I Like The Future of Station Access Idea ^_^

**Avalod**

=P

Smedley Interview Part 1
Smedley Interview Part 2

And for those lazy to not click the link...

A CES interview with SOE CEO John Smedley (pt. 1)

by Michael Zenke Jan 14th 2008 @ 9:00AM

Filed under: Business models, Culture, Economy, Interviews, MMO industry, New titles, Free-to-play, Legal, Casual
At CES last week we had a chance to check out several of the newest titles in the works or on offer from Sony Online Entertainment. The Agency, FreeRealms, and Legends of Norrath are three substantial departures from the company's big-budget fantasy past. Last week we brought you links to the company's full video presentation on The Agency. Today Dan O'Halloran has firsthand impressions of what the free-to-play kids title FreeRealms will offer.

While we were in Las Vegas we had a chance to sit down with SOE's Chief Executive Officer, John Smedley, about these departures. Our chat focused on the economic changes the company is making in response to the shifting face of MMO gaming. He had some fascinating things to say on the subject of microtransactions and RMT, and unveiled a new community outreach program that will tie in to FreeRealms called "Share the Wealth".

Let's say you have your own website. You come to our site, fill out a form pretty much the same as the one for our Station Exchange service with a Social Security number, and give us your PayPal account information. You cut and paste some JavaScript to your site, and now you have a banner ad for FreeRealms on your site. We are tracking every customer you give us, and once a month we'll give you somewhere between 5-10% of all the revenue from every customer you send us. That's as long as they are playing the game.

Check out the full discussion on that subject below, and come back later today for the rest of the interview. Mr. Smedley offers us a sneak peek at big plans for subscriber's to SOE's Station Access pass.

Massively: In the past year, Sony Online Entertainment has made some interesting announcements regarding plans for their upcoming titles. What made you change your mind, and focused you and SOE down the path of mictrotransactions as opposed to subscriptions?

John Smedley: So, it's very simple. It's the belief that these games are more accessible to people if the barrier to entry isn't a credit card. I believe fundamentally, long term, that the subscription model won't be the primary one in the industry forever. It will always be there, but many more people will have access to these games through other methods, a much younger audience. The average age of our consumer right now is 31 years old. Our players are 85% male. If we are going to grow as a company we need to change that, we need to aim younger. We're doing that through a combination of different games, which is the biggest way we're changing things.

We're also looking at new business models, and that's a close second. In order for people to see the games, they have to be able to play them; we're opening them up to that possibility by letting them play for free. You're going to see that first with FreeRealms, and I'm not going to commit to it yet but we're leaning towards going that direction with the Agency as well. It's the same with console games, subscriptions are new things for console gamers.

Massively: You've previous discussed buying non-essential items through FreeRealms, and we talked earlier about Legends of Norrath – do you think that those kinds of microtransaction charges are going to be one of the primary sources of revenue for the company?

John Smedley: I do. Our position on the selling of items, and I realize this is a controversial position, is always to focus on non-game-altering items. I think we've done a fantastic job with making sure the items you can get in Legends of Norrath, the loot drops, are not game-impacting. That's essential. However, some people care if their character's shirt is black and they can get a one-of-a-kind item. I think World of Warcraft did a really good job with that in their card game. The turtle mount doesn't give you any extra speed, but it looks cool, and people like that. We want to go the direction where one player doesn't have an advantage over another, but perhaps one player's style choices are more deliberate.

I also think one of the smarter things we did in Legends of Norrath was to make it so that people can get cards via drops in the games. Eventually I want to find a way where people can get everything they need completely by buying it, or just by playing the game.

Massively: So you're talking about a situation where you might be playing and you could find a time card as a drop?

John Smedley: It's interesting that you mention that, because we have been debating in LoN about having 30-day timecards as some of the loot cards. I think that would be a cool way to go. We've proven to ourselves with this game that you can introduce things like this to customers in a way that doesn't *CENSORED* them off. I think the reason people are okay with it in LoN is that even though it is inarguably the selling of items, you can also get the packs just by playing the game. In my perfect scenario, every item you can get by buying you could also find through straight gameplay without spending a dime. Literally without spending a dime; we can monetize those customers by using in-game ads ... by the way, when I say in-game ads that probably means watching a 30-second video when you log in. I think at the end of the day if you're playing completely for free that's a pretty good trade-off.

Massively: Talking about Legends of Norrath, how do you feel like the game has done in these couple of months since the game came out?

John Smedley: Really well! I can give you some numbers: our average customer spends $133 dollars. We have been able to successfully convert 40% of our customers into Legends of Norrath players. 25% of our customers are paying players. We're extremely pleased and pretty shocked at the level of money people are willing to spend in these things. The reason that's important to customers is that, long-term, we can use that same model to make it so that the people that want to pay can help pay for the people that don't. I think it's an ideal business model for this industry.

Massively: When we spoke last year at SOE Gamer's Day, you were fairly firm about not bringing payment schemes like this to the more traditional hard-core games, like EverQuest 2. With Vanguard you folks have sort of an interesting opportunity, is there any thought to making that game a free-to-play title?

