There's More Than One Hunter in MBA 618

Besides the obvious Dr. Hunter, someone else in MBA 618 at AUS is worthy of the Hunter moniker. For the past few months, every Tuesday evening from 6pm to 9pm a hunter in disguise has been sitting in the seat closest to the door in room SBM 112. Yes, that’s right. As strange as it might seem, I’m a hunter. Allow me to dismantle any mental image that might be forming in your mind of me donning beige safari gear with a machete in one hand and a rifle in the other. The truth of the matter is that for the past seven years, I have consistently spent a solid few hours a day on my addiction pastime of playing MMORPGs. If the unwieldy acronym is unfamiliar, perhaps some elaboration is called for. MMORPG stands for Massively Multiplayer Online Role Playing Game, and it is the latest craze in the multi billion dollar computer gaming industry. There have been countless articles that have documented the success of this emerging genre and have examined business aspects of companies developing them (some samples are found online here, here, and here.) MMORPGs are fantasy worlds in which players create an online avatar and then compete with their peers by spending considerable time improving them by embarking on various quests in order to seek rewards in the form of virtual weapons, armor, currency, and/or improvements in faction standings with an assortment of non-player characters. One of the most successful MMORPGs is Blizzard Entertainment’s hugely popular World of Warcraft, a game where over six million players worldwide play their characters in a digitally created land called Azzeroth. Every day I pull off a Clark Kent when I sit at my computer and mild-mannered Qais Sedki becomes Baraal the hunter!

So what does all this have to do with business strategy? Well, I have sampled a few MMORPGs over the years, starting with Sony Online Entertainment’s genre-defining Everquest back in 1999, and to me, the MMORPG industry exemplifies the phenomenon of disparities in the financial results of firms, otherwise known as the heterogeneity of firm performance. All the companies that produce such games are operating within the same general industry, and yet some enjoy stellar financial success, while others provide lackluster results. MMORPGs are not a sure-shot recipe for success, and many seemingly promising titles have failed miserably and have long since shut down. This disparity in performance has to be attributed to something, and in trying to understand what that elusive something is, we start to see strategic strengths and weaknesses emerge.

Perhaps highlighting the differences between MMORPGs and regular computer games will help us understand the business strategy behind World of Warcraft’s success. MMORPGs operate on a different business model than run-of-the-mill computer games. Whereas the usual (and only) revenue stream of regular games comes from off the shelf sales, MMORPGs generate revenues from an additional, much more significant, source: subscription fees. Players are expected to shell out $40 to $50 on average to purchase the game initially, and have to pay an extra monthly subscription fee ranging from $10 to $20. World of Warcraft’s current subscription revenue has been estimated to be around $1 billion annually. The subscription fees are justified because MMORPGs are not as static as regular games. Much of the content is being continually updated by hundred of artists and programmers employed by Blizzard. New armor, weapons, beasts to slay, and dungeons to explore are regularly introduced to the game. Furthermore, the developers incur significant monthly costs because the game has to be hosted at large server farms where downtime is not tolerable at all. Another distinction is that MMORPGs are not linear in nature. Players do not have to go through level after level in a predefined path, but are given total freedom to focus on whatever aspect of the game they wish to invest their time in, be it leveling their characters, completing assigned quests, working on trade skills, or even simply exploring the vast virtual lands. The final element that is a major difference between MMORPGs and normal games is summarized by the “O” in the acronym: online. Players from anywhere with an internet connection play together and interact with avatars of real people instead of being limited to computer controlled characters. Because of this integration of social aspects, early MMORPGs were able to create an environment where competition between players runs rampant. In order to intensify the rivalry, the pioneers of the industry purposefully made the higher end items extremely difficult to obtain, thereby requiring anyone with the time, skill, and determination to acquire these objects of desire to play the game with ritualistic addiction.

Benefiting from hindsight, Blizzard Entertainment quickly realized that the critical factor that was holding back a vast number of potential subscribers was a two-fold factor of sizeable time commitment and a focus on a non-casual gaming audience. Therefore, Blizzard designed its flagship game with two audiences in mind. Much of the content can be completed without the assistance of other players, thereby greatly diminishing the boring, unproductive time it takes to otherwise form a group to accomplish a task. On the other extreme, there are various encounters in the game that necessitate a raid force in order to overcome. This two-pronged design has fared well for Blizzard and I can see elements of Hamel’s BCI framework being largely responsible for the success behind the design. For example, Blizzard’s focus on certain market scopes and a basis for differentiation can be immediately felt upon playing the game, as it adds an element that is sorely missing in other MMORPGs: humