If you're going to have a revenue model that includes both off-the-shelf sales in addition to a per-month fee (such as UO or EQ), then you have 2 very important numbers:

1. How many off-the-shelf units do you expect to sell?
2. What percentage of off-the-shelf units sold do you expect to turn into regular subscribers and how does this compare to the initial off-the-shelf revenue?

And then there are the other questions...

-Are you going to provide any "free months" out of the box? I think EQ gives 2 free months with the initial purchase.
-What do you estimate is the average "player lifespan" once they become a paying subscriber? Remember: Any free months don't count towards subscription revenue, so if you estimate 4 months, that's only 2 months of subscription revenue.
-What are your expected infrastructure overhead costs? Massively multiplayer online games tend to require a pretty hefty infrastructure. You have to acquire servers and Internet connections, with the accompanying security and hardware maintenance issues.

And if you think the publisher isn't going to take a % of the subscription sales, you likely have another think coming.

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DavidRM
Samu Games

Do you think the publisher would ask for a piece of the subscription if they did nothing but put the game in stores. I tend to think that I am bringing business to them with a completed game and all. I almost look at it as if it was a contracting agreement. I am paying a company(through a percentage of sales) to market and distribute my product. Any additional revenue I earn from that product once it is beyond their distribution network is mine to do with as I please. The involvement of the publisher does not need to go any further unless the publisher takes a substantially less percentage from boxed sales. Giving the publisher enough to recoup production plus a percentage beyond that is payment for what they do for a living. Giving them access to a constant revenue stream is something entirely different. In addition to the publishing there is advertising revenue from the games web site. The publisher gets none of this unless it helps to defray the costs of development of the game or the web site. In my eyes without the money from a publisher coming in during development, I don't believe they have any right to revenue streams outside the sale of the boxed set.

That being said what is a typical percentage that a publisher wants for a completed game. I need to work that into my model.

Thanks for your input. I would like to hear from others as well.

Kressilac

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Derek Licciardi

There's another thread going on in this category called ROYALTIES that talks about royalties from publishers.

Are you going have the money to get a stable server set up that can handle some serious traffic? A server breaking down would kill an online game. If not, someone's going to take a cut.

If you're controlling the server, you might want to consider giving the game away. A one month $10 subscription is probably around what you'd get from the publisher for selling a game.

Since you don't have a brand name like Ultima or a track record, I think most people would be reluctant to spend $45 so they can spend another $10 a month on a game they basically know nothing about. If you give the game away, more people will probably give it a try than would buy a retail version. And as far as the cash flow goes, you'd probably get the $$$ quicker than any royalties above and beyond the advance.

I plan on running the server(s) myself. Since I am going to bear the cost of the infrastructure, I figured the publishers involvement is only there to get a boxed game out to the public. Putting a boxed game on the shelves of major stores is advertising. I am not sure that I could generate the kind of advertising that I would need through a web site only. That being said we are seriously thinking of giving away the client despite the loss in revenues that it means. Publishing the game in a box provides a good way to recoup the upfront investment cost so that a years worth of subscriptions doesn't go back to the angel that has funded us.

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Derek Licciardi

Glad to see you're considering giving the client away.

I honestly don't think you'll be able to find a publisher who would be willing to go hands off on the online revenue(whether it's fair or not) for a couple reasons:

(1) As far as they're concerned, they're taking the biggest risk by laying out all this money ($2 -4 million dollars is alot, even for big publishers, EA grossed over a billion dollars last year and still posted a loss) and therefore entitled to share in all profits.

(2) The quality of the online service is directly tied to how well the game will sell. If you screw up ( I'm talking from the company's exposure analysis, not trying to slam you) on the server side, and people know it, they won't buy the game.
Worst case scenario, the site goes dead after three months, everyone grabs their already opened boxes, and takes them back to Electronics Botique and demands a refund. Electronics Botique gives them store credit and demands credit from the publisher. Now the publisher ends up taking a hit on something that they thought was closed out and profitable. Gamers will also hold the publisher responsible for years to come even if they had nothing to do with it. I know at least Activision's SEC filings lists returned products/retailer relations as one of the risks of the industry right up there with missing the Christmas window.

Back to the client. I don't think that a website is the only way to get copies out. One is OEM channels. A hardware company comes out with a new product and tries to manufacture a market for it, and bundles software to show it off. One of the ways companies are trying to sell DSL(which I just got, downloaded the Kingpin demo in 25 minutes) and other broadband services is Online Gaming. If you get US Robotics to throw the game in with their DSL modem, it'll get delivered straight to people who want to see what this puppy can do. You might even be able to get a few bucks.

Does anyone out there know how the deals go for the Demo CD's that get thrown in with Game Mags? Are publishers paying for the privilage, or do the Mags negociate for exclusive rights? I imagine a little bit of everything goes on but what is more prevelant?

While I would agree with you, that if the publisher funded the development of the game they would want the online business. Seeing that I am only going to use a publisher to put boxes on shelves and to market the game, I figure the profits earned from the boxes should be enough to satisfy a publishing agreement. Since single player games have no online revenue, I have to assume that the profits off boxed sales have been enough in the past.

I plan on approaching the publisher with a completed game. This should eliminate all other revenue streams the game might bring in as accessible to the publisher. Beliefs aside, should a car manufacturer get a piece of my pizza delivery revenue because I used the car to do it. No. Same principle here. If they don't pay for it, they don't get access to the profits from it.

If the publishers are as powerful as you say they are, then I can get the software out to the players over the internet and skip them all together. The project is not dependant upon boxed sales royalties.

Kressilac

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Derek Licciardi

Assuming your getting this business plan togeather for investors, it's possible they'll want a bigger cut than a publisher. A Venture Capitalist is going to want equity in the company, and even a 'Rich Doctor/Lawyer' expects +20/30 from the relatively risk-free stockmarket, so they have very high expectations for something they can actually lose all their money on.

An actual Venture Capitalist (simplistically) invests in 10 high risk companies fully expecting 9 to go belly up. So the company that does succeed needs to return at least 10x the original investment to break even. At that point they still haven't seen a profit. The only way they'll get that kind of payback is stock or other ownership. (It's alot like investing in Junk Bonds.)

Investors are still reasonably warm on Internet, so I'd push that (there's a running joke that Amazon isn't losing enough per quarter to invest in.)