The WOW Annual Pass was quite an interesting new announcement at Blizzcon.. it's actually quite brilliant and I have to commend the marketing team.

Here is more information on the Annual Pass which I will be referencing.

From what I understand, this was a last minute change. It was probably an idea developed (or just implemented from an earlier idea) within the past 3 months or so after they decided not to make the surprise Christmas announcement.

It's being marketed just like a mobile contract. If you sign up with us, you get this fancy new phone for free.. and you only have to pay month to month! Cancel anytime you want! (Many view this contract scheme as a scam, but it's pleasantly ignored when it comes to a video game.)

Just like mobile contracts, users on jumping on board without considering the consequences. And, it's a common human trait not to fully understand long term consequences (which is being exploited by clever marketers) after all.

Here are some things to consider:

• You CANNOT cancel the monthly payments, so you better make sure you don't run out of funds and save up in advance (in case of monetary emergencies.)
• In order to be eligible, you need to pay for a recurring subscription already. Meaning that it will cost you an additional month (13 months) to get the offer: "Prior to accepting the offer you must have a recurring World of Warcraft subscription active on the associated account."
• You are stuck with the 12+1 month subscription, and it's deducted on a month to month basis.
• You are buying the standard digital copy only. You do not get a retail box.
• If you fail to make a payment: you lose the items, your account is disabled, you are charged the full amount for Diablo 3, and Blizzard is within their right to sue you: "If your World of Warcraft subscription lapses during the Twelve Month Commitment, or if you fail to make any required payments or timely payments, Blizzard reserves the right to terminate your participation in this offer in addition to any and all other remedies that may be available to Blizzard at law."
• Because of the guaranteed beta access, other WOW players are penalized access for this. It further encourages them to participate in the offer.
• You're locked into playing WOW even when D3 comes out next year. It's a limited time offer too, so you need to act fast!
• You are stuck with an entire year's subscription during a time when new games will be coming out: Skyrim, Guild Wars 2, Tera Online, SWTOR, Torchlight 2, Path of Exile, The Secret World, etc.
• When you're stuck with a subscription, you feel obligated to play the game to avoid a wasted expenditure.
• It's a great way to keep Blizzard players away from new MMOs and more importantly, their competitors.
• It gets Diablo 3 players to play WOW, and gets WOW users playing Diablo 3.
• Having so many players locked into a 1 year contract increases their subscriber counts (vanity figures for impressing shareholders) even if the accounts aren't being played. It's "Subscriber" counts, not actual players.
• Michael Morhaime stated that "their margins are higher when we sell direct." It's in Blizzards best interest to get you to use their digital downloads.. they are saving a ton of money by you not buying retail (they also lose a major cut from the retail sale too.)
• This is also why the new D3 RMAH and PayPal relationship is so important.. by building up B.NET bucks, their profit margins are going to skyrocket compared to retail loss. This is the future of all of their games. Keep your money within Blizzard, buy digital. Degrading the quality of retail boxes is a great way to encourage digital purchases too. (Remember the quality of materials that retail boxes used to carry?)

A very clever move, just like the Pokemon style combat pets.

(Blizzard will be selling even more pets in the Blizzard Pet Store now, with special pets having new abilities. Since it's not "game impacting" and only for "vanity pets", then it's perfectly acceptable to start selling weapons and armor.. but just on pets. (I don't literally mean real weapons and armor.. I'm talking special skills and pet stats.) It's also opening up WOW to a younger crowd, whereas Diablo 3 is targetting a more older/serious crowd. They'll have a couple games now to hold over the various demographic groups until Titan comes out for a more larger demographic.)

I wouldn't recommend the WOW Annual Pass for anyone.. unless either you're rich or you live in Australia. $100 for Diablo 3 is a pain in the ass, I'm so sorry for you guys. This deal is much more beneficial to you guys than everywhere else.

For everyone else though, please consider the repercussions.

The big problem I have is that you're FORCED to start paying for the WOW Subscription right away, during the time when Diablo 3 and other MMOs come out. It would be much more fair to players if you could buy the WOW Annual Pass now, but start using it at any time you want. But, their plan is to get users paying monthly fees for a year, knowing fully well that they'll never actually be playing WOW. Brilliant marketing strategy.

