Following the recent NPD sales report, which revealed software sales plummeting 15% for the month of June, Wedbush Morgan Securities analyst Michael Pachter tried to figure out exactly what the heck has been going on. June marks the fourth negative month of decline this year, but why?
Pachter said part of the problem stems from Nintendo now bundling two games in with the Wii, and many consumers buying clearance software with their new, cheaper Xbox 360s. The bigger issue, however, is the rise of online multiplayer gaming, which obviously gives any game more replay value, which in turn means that those players are less inclined to go out and buy new software.
"...we think that the overall decline was due to a very large number of people playing multiplayer online games for free on PlayStation Network, and for an annual fee with unlimited game play on Xbox Live," Pachter noted. "We estimate that a total of 12 million consumers are playing Call of Duty Modern Warfare 2 for an average of 10 hours per week on the two platforms’ respective networks, and the continued enjoyment of this game (along with an estimated 6 million Halo online players, 3 million EA Sports players, and 5 million players playing other games, such as Battlefield, Red Dead Redemption, Left 4 Dead and Grand Theft Auto) has sucked the available time away from what otherwise would be spent playing newly purchased games."
He continued, "We see this as a continuing problem, and think that unless and until the publishers come up with a business model that appropriately captures the value created by the multiplayer experience, we are destined to see a migration of game playing away from packaged goods purchases and toward multiplayer online. While the shift has been great for consumers, who are enjoying an unprecedented, and largely free, game experience, it has been devastating for publishers and shareholders, who are seeing sales and profits decline."
Ultimately, Pachter says Activision will have to lead by example and push the industry and its online games in the paid direction. Gamers will not like it one bit, but if the experience is as compelling as Modern Warfare 2, then gamers will probably pay. Pachter's advice is no doubt music to Bobby Kotick's ears, who's already said that he'd like to turn the entire Call of Duty business into a subscription.
"We think that it is incumbent upon Activision, with the most popular multiplayer game, to take the first step to address monetization of multiplayer. It is too early to tell whether that will be a monthly subscription, tournament entry fees, microtransaction fees, or a combination of all three, but we expect to see the company take some action by year-end, when Call of Duty Black Ops launches," Pachter commented.
"The company has the greatest experience of the Western publishers with multiplayer subscriptions, given its huge success with World of Warcraft, and we expect Activision to apply a WoW-type model to its Call of Duty franchise. It is likely that Activision will ease the pain of consumers, and will continue to offer some form of free multiplayer, at least for a while, but we believe it is imperative that the company begin to capture some value from the huge number of hours spent – 1.75 billion hours on Xbox Live alone through mid-April, and we estimate that this figure is approaching 4 billion hours combined through today on Xbox Live and PSN. We are quick to point out that the average single player game has an expected play time of under 30 hours, suggesting that a staggering 133 million units of equivalent game play have been spent (so far) playing Call of Duty online, with Activision only seeing revenues from the original 20 million units sold, plus an estimated 8 million map packs sold."

28 Comments
2 months ago
It seems to me patcher was paid good enough by "guess which company" to say such a crap.
Its not prediction of what gamers want, its a clear attempt of greedy companies to find excuse for possession to obtain even more profit than they have.
Strange that Pachter forgot to mention that every publisher, and especially activision makes more then just big profit on permanent sales of game.
Also he did not described any reason why **ck we should pay for monthly subscription?
In MMO case subscription have reason as massive dedicated servers that handles 1000+ players in same virtual world in same time, and running these servers and providing regular updates is expensive.
But in non MMO case publisher run nothing but a plain & cheap masterserver that just checks validity of auth key and provides indexed list of dedicated servers which running for free and provided by gamers and enthusiastic hosting companies which are not related to publisher and thats about PC, in console case and in special Modern WarFail 2 case, every user acts as peer 2 peer server...
So i ask again - why the **uck we should pay for if we run our own servers?
Even if publisher will run dedicated servers for non MMO games in every country (to provide good connection to players) to have excuse for month fee, this will cost them more than they can imagine and this will be clear attempt to run monopoly in dedicated servers sector which was established long enough to have rights to put veto on this... otherwise "ActiveGREEDYon" actions will awake interest of anti-monopoly commission and imaginable profit will turn to real fail!