John Smedley: We haven't talked about it with Vanguard, but we have discussed it with the other games. We just feel like it would be too big of a change ... but we do have something that I can talk about publicly. This would be the first time I've ever mentioned it.

With FreeRealms, we're going with a very different distribution system. It's called "Share the Wealth". Let's say you have your own website. You come to our site, fill out a form pretty much the same as the one for our Station Exchange service with a Social Security number, and give us your PayPal account information. You cut and paste some JavaScript to your site, and now you have a banner ad for FreeRealms on your site. We are tracking every customer you give us, and once a month we'll give you somewhere between 5-10% of all the revenue from every customer you send us. That's as long as they are playing the game. I just announced this to our company in December, so this is a very new thing.

Massively: That's very interesting; what made you folks decide to go in that direction?

John Smedley: I believe very firmly that MMO games and online gaming is an ecosystem. A great example of this is World of Warcraft. I think we did a good job with this in EverQuest 1, not so much with 2. Thottbot is a direct example of someone who wrote a great tool and became a part of the game as a result. It's an ecosystem, and so an outside company has been able to make money off of WoW customers via advertising. I believe that one of the best things we can do is to ... first and foremost we have to make a great game. A close second is to give people the ability to build a community around the game, for there to be a community that can feed itself. I think the blogs surrounding these games are a great example; all part of the ecosystem. People want information, and that's healthy for the games and for the bloggers. I want us to push forward in the direction of people evangelizing our games. I think it's a big thing.

Massively: To make sure I understand this, you want to sort of reverse the relationship between Thott and Warcraft? You're giving people the tools to have a 'buy-in' into your game.

John Smedley: Exactly. You get a piece of the game. And it's not a one-time piece, it's an ongoing piece.

Massively: So that's the entire time that the referred players are with the game?

John Smedley: Yep. We're still working out all the details, but that's exactly what we're going to do. We're going to come up with some sort of ramping rate over time ... I'm talking about the number of customers you bring us, you'll reach some sort of threshold ... we're working out the details. That's what we want to go for though, it's about sharing the wealth. I want our customers to be our evangelists, and I want our evangelists to be gaining some kind of reward for that.

Part 2

Earlier today we unveiled the first part of our CES interview with SOE's Chief Executive Officer, John Smedley. He announced to us an unprecidented buy-in program for their upcoming free-to-play kids fantasy game FreeRealms. This afternoon we have the rest of the interview to share with you, with big news for players who use the company's Station Access pass. While a lot of commentators have been frustrated by price increases, SOE is working behind the scenes to make those increases worth your while.

We are having ongoing discussions inside the company about making station access an all-inclusive pass. Everything that we have, you get as a customer. Station Access subscribers would get every expansion pack for every game, as well as future expansions for every game as well. For the same price now, without raising the price.

Read on for our discussion on why these changes have taken so long to implement, and a few words about the company's rededication to fighting gold farmers.

Massively: To kind of flip back to the other end of the spectrum – Station Access. We'd talked about some plans for that at last year's SOE Gamers day that still seem to be in the works. Is there any chance we could talk about that today?

John Smedley: Sure. I don't mind this being public. We are having ongoing discussions inside the company about making station access an all-inclusive pass. Everything that we have, you get as a customer. Station Access subscribers would get every expansion pack for every game, as well as future expansions for every game as well. For the same price now, without raising the price. We have two problems, though. One: we have third parties involved in this. LucasArts, for example, will have to buy off on this, as would others. Second is the less obvious one: Promising future stuff is the meat of the problem. We haven't found the right way to word things yet. To be honest other priorities have gotten in the way. That's what we want to offer people.

It's really a question of logistics. For example, if a customer buys an expansion pack now, they physically own it. What happens if a customer with Station Access decides they primarily play EverQuest 2 and decide to convert from Station Access to just EQ2. What happens to the expansions they got access to as a part of Station Access? This is somewhat similar to the questions services like Napster has had to deal with. In their model while you're a member of the service you have access to everything, but once you stop it's another story. But for us: what happens to items collected from expansions? It's a difficult question, and we've put a lot of thought into it. We have to make sure that people can't game the system, because you know farmers could have a field day with this.

Massively: I wanted to ask, because while it makes sense that these are tough issues to deal with it's been some time since the rate was raised. I think players have been a bit concerned.

John Smedley: Well, the reason the rate went up has more to do with the number of games on the service. The cost of these games is getting up there. The economics of running MMOs is interesting. We've been running EverQuest for almost nine years now, and people think that some costs like customer service don't go up. Sure they do! We have a lot of long-time employees who need raises over time and the cost of living goes up ... The Station Access thing is something I want to see happen, though. I want to incentivize more people to go into that.

Massively: While we're talking about EverQuest ... I think some players are at the point where they don't understand why you're still running the game? SOE has this reputation for keeping games like Vanguard and Matrix Online going, and we were just talking about the economics. What is it about these games that make them worthwhile to keep them going?