In an earlier post, I had predicted that Blizzard would be adding in-game chat features via mobile phone. (e.g. "A lot more mobile services definitely! The Remote/Mobile AH is just a start. Checking in-game mailboxes. Inventory, bank, character, and talent management through mobile. In-game chat with Guild, General Chat, Trade Chat, etc through mobile/remote.")

Looks like it was just revealed a couple days ago. Premium monthly subscribers (those who are paying an extra $3 per month) will have access to a new feature that allows them to communicate with Guild members while mobile.


How utterly.. predictable.

In one of my previous posts, I calculated the maximum possible number of WoW players, but those figures did not include alternative revenues collected during the same time frame.

Since the quarterly figures also included such sales as transfers, faction changes, and other paid account services then it would mean that the WoW player counts are even less. But since this transactional information is not public, it's impossible to tell what percentage of their overall Net Revenue is related to subscriptions vs paid services.

Blizzard is under a lot of pressure from their "boss" to introduce new products or add new sources of revenue to combat World of Warcraft's decreasing revenue: "If consumer demand for World of Warcraft games declines and Vivendi Games has not introduced new MMOG or other products that replace World of Warcraft’s potentially decreasing revenue, or added other sources of revenue.."

And it's very interesting to see the strategic deployment (ie, "well timed" delivery) of new account services or virtual products that have been planned for months or possibly years. It's as if the new revenue streams need to be constantly introduced each quarter to combat significantly declining player counts.

(Note: This list does not include major content releases/patches.)

2nd Quarter ending Jun 30 2010 - $289 Million Net Revenue
- Celestial Steed & Lil’ XT Pet introduced at the beginning of the quarter (Apr 15th, 2010)
- The horse was just a reused 3D model so it hardly cost them anything. But it sold at $25 for a minimum of $3.5 million on the first day. Because those sales were part of their Net Revenue, that actually amounts to about 100,000 players. So instead of a maximum of 6.7M players during that quarter, it would be a max of 6.62M.
- Exclusive RAF Flying Mount introduced Apr 30, 2010.
- Remote / Mobile Auction House service ($3 per month) introduced at the end of the quarter (Jun 2010). So many of the profit increases won't be visibile until Q3 2010.

1st Quarter ending Mar 31 2010 - $306 Million Net Revenue
- Celestial Steed leaked to the public to build up interest.

4th Quarter ending Dec 31 2009 - $294 Million Net Revenue
- Race Change service ($25) introduced at the start of the quarter (Oct 09)
- Pet Store introduced in the middle of the quarter (Nov 09). $10 to $25 virtual pets.

Interesting Note: They had a "special" on Pandaren Monk's where they donated 50% of the sales to charity. That special ended on Dec 31, 2009 (coincidentally, the end of quarter). Not only that, but they sold something that cost $0 to make, made quite a bit of profit, while simultaneously receiving tax relief and public relations. Brilliant. =]

3rd Quarter ending Sep 30 2009 - $301 Million Net Revenue
- Faction Change service ($30) introduced at the end of the quarter (Sep 09)

2nd Quarter ending Jun 30 2009 - $324 Million Net Revenue
- Nothing new introduced.

1st Quarter ending Mar 31 2009 - $314 Million Net Revenue
- Nothing new introduced.

4th Quarter ending Dec 31 2008 - $325 Million Net Revenue
- Character Re-customization service ($15) introduced at the end of the quarter (Dec 08)
- Wrath of the Lich King released (Nov 08)

3rd Quarter ending Sep 30 2008 - $271 Million Net Revenue
- PvE to PvP Paid Transfers ($25) introduced at the end of the quarter (Sep 08)
- Recruit a Friend program introduced in the middle of the quarter (Aug 08)

2nd Quarter ending Jun 30 2008 - No Quarterly Report
- Nothing new introduced.

