Otha Fish or You Can't Get (All Your) Blood From A (Standing) Stone

When the news about EG7's acquisition of Daybreak Games broke last week I wasn't in a position to say much about it . Now that I have the time, the moment has passed. But maybe I can find a different angle.

There's been a wealth of discussion and debate, first about the sale itself and then over the astonishing flood of detailed information concerning the population, popularity and profitability of the games themselves. Wilhelm covered most of what I would have written about and linked to everyone talking about the revelations and the implications. By and large, I feel sanguine about the change of ownership but I wouldn't say there were no warning flags at all.

In contrast to many commentators, I've been happy with Daybreak's stewardship of the portfolio they assumed from Sony Online Entertainment almost six years ago. It's only through the thick glass of a robust pair of rose-tinted spectacles that anyone could regard the later years of SOE's tenure as some kind of pre-lapsarian Golden Age. Daybreak may have had its issues, not least over who the hell was driving the bus, but so did every incarnation of ownership before them, from Verant Interactive and 989 Studios onward.

Rather than objections grounded in anything in particular, much of the criticism of DBG felt more like the generic, endemic contempt of mmorpg players for the companies that run the games they play, a tedious pose that acts as an enervating drag anchor on every discussion of custodianship across the genre. By contrast, during what I tend to characterize as SOE's decline into late-period decadence, there were much more substantive concerns as hubris, arrogance and barely-concealed personal agendas drove the ship onto a seemingly endless series of sandbanks.

From the selfish cynicism of the PSS1 debacle (yeah, I'm never gonna let it go - it's like my personal NGE) to the inglorious self-aggrandizement of the EQNext pipe dream, it seemed there was no limit to SOE's capacity to disappoint. And yet, through the worst of it, SOE remained my favorite MMO studio, albeit mostly by default. 

Even so, the six years under Daybreak has felt like calm sailing in comparison, with most of the drama confined to confused and confusing claims and denials concerning ownership along with a peculiar predilection for moving and renaming the furniture. That's been more of an entertaining sideshow than an existential threat, although the month or so when it looked as though the Russian connection might see the games banned in the U.S.A. had its moments.

As for the games themselves, after a shaky bedding-in period, they settled into a comfortable rut. For a genre that relies almost entirely on predictable, repetitive content, that was close to ideal. And for all the negative news stories about cutbacks, for all the developers "let go" and for all the evident strains imposed by reduced circumstances and resources, the whole ramshackle edifice still felt far more stable than it had in the last years of SOE, when all the stories revolved either around sunsets and closures or grandiose projects that hinted of mania.

If life under Daybreak has been dull but good, then looking into the intentions and ambitions of EG7 suggests it could get better yet and more exciting, too. There seems very little doubt that the new German owners have purchased a portfolio of games with the firm intent not only of continuing to run them but of building on the platform they provide, as this paragraph from the press release amply demonstrates:

"The acquisition of Daybreak will further strengthen and add diversification to EG7’s IP portfolio through acquisition of best-in-class original and third-party IPs (EverQuest, The Lord of the Rings, Dungeons & Dragons, DC Universe Online). Daybreak will also add a strong team of both operationally and strategically capable individuals. The Transaction will increase size and profitability of the Company through stable cash flows from free-to-play model with loyal communities for existing IPs. Furthermore, the Daybreak platform offers future upside through upcoming content releases for e.g. DC Universe Online and The Lord of the Rings Online, potential synergies across the group, and strengthened team to identify and execute further M&A".

Whereas theories about the motivations behind the Columbus Nova buyout (CN being the original purchaser of SOE, later morphing into DBG, in case anyone forgets) ranged from the illegal to the exploitative, EG7 clearly seems just to want to become a global player in the online gaming marketplace. As the plethora of financial and demographic information released to consolidate the fiduciary wisdom of the acquisition suggests, the whole point of buying the games is to make money from operating them.

And there's the red flag. It's a small one and it's waving somewhere towards the back but it's definitely there. I spotted it even before I read Yeebo's excellent post on the monetization of the two Standing Stone games, Lord of the Rings Online and Dungeons and Dragons Online, both of which we now belatedly understand to have been owned by Daybreak all along.