Someone got to stop this madness! "Active Greedy on" got enough from perma-sales of game, and Pachter is sold and lying about reasons - there is no necessary reason to start month subscription for non MMO games, the only reason - Activision got a lot and they want even more, because their shareholders are greedy scumbags !
They dont even have idea how massive will be protest of consumers to this move, they simply will ignore product with month subscription and will stick to old games and wait until some yet-free-to-play rival of COD will arrive, and i have feeling that this some game would be Medal of Honor and another Battlefield, so Activision will loose many customers.
2 months ago
Only 20 Million copies plus 8 million map packs? That's it? wow I feel really sorry for you guys. You must be going bankrupt.
Who does pachter think he's fooling? Then again I've seen gamers fall hook line and sinker for buying Used equals Stealing. Then again those fools could be plants. Needless to say this is complete nonsense but if they did start charging I guarantee that the majority of gamers will support it without a second thought. Personally that's another line in the sand i'll have to draw. I had to catch myself. I was so anxious to support a game from a company that (to my knowledge) hasn't said word one about any kind of charge for online that I almost bought Sniper: Ghost Warrior.
"Free game, experience"? According to microsoft. I can complain and boycott companies who support this but we willingly accepted paying for Xbox Live. Nobody thought that that would have an effect on the Industry? You don't think other companies would take notice of free money?
Instead of worrying about if i'm still playing the game, I bought, maybe concentrate on making new and compelling franchises people might want to spend their money on. What am I talking about? That's a stupid idea. I'm so silly.
2 months ago
Good point, but im not sure i agree about Live. At least Xbox Live is more complex online service that connected with every game available for console, it have unified user database which handle no just online Mp but also a cross-game voice and text chat, statistic, DLC and full game store and many things that require a lot of server power and pretty expensive to take care of, and as far as i know this includes dedicated console servers for these games that dont handle p2p architecture (but im not sure about this part, this is just my guess)
So in case of Live - monthly fee is reasonable because its very similar to MMO servers, since live keeps millions in same virtual "world" at same time, and live is massive community and instant messenger , and again in case of live you pay 10+ bucks to play hundreds of games online and not just these game... what will have in case of activision?
15$ (or according to latest very greedy moves like 5 crappy mp maps for 15$ it could be even 20$ per month) in month just to play COD, or best case few CODs - an im not saying that you must pay for what you used to get for free during almost 20 years!
I can only compare this to monthly fee for air that we breath in, they just want to get money for already belongs to us!
I dont want to pay for Air!
Do you, Blaiyan, want to pay for air?
How many idiots will pay for air?
How stupid an greedy Activision Shareholders and Marketing team and Pachter must be to think that they can and must make money of air simply like that?
They have nothing to offer and think they can get money for that? Thats so pathetic!
And you right about last thing - new titles is way to go! Sequels is way to destroy established title and get people tired of it! If you threat title like a Milky cow and milking it without giving Cow a rest and food, mill will end soon and cow will die... but companies like activision can milk even dead cow and bring us "tasty & fresh" juice of dead flesh.
And I already felt the taste & smell of dead flesh of Call of Duty when played Modern Warfail 2..
2 months ago
There is one crucial difference between this and WoW. WoW is six years old, whereas the CoD lifetime is no more than one-and-a-half years old. Let us take the example of the current CoD releases: 4, 5 and 6. The last six months of those one-and-a-half years is relegated to approximately 25,000 gamers. And in the case of MW2, these 25,000 harbour ill-feelings to the latest CoD, choosing instead to play 4 or 5. So if Black Ops and the subsequent CoD release isn't a failure, then the gamer base of Black Ops will transition successfully to the next CoD. Hence Black Ops subscription service will be thrown up in the air, and Acti's promises of commitment and dedication thrown into doubt.
There simply isn't enough on the plate to build any sort of long-term relationship with its consumer base. If Acti heeds the deafening roar of its shareholders crying out for subscriptions, it risks alienating large swaths of its consumer base.
If people do subscribe to CoD access monthly, I expect it to last the lifeline of Black Ops, i.e. one or one-and-a-half years.
On the other hand, something like the action adventure development undertaken by Sledgehammer comes to fruition, that would be a far better proposition for a subscription-based model.