1st Quarter ending Mar 31 2008 - $275 Million Net Revenue
- Character Transfer and Character Name Change cooldown reduced from 3 to 1 month. (Feb 08)

4th Quarter ending Dec 31 2007 - $279 Million Net Revenue
- Name Change service ($10) introduced in middle of the quarter (Oct 07)

3rd Quarter ending Sep 30 2007 - $269 Million Net Revenue
- Scroll of Resurrection introduced at the end of the quarter (Sep 07)

2nd Quarter ending Jun 30 2007 - $324 Million Net Revenue
- PvP to PvE Paid Character Transfers ($25) introduced at the end of the quarter (Jun 06)

(That's just a quick run-through, but if I missed anything I will update it.)

It's very interesting to see that all of the major paid services were all introduced at the end of each quarter. Based on those trends, we might see something new (probably a remote service of some kind) introduced in September 2010. And then next quarter (Q4) is when Cataclysm will be coming out.

Not only that but there's another interesting trend: New paid services (or any kind of alternative revenue stream) are introduced just before quarter end (e.g. 1-2 weeks prior) when the most amount of sales are made! You see, there's a rush because of the new service and everyone wants it as soon as possible. In the end, that rush pads their Quarterly Report profits. And because they can introduce the services any time they want, they only have to release them if they are showing poor performance for that quarter. Of course, follow-up quarters will have significantly less sales, but I'm guessing that there are probably major content releases between each of these activities to keep users interested. =]

Note: Did you notice that major services/changes are released when profits are low for that quarter? But when profits are high, nothing new is introduced.

As you can see, their Net Revenue has remained very close in proximity from 2007 to 2010 as well. If that number is remaining constant (although it's actually trending downwards), but they keep deploying more-and-more paid services over the years, that would indicate that player counts are declining even faster than predicted in the previous post.

The big next step to increase profit is getting WoW players back into China with the WOTLK and the Cataclysm launch. I'm sure we'll see a lot more "alternative revenue streams" (ie, paid services) after the Cataclysm launch, or possibly PR stunts to increase sales of an existing service or virtual item.

Much of this will depend on the success of Cataclysm (mentioned a lot in earlier posts).

What do I think those services could be?

- A lot more mobile services definitely! The Remote/Mobile AH is just a start.
- Checking in-game mailboxes. Inventory, bank, character, and talent management through mobile. (*EDIT: Apparently, the new "Mobile Armory" does some of this already. Guess I was right =] )
- In-game chat with Guild, General Chat, Trade Chat, etc through mobile/remote.
- Integration with Battle.net to allow chat between accounts (e.g. SC2 and WoW players).
- Mobile application that alerts you when other WoW players are nearby, giving you details on their avatar after you "handshake".
- Further integration with Facebook, linking the virtual world with your profile page.
- "GPS tracker" so your Facebook friends know where you are in Azeroth.
- More virtual pets, mounts, and special character customizations only available for real money (special hair cuts, glowing eyes, imposing skull faces, exclusive dances, flaming horns, jewellery, fashion wear, etc.) I think there would be many people who would pay $5-10 for bright glowing eyes.
- Special virtual pets sold with very limited quantities so that people rush for the one-time-only "elite pet" or charity pets for those with a soft heart.
- Depending on the success or failure of Cataclysm, we might see more non-vanity and game-effecting virtual items being sold.
- Change all vanity pets so that they can engage in special combat with each other (they level and grow) to sell even more vanity pets. This would be very easy to do.
- Reduced price structure of existing Paid Account services to attract more players - "Weekend specials", "Christmas Gift Specials", etc.
- Guild Paid services for entire Guild Transfers or group/individual rates for multiple character transfers, realms transfers, renaming, and faction changes.
- Blizzard has been experimenting with Player and Guild Housing, but they also don't want cities to appear empty. It's therefore hard to say if this will ever be introduced, but if it is, the Blizzard store will have house items for sale (e.g. paintings, rugs, bookshelves, etc.) Personally, I don't think this will ever be introduced.
- More "community" integration between Battle.net's games, like pets/mounts for playing the other game, and then once you're hooked: paid premium services.

The list can just go on and on. There are a ton of possible alternative revenue streams, but those are just the simple ones off the top of my head.