOG hosting services.

Whether an MMOG game developer is hosting a game in-house or outsourcing it to a hosting company, the following three issues are most important in selecting IT vendors:

  1. Price - minimize price of both hardware and bandwidth. A rough estimate for hosting prices for 100k subs requires 30 servers plus bandwidth and costs $50k/month. (Note this includes ammortized hardware costs, bandwidth, and managed services)
  2. System stability and scalability - ensure data isn’t lost or corrupted and system can scale to handle growing subscriber base.
  3. Bandwidth and latency – maximize uptime at all hours of the day, since most MMOGs are highly international and cross all time zones. Provide sufficient bandwidth for peak usage. Minimize latency by using NOCs collocated near major POPs and with localization in areas with large numbers of gamers.

The largest IT vendors for the MMOG market are IBM, HP, and Dell.

ENTERING THE MMOG MARKET

A vendor seeking to serve the emerging MMOG market should take the following approaches:

1) Target both large MMOG developers that do their own hosting and also outsourced MMOG hosting companies. To avoid competing on price, focus on system stability, scalability, and management tools that can support the MMOG environment.

2) Focus on the development stage. Historically, MMOGs could be hosted on any vendor’s hardware, but as developers seek to increase system stability they are increasingly becoming platform dependent. This means that if an MMOG developer uses a specific vendor’s hardware for development and testing, they are likely to request the same vendor’s hardware for hosting.

In order to assess exactly how a company can enter this market, it is necessary to understand how the company is currently positioned. The Ansoff matrix provides a basic framework to understand what type of entry is needed – based upon a company’s product portfolio and market space.

Ansoff Matrix

A go-to-market strategy required for a Market Development play is quite different from those required for a Product Development play, and different still from Diversification.

One of the immediate next steps to take will be to benchmark your company’s current status along key dimensions. Using a “Points of Differentiation” graph, it is possible to tailor the go-to-market strategy to take advantage of the company’s strengths.

Points of Differentiation

In the example above, a company may be strong in performance, reliability, average in scalability, reputation, service and price, and weak in value-added services. After analyzing other vendors using a similar framework, a company with these particular points of differentiation might choose to focus on midsized MMOGs with 100k-200k subscribers.
SOURCES

MMOG Data

http://mmogdata.voig.com

DFC Intelligence – Online Game Market Forecast

http://www.dfcint.com/game_article/may07article.html

IGDA (International Game Developers Association) – Hardware and Hosting

http://www.igda.org/online/quarterly/1_3/persistenthw.php

GigaOM Top 10 Most Popular MMOs

http://gigaom.com/2007/06/13/top-ten-most-popular-mmos

MMORPG Developer’s Forum

http://mmorpgmaker.vault.ign.com/phpBB2/index.php

FURTHER READING

IDC – ASEAN Online Gaming 2007 – 2011 Forecast and Analysis

http://www.idc.com/getdoc.jsp?containerId=AP3221S4P

IDC – China Gaming 2007-2011 Forecast and Analysis

http://www.idc.com/getdoc.jsp?containerId=CN656102P

IDC – India Online Gaming 2007–2011 Forecast and Analysis

http://www.idc.com/getdoc.jsp?containerId=AP3221SSP

About these ads

One response to “Massively Multiplayer Online Game (MMOG) Hosting Market Opportunity Analysis

  1. Hi –

    This is James Hursthouse, formerly CEO / founder of OGSi, now part of GNi (our long term hosting partner). As one of the first companies to offer a ‘no-upfront / monthly recurring’ scenario for games companies, we believe that the rental model outweighs the ‘purchase and colo’ model in terms of service quality, risk management, allocation of capital etc. But the $50k is a pretty drastic oversimplification.

    Aside from that, nice article – particularly the differentiation chart.

    Thanks – jh@gni.com

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s