Lastly, Acti needs to remember that a market filled with subscriptions, will mean NO market.
2 months ago
First off, Mr. Pachter is an "analyst" and yet he fails to make a single mention of the broader economic picture. I wouldn't think I would need to remind anyone, least of all an "analyst", but in general, consumer sentiment is woefully low. Anyone who has been fortunate enough to not lose their job in the last two years is likely still concerned with their own job security. And this would include the parents who purchase games for their children. (And don't tell me about "mature" games—not two weeks ago I saw a "mom" who bought her ten-year-old a copy of MW2.) Recent college graduates—who constitute a good chunk of the target audience—are struggling to find decent employment.
The problem is not that games are too good and gamers are somehow squeezing unfair value out of multiplayer games. (Let's not forget that publishers are getting $10 more now for each and every PS and Xbox game than they did in the previous generation.) And the solution is not capturing surplus disposable income that's sloshing around—because it ain't there.
While not the only cause, I would say the main problem is the economy and the austerity that its condition has invoked. To not even mention this when attempting to explain a drop in entertainment-related sales figures displays stunning intellectual myopia and perhaps even the pro-publisher bias that others have mentioned above.
2 months ago
Agree with Abraham. Being an analyst myself I find Patcher's tirades, especially this last one, as woefully short-sighted and almost reeking of bias.
Though I don't directly work on the gaming industry Patcher's "analysis" is easy to shoot down as not only doesn't he take into account external factors to the industry like consumer confidence and economic climate as the poster above mentioned correctly, he's not taking into account the internal factors of the industry like the fact it is overall freefalling for the past months. Investors right now are scared silly of investing in this industry and some serious analysts are actually predicting a gaming industry crash like the one in 83. The collapse of general sales added with the creative stagnation of games and the current models of publishing are leading this industry into what might be a serious crash.
But you don't see Patcher talking about it. In our circle Patcher is seen as a complete joke since any serious or half-decent analyst will not do his best to appear on the news and become an e-celebrity of sorts. Patcher may do some decent analysis but I don't belong to this industry and I've been making far better analysis for it for years and I don't have a lot of data about the industry. Sad really, Patcher is an analyst gone bad by trying to be more of an e-celebrity than a serious analyst.
2 months ago
This is ridiculous to think that Game companies must now be making money at all times on a single product. What happened to making a game, making your profit, and moving on to the next game? Nooooo, everyone wants to adopt the paid subscription model to squeeze as much money out of people as you can. Sorry Activision, i'm not going to EVER pay a monthly fee to play a FPS, especially nothing out of the Rehash Warfare franchise.
2 months ago
Nice post designed to kill the CoD franchise and bring down the gaming industry.
I don't know about most people that buy CoD, but I'd suspect most people plunk down the 50+ bucks for the multiplayer. Sure, the single-player campaign is flashy, and the challenges are difficult, but there's only a little bit of value in replaying the single player portion of the game.
For me, I buy games based on 2 factors:
1. Length. RPGs like Mass Effect, Oblivion, or most Final Fantasy games. These types will allow me to play for a long time and get some bang for my buck.
2. Replay value. Some RPGs fall into this category, but mostly multiplayer games that have long lifespans. Halo 3, perhaps Reach. I pay for multiplayer for XBL. I don't want to pay an additional subscription for a specific game.
Given recent actions that Activision has taken (Infinity Ward, the RealID scare with WoW and SCII, anything that Kotick says), I wouldn't put it past them. Ubisoft's unbelievable failure with piracy protection. EA has done interesting things with DLC and redemption codes, but is going too far with the one time multiplayer use for Madden.
It's a dark road for gamers. The games tend to get shorter, and releases more frequent. Features and benefits once thought to be incentives to buy the game to begin with are being charged for, either indirectly like EA, or directly like what Activision is planning.
I for one, won't buy a game that requires a monthly fee for subscription. No WoW, no CoD.
Though I suspect it would make money, especially with the early teens that have parents paying for it, or with college-age kids that have nothing better to do, it will alienate a sizable crowd that continues to play these games years after they are released.
2 months ago
The idea of a subscription-based FPS game is insulting.