John Smedley: Great subscriber bases for EverQuest and EverQuest 2 and Galaxies, pretty much. I will tell you, I'm as surprised as anyone that the longevity of EverQuest. Our first spreadsheet had this thing running for about two years, and even that we thought was a little optimistic. Nine years later you go, "wow". There's still a large community there. As long as people pay us money and we love what we do, we'll keep running it. The challenge is that, with EverQuest and EverQuest 2 on the shelves together ... why would people want to play a nine-year old game? Honestly the acquisition in EverQuest has slowed down a lot, and it's hard. We've refocused on one expansion a year with these games now, I think we let quality slip too much when we were doing two, and I'm happy with where we are on that. We have a great player base and we're making some money so there's no point in not continuing.

Massively: From what I've seen with Galaxies, where you have a really dedicated team working on it, it seems like you're even gaining a little ground back there.

John Smedley: Galaxies, I have to say, we screwed up with the NGE, but we're very much focused on making the game better and better. I was pleasantly surprised to see Tabula Rasa used a very similar combat system to what you see in Galaxies. If I were to do it again, I never would have done that switchover, but I think the effort we have put in has started to show. It's taken longer than it should have, but the quality level has just skyrocketed. We did this recent house pack-up, and that drove so many people to resubscribe, I was truly surprised by that.

Massively: Earlier you mentioned the problem of farmers with regards to Station Access. I know that's something the company feels very strongly about?

John Smedley: I think the issue of farming is higher on the radar now than it ever has been. The behinds the scenes things are really frustration. A lot of these farmers are essentially stealing from us. What they do is they charge us back all the time. They use a credit card –sometimes stolen, sometimes not – to buy an account key. They use the account for a month, and then they call the credit card company and charge it back. We have suffered nearly a million dollars just in fines over the past six months; it's getting extremely expensive for us. What's happening is that when they do this all the time, the credit card companies come back to us and say "You have a higher than normal chargeback rate, therefore we'll charge you fines on top of that." We're really trying to get on top of that. We're taking our current efforts up about five notches to Defcon 1 on this issue. They bug us even more than they bug our customers, and we're definitely taking steps to implement rigorous anti-farming efforts.

It's actually really amazing to sit and watch these people work. I've personally sat with them as they're tracking a farmer, and you'll see a mob spawn – this guy's got a bot that within half a second has them moving towards the creature even if it's halfway across the zone. It's a serious problem.

Massively: And you can't fight the chargebacks with the credit card companies?

John Smedley: No, and the reason for that is very simple. Visa and MasterCard have these rules about chargebacks, and I personally think they're antiqued. Digital delivery isn't covered by their rules very well. So if you order something from Amazon and pay thirty bucks for a book, if it doesn't show up at your house you can fight it because you can say "I never received that thing." They do not cover that with digital delivery. In my opinion the world has changed a lot and I think that needs to be addressed.

Massively: Is there any sort of collaboration on that subject with other MMO developers?

John Smedley: I have to say "We are in close contact with our friends in the industry."

Massively: Of course. Many thanks, as always, for your time sir.

I like smed's Idea... Free expansions please!! =P

**MotorZ** · 01/17/2008 10:35:13

Very interesting. Too bad the question involving MxO near the end didn't have an answer involving MxO. I'd think it'd be really interesting if one of our radio stations could ever have a short Q&A with Smed.

But yeah, for the things that annoy me for SOE, I like the variety they have, and they're willing to keep things going for the sake of that variety.

EDIT: I never have wanted to pay more than my $15 monthly, but once I'm outta high school, who knows? I've trialed a couple other SOE games and liked a few of them. This stuff with Station Access would be really cool.

Havocide

Station Access is what ive used for a while. The future looks good.

**Kybutra**

Heh sucks about the farmers ingame doing the charge back, I used to have Station access until they screwed swg over.

**SolidRevolver**

They are targetting an expansion a year for EQ and EQ2 ¬_¬

Yet MxO doesn't get an animator...

*starts singing 'Where is the Love' by the Black Eyed Peas*

**Croesis**

MotorZ wrote:

I'd think it'd be really interesting if one of our radio stations could ever have a short Q&A with Smed.

RMC / Catzi.... this is your next challenge....

**Lezel**

yeah it better be free...shiiit with the lack there of MxO should be free...

\m/><\m/

**TheUnknownShadow**

Vinia wrote:

MotorZ wrote:
I'd think it'd be really interesting if one of our radio stations could ever have a short Q&A with Smed.

RMC / Catzi.... this is your next challenge....

Your mission should you choose to accept it?

I'd certainly say go for that, from those I spoke to in SOE, they're surprisingly nice to you if you send them an email and start talking with them. I wouldn't be surprised if you could sit him down for a chat. It might take a while to arrange it but it would be do-able I'm sure. Go for it!

*wanders back down to the docks whistling, "What shall we do with a drunken sailor"*