Online gaming cos opt for sale of virtual items

Companies give subscription model the thumbs down.

A shift from the subscription model to direct sale of virtual items in cyberspace has just begun.

Massive multiplayer online game (MMOG) company Level Up, for instance, has set up an online mall, following its decision to earn revenues from the sale of virtual items as against subscription fees for its MMOGs and Massive Multiplayer Online Role-Playing Games (MMORPGs) "" Ragnarok, Gunz, and the more recent Ozworld.

The business model of selling virtual items is also finding favour with Sify which launched a MMORPG called Rakion 3-4 months ago, and will be beta (test mode) launching Nostale "" an entry level MMORPG on the same business model "" next month. Its older MMORPG, A3, will continue to follow the subscription model.

"Currently, the sale of virtual items accounts for less than 5 per cent of the total subscription sales. However, by the end of financial year 2007-08, there will be a substantial shift from the subscription model to sale of virtual items," says Suryadev Goswami, assistant manager, Communication Research, IDC India.

Subscription revenues will grow at a Compounded Annual Growth Rate (CAGR) of 126 per cent from $1.22 million in 2006 to $72 million in 2011, he adds.

Additionally, the number of online gamers will grow, at a CAGR of 63 per cent "" from 1.3 million gamers in 2006 to 14 million by 2011.

However, it is too early to say what the revenues from the sale of subscriptions would be, since industry players and experts refuse to put any estimates.

"The change in the business model would ensure more entry-level gamers and subsequently more revenues as playing would now be free," reasons Venkat Mallik, managing director, Level Up.

For instance, "at Level Up we are already experiencing a 100 per cent increase in the number of gamers playing for free," he adds.

Besides the change in model, "The MMOG and MMORPG market is also witnessing an explosive growth in the number of titles increasing from three in the beginning of the year to 10 by the year-end," says Navin H, head, national sales, Sify.

Level Up is planning to launch three more MMORPGs/ MMOGs over the next 3-6 months. Sify is introducing Nostale next month, even the recently set up MMOG company Kreeda Games, which launched Dance Mela a couple of months back, is planning to introduce another MMOG title.

Besides, other online gaming players like Anil Dhirubhai Ambani Group (ADAG) company Zapak.com too plans to launch two MMOGs in the next 3-6 months. Even Mobile2Win is planning to launch City Racer, a MMOG, soon.

Rohit Sharma, chief operating officer, Zapak Digital Entertainment, says, "Currently, advertising is our only source of income but after the launch of MMOGs, revenues from subscriptions will account for 40-50 per cent of our overall earnings."

For Mobile2Win too, MMOG would provide the company a new platform to attract additional advertising revenues, concurs Rajiv Hiranandani, country manager and co-founder, Mobile2Win.