Related and obligatory: console gaming is killing gaming. First, it's 15$ for five multiplayer maps (three of which are NEW), and now it could be 10-15$ per month to turn CoD into a WoW cash-cow.
2 months ago
I also think Patcher has ignored the facts again.
The loss in revenue has come about because of decline in the casual games market. Drops in software sales have mainly been seen on the Wii and the hand-held market. Hardware sales for the PS3 and Xbox 360 have increased on last year. The core games have still sold well. Are you really suggesting that it is the CoD audience that are responsible for the drop in sales?
The problem is that the casual audience has moved on to facebook games and other cheaper options.
You can try and pump the core players for money to make up for the loss if you like but push it to far and the bubble will burst.
2 months ago
Shifting to a subscription model is not simple, especially when you've been giving away free online multiplayer for years. An established franchise has built a set of expectations for its users, and it's going to be hard to change those. A new model would have to be carefully introduced. Perhaps if the entry point was less than $60, perhaps even a free download, then a subscription price might go over better. Or if the subscription fee allowed players to pick from a variety of games. Using sales of in-game items or maps to supplement the subscription revenue would allow lower subscritpion rates. This is all difficult, though; it requires changes in the game design (fundamental ones!), changes in the development process, changes in the marketing... and successfully changing the perceptions of the buying public.
It's easier to do all of this from a clean slate, like a new franchise. Once you've shown your audience how it can work, and they decide it presents value for them (and not just your company's shareholders), then you can try to move over an existing franchise to that model.
I don't think WoW should be a model for Call of Duty... WoW itself may have to change its business model, as one of their designers admitted. The market is changing fast, and publishers have to change in response. It's like trying to turn an oil tanker, though; it doesn't happen fast. Big publishers may have lots of resources, but they also have lots of inertia.
2 months ago
Yes this definitely reads of a money loving PR-rep. Imagine if we were charged a toll every time we wanted to use the baseball equipment after paying our seasonal playing fee? The cost of server upkeep and maintenance is already covered in the DLC. This all about getting more money for investors... who want $ not great videogames.... Activision deals in video-games like the Devil does with souls.
2 months ago
I'm sorry but is Pachter ever right about anything? If you Google "Michael Pachter wrong" you find out that the guy didn't think Red Dead Redemption would sell, he thinks RTS games are turn-based, he underestimated the potential of Mass Effect 2, and he didn't see the industry slowdown in 2009 sales or the saturation of music based games.
2 months ago
Someone should mention to Mr. Patcher that World of Warcraft is about to make the jump to free to play with a micro-transactional economy. Poor choice of examples.
http://www.pcgamer.com/2010/06/30/blizzard-discuss-making-world-of-warcraft-free/
2 months ago
Oh, no, shareholders are being devastated by online gaming being free!
Waaah. Screw shareholders. The stock market should never have even been conceived in the first place and I'll be damned if these rotting old suits are gonna weasel more monthly fees out of gamers. These people do nothing for society.
2 months ago
Charging for multiplayer on Xbox live? Who want's to pay DOUBLE to play on Xbox live? I mean, I dont play one certain game cause you have to have a subscription for it..Phantasy Star anyone? or whatever it was called? thats an RPG of sorts, Call of Duty? thats a FPS. We already pay for Xbox live, some of us 50 to 60 bucks a year. He's a complete moron for thinking we'd go for that. Bet he'd whine if he started doing that, and ended up losing even more money because everyone stopped playing the game until it went back to normal.
2 months ago
It's amazing how little Pachter actually understands the game industry. I mean, he says things that people who only casually follow the industry know are ridiculous, let alone someone who is supposed to understand it as a profession.
I really hope GameTrailers realizes just how little he brings to any kind of discussion. Sure, you can get novel ideas from someone with a different viewpoint, but you tend to just get nonsensical ones from someone with no experience at all.
2 months ago
Monthly subscription+FPS=FAIL. I said it before and I'll say it again: I already pay $30 a year for Xbox live. I will NEVER pay a subscription fee for any single game, let alone an FPS. And that includes my favorite FPS series of all time--Halo. They can charge for multiplayer if they like but they won't be getting my money
2 months ago
So you have a dedicated and somewhat specific group of consumers who are now not watching television, but are gaming. Between each game is a lobby. Sell advertising! but keep it free for gamers.
2 months ago
Now, THAT I can see. a small advert on the lobby every time you get in between matches. Heck even 1 vs. 100 had THAT, and it wasn't even much of a bother for that. So that, I think would work. But paying directly for time for games like that? America's Army, a computer FPS, and Combat Arms, another computer FPS, are FREE TO PLAY, though combat Arms DOES let you pay to buy points to buy better weapons and other stuff to oufit your characters, though you dont HAVE to do it.
2 months ago
This article is a joke.
2 months ago
I and no one else in the PC gaming community that I know will ever submit to a subscription service for an online FPS. MW2 was a joke, Wait for everyone to pre- order the game and then announce that there will be no dedicated server support. When Black Ops was first talked about there was a whisper of a possible subscription service. Those whispers soon were replaced with "yes there will be dedicated server support" And we heard no more about the possible pending subscription service. The only credit I can give Activision is they had the balls to talk about it again before the game was two weeks away from release and we had all pre-ordered....Join me wont you?
[IMG]http://i221.photobucket.com/albums/dd306/gomez02photos/blackops.jpg[/IMG]
2 months ago
It's always about Greed, look at the big, big picture. http://www.dragthemeswebdesign.com/TRUTH People are worried about what's happenning with greedy Corporate heads and online gaming, but what about what's going on with the world all around us. Our own government is destroying your future.
2 months ago
Paying for online game play in Australia is going to be a very expensive proposition for PC users.
For starters the the providers in this country like to charge for uploads as well as downloads
and some plans are only enough to check e-mails one or two times a day not to mention the fact that if you go over your download limit you get charged again at 15 to 25 cents per meg.
So with the above cost and the cost of DLC for some games I for one will have to give up gaming.
As some of us are aware some games also come with unlockable content that some companies charge to unlock an example is MW2 that has 3 new game play types that came with the disk that I paid 100 dollars for . To unlock what I have already paid for I will be charged another 20 dollars ontop.
IF THIS IS NOT GREED WHAT IS?
THIS IS ALL BS
2 months ago
Hopefully Activision will see more than the 15% software market drop. The problem will all things like this is 100% percent of us whine about it. Then about 50 percent of us buy the game. Do you all see the problem with that? Activision and all like minded companies will do whatever they can get away with. If we keep supporting them financially why wouldn't they keep doing it? Do you think they really care what we the consumer think? They care about their bottom line. MW2 was the same. Everyone bitched about the fact that there was no dedicated server support, then went out and bought the game. Do yourself, me and everyone in the gaming community a favor. Dont buy the game if it comes with a subscription service! The only way we the community will ever get a fair shake is if we express our displeasure with our pocket books. Trust me...its the only way it will ever happen.
2 months ago
All this for the greedy activision. The only games that have subscription fees are MMOs and that because the company manages the servers and keeps all the info and systems running. They want the money cause they are only making it off of a few games that they milk every year. The only reason the gaming industy is hurting is because people wont spend the little money they have in a ressecion for a crappy game. Not mentioning
2 months ago
thank you gomi for that image cause im going to put it up on this website im going to try to make. ok if anyone wants to help me say screw activision for this message me on psn(DARKDRAGONTY)or email me at tyman000@verizon.net
2 months ago
I think this article shows just how out of touch the management of game developers are from their customers.
To put it bluntly, the only reason any pc gamer would actually BUY a game is to play it online. The proliferation of game cracks makes the single player campaign entirely worthless: why pay for something when you can get it for free.
Charging a subscription in order to access the online component of a game is adding an additional disincentive to fork out money for a game, especially considering the dubious value of such a "service"
I am additionally certain that such a subscription will in no way improve the support offered for the game. As soon as a new title is released, say goodbye to any additional support - as per coD4 patches ceasing soon after mw2 release.
The above statement sounds exactly like a cash grab: "why not make money from a previously untapped form of resource"
Patcher clearly has no understanding of what drives the gamer's decision to buy or not buy a product: adding subscription charges will merely direct more potential customers toward alternate [illegal] means of accesssing games content (even online content via virtual netowrks), or direct them toward alternate titles which will not tax them ESPECIALLY for causal gamers for whom the value proposition is even more dubious.
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