As Yeebo explains, "DDO has the highest monthly average revenue per-paying-player of any game in the Daybreak portfolio.  In other words, the income of DDO is disproportionately dependent on whales". This stood out for me, too, when I read the recently-released details we'd previously guessed at but couldn't know for certain. 

What really surprised me, though, was the information relating to EverQuest II. Anyone not in denial must long ago have realized that EQII never really managed to step out of the shadow of its progenitor. EverQuest has been running for longer, has more servers and I believe it also has more developers assigned to it. There's been a widespread belief for the last few years that it also has more players and brings in more money, both of which we now know to be true.

 

It's not quite as straightforward as that, though. The figures we've seen are snapshots. We don't have a longitudinal analysis. Anecdotally, EQII has been hemorrhaging players for several years. Perhaps it once did compete on equal terms with EQ. There was certainly a time when it felt that way. 

Why has EQII lost so many players, if indeed the rumors are true? Almost certainly because of the increasing use of the kind of practices Yeebo ascribes to DDO. The mechanics may differ but the intent and the result is the same. 

EQII has frequently been described as "pay to win" by disgruntled ex-players but what it really is is "pay to play". I'm not talking about the subscription, which is good value but by no means necessary for a casual player. I'm referring to the ever-increasing raft of purchaseable consumables that service the myriad progression systems within the game.

Just off the top of my head, these include familiars, mercenaries, mounts and by far the most controversial, spells. All of these are far more than cosmetic or flavor choices, although most of them are that as well. They all add power and at the top end the game is tuned to expect players to have it.

Over time, all of these systems and almost certainly more that I'm forgetting have been expanded and tuned so as to allow a never-ending spiral of upgrades. If you play casually, as I do, you'll get all the upgrades you need for free just by playing but if you want to move into Heroic dungeon content or, most certainly, raiding you'd better be ready to pull out your credit card.

There's always been a little of that, or at least since the cash shop was added more than a decade ago, but under Daybreak the system has been pushed to breaking point. Probably the most common complaints I read on the forums (and there are a lot of complaints because EQII players are and have always been quick to reach for the tar and feathers) revolve around having to buy consumables to accelerate the many time-gated upgrade processes. 

It's also the reason most commonly cited for players leaving the game and, even more importantly, not feeling able to return. No wonder the time-limited expansion server, Kaladim, is so popular. As yet progress there hasn't caught up with the expansions that introduced these systems.

Where the whaling in DDO and the consumable racket in EQII strike sparks with the EG7 acquisition is in this slide from the Investor Presentation:

Terms like "Industry leading monetization" and "Deep monetization model" may excite investors but are unlikely to settle a nervous player's concern. And not without reason. As you can see, EQII is second only to DDO in ARPPU or average revenue per paying user. The two smallest games in the portfolio by "bookings" (I think that means how many people actually play) bring in the most money per player.

It's a red flag but as I said it's a small one. There's plenty in the presentation emphasizing the benefits of player loyalty, game stability and the strength of the I.P.s and the breakdown of where revenues come from is balanced: "Mainly monetize via in-game purchase, membership subscription and DLC / expansion pack." 

It must be of some concern to the new owners, though, that the games with the highest MAUs stand in reverse order to those with the biggest income. It wouldn't be all that surprising if they wanted to do something about that. Let's just hope that in seeking to do so they don't kill off the goose that lays the silver eggs. (I mean, c'mon, these numbers are maybe better than we expected but they're hardly golden are they?).

As I said, I remain sanguine. In the short term I'd expect little to change and I'm happy with the status quo. Once the new owners get their feet under the old DBG boardroom table (presumably it's somewhere in Jason Epstein's garage right now) I imagine there will be some changes but so long as they stick to the "Evergreen live service game portfolio" (translation - keep the servers up) and go on pumping out the expansions, I'll be happy.

And maybe they'll even tweak the parameters a little so as to realize that "potential to leverage for marketing and reactivation". Win some of those 178m "registered users" back. They might not all be whales but some of them could still be worth fishing for.