World of Warcraft, the “subscription-based massively multiplayer online role-playing game,” by Blizzard Entertainment, now has 2 million subscribers. Each player has purchased the CD-ROM for $49.99. In addition, there are three monthly payment plans: The month-to-month subscription plan costs $14.99 per month, the three-month plan costs $13.99 per month, and the six-month plan costs $12.99 per month.
Conservatively, there was a one-time revenue stream of just under $100 million dollars, and an on-going monthly revenue of just under $26 million (just under $312 million annually). They are opening the game up in China soon, where there are 500,000 players in the open beta period. It’s not hard to imagine cumulative revenues of over a billion dollars, or perhaps two.
Blizzard has 250 game designers and developers, so figure maybe another 100 in marketing and administration. Annual revenue per employee is therefore around $1.1 million. A standard rule of thumb for a normal business is that you need $100,000 per employee to break even. $200,000 is excellent. At one point Microsoft was doing around $500,000 (I don’t know what they do today). By this measure, in 2003, the top 10 software companies ranged between $340,000 and $788,000. Point being, online gaming is profitable.
Compare to movies: The top-grossing film of all time was Titanic in 1997. They took in a little over $600 million dollars in eight years. The #100 top-grossing movie was Robin Hood: Prince of Thieves (who knew?). Since 1991 (14 years) The Prince has taken in $165 million – just about the annual revenue of World of Warcraft.
Of course, it’s nice to be able to spend (or squander) that level of resources on entertainment. In a few years, as the price of oil goes from $50 a barrel to $60, then $75, then $100, and suburban salarymen are living in their SUVs at the office four nights a week to save gas money on commuting, we’ll all fondly remember these glory days of “robust economic activity.” I wonder where our food will come from?
June 15, 2005