Wednesday, September 05, 2007

What do WoW's numbers mean?

I recently got dragged into another debate on how much money Blizzard makes each month from World of Warcraft. I'm getting very tired of this argument mostly because I hear so many different numbers. Most players know that the pricing structure differs from region to region and that its not a straight (total subscribers x 15$ a month) formula. Still the specifics of the game's monthly subscription revenue remains mysterious and allows many a bored player to constantly argue with his fellow nerds.

Its funny but if you take some time to research the pricing structures of the different regions then you can actually get a well educated guess on how much monthly revenue World of Warcraft earns. In past interviews the developers have given rough estimates for the population breakdowns of each region. If you use some logic you can assume those numbers for Europe and North America have increased because of the expansion release and mostly stayed the same for China because of its hourly rate.

So based on past developer comments and some educated guessing I get this breakdown.

North America: 2.5 million
Europe: 2.0 million
China: 4.5 million

After breaking down the populations I tried to define the different pricing structures of each region and convert them all into one currency. North America is the easiest with a simple 15$ a month fee and no additional taxes effecting the price. Europe is a little harder to calculate since it has a 17.5% tax on online game subscriptions. The monthly cost of a European subscription is 12.99 Euros which is about 17.70$. If you subtract the tax though it comes out to around 15$, the same rate at which Americans are charged.

China is a even harder nut to crack since they pay by the hour and you have to guess the average amount of hours they played each week. The company that handles the fees for Blizzard in China charges about .04 cents an hour. According to Nick Yee's demographics the average player spends about 22 hours a week in game. This number could differ for a region that uses an hourly rate but I think its a good average estimate for our purposes.

So based on my online investigations I get these three pricing structures.

North America: 15$ a month per subscriber
Europe: 12.99 EU = 17.70$ - 17.5% = 15$ a month per subscriber
China: .04 per hour x 22 hours a week x 4 weeks a month = 3.53$ a month per subscriber

Combine the population with the pricing structures and you get the total.

North America: 2.5 million x 15$ = 37.5 million
Europe: 2.0 million x 15$ = 30.0 million
China: 4.5 million x 3.53$ = 15.89 million

Grand Total for Monthly Subscriptions ~ 83.39 million

Interesting side notes.

1) Game Cards on eBay seem popular for European servers.

Can you avoid the online tax by buying game cards from eBay?

2) China pays the least but Blizzard lets the local company The9 handle servers and customer support.

Is the percentage The9 charge so low that Blizzard actually makes more profit from China?

3) If you assume that box sales payed for intial servers/support/development and that monthly subscriptions are almost pure profit then World of Warcraft is more profitable then some of the lower end Fortune 500 companies.

To turn a profit over 80 million most Fortune 500 companies have to make over 5 billion in gross revenue. What does it mean that a video game which cost around 300 million and probably payed for itself with box sales can earn the same amount of profit?


Anonymous said...

Don't you also get a discount for pre-paying in 3 and 6 month blocks?

Relmstein said...

Yes, Its 14$ rate per a 3 month period and a 13$ rate for a 6 month period.

From what I understand most people pay on a monthly basis unless they are very involved in the game.

Nuyan said...

Do chinese people only pay this $ 3.53 on avarege to play on EU/US servers too?

China Internet Marketing Blog said...

Only 20 hours in China - you've got to be kidding me. Most Chinese players are either gold miners--in which case it is 24x7 use per each account--or heavy addicts that play WOW day and night - I know, I've seen it myself on many occasions in Hong Kong, Shanghai and Beijing.

Relmstein said...

Any account played on a North American or European server uses a monthly subscription and not a hourly rate. This includes any gold farmers.

I got the 22 hour quote from Nick Yee's Daedalis project survey. It mostly was taken from NA gamers but I figured with the new underage restrictions on gaming for Chinese citizens it was probably comparable.

Leiandra said...

Honestly... nice math. Makes for a very interesting topic. Of course, seeing these numbers, there's no question that Vivendi's got a pretty good cash in Blizzard Entertainment.

Relmstein said...

Yeah, Vivendi makes a very nice amount from Blizzard and thanks to some very tough contract negotiation they have almost complete autonomy.

Ravi said...
This comment has been removed by the author.
Ravi said...

Something else that might be worth considering as far as Chinese numbers.

That link is the financial quarterly statement from The9. While it is old, it does outline the terms of agreement of their contract.

In all likelihood, I didn't really check, but it seems that they make relatively little money from china. From what I can make out it seems like it's a little over a 1 million dollars a month from china. That is, 52 million (c.f. Page 11) over 4 years.

Other things to consider in your numbers: The9 also works with a large number of other games such as MU, Granada Espada Sword of the New World, Joyful Journey West, and others. With their pricing structure, flat hourly fees as far as I can tell, I think it's less likely that they will play only a single game for 22 hours a week. To compound this, while the subscriber policy for a NA/EU player is very well defined, it is much less defined as to how long an account is considered active if the pricing structure is for an hour out of a week, a month, or a year.

Discounting the chinese market, where I do not believe blizzard, and therefore vivendi, make their money from wow, I'm much more curious as to the current ratio of units sold is to the current active number of NA/EU accounts.