Wedbush analyst Michael Pachter thinks that the arrival of premium multiplayer services for console games “will be the event that turns the negative tide of industry sales around”.
“The appropriate business model for online multiplayer has yet to emerge,” he said in a research note, adding that some multiplayer content for FPS games needs to be given away freely because the genre has evolved to be dominated by online play.
“The premium services that we expect to be monetized are the sale of virtual goods, the opportunity to play in tournaments, the maintenance of achievements, the creation of ladders and leader boards, and access to value-added content.
“We are not sure which direction that monetisation will take, but expect to hear about future plans for charging for premium services some time between this earnings cycle and early 2011. We think that scheduled releases like Call Of Duty Black Ops, Medal Of Honor and Halo Reach, and unscheduled releases like Grand Theft Auto 5 all will contain the opportunity for gamers to pay more to the publishers.”
Pachter expects “somewhere around half of the current 15 million online game players” to pay something for premium content. The other half will play fewer hours online because the free experience won't be as robust as it once was, and they'll instead choose to buy more boxed games.
“Should the 7.5 million people who choose to pay generate only $5.00 per month (around 11.5¢ per hour), publisher revenues and operating profits would increase by $450 million; should the other 7.5 million people purchase only one additional game per year to make up for fewer hours spent online, publisher revenues would grow by another $450 million.”
He continued: “… We think that once a premium service is established, likely by Activision, other publishers will quickly follow suit…. We do not think that charges for premium content will be mandatory, and we expect the publishers to continue to provide some form of online multiplayer for free. However, we think that the opportunity to charge something is too great to be overlooked by the publishers for much longer, and we expect to see Activision lead the way by creating a new system some time before the end of the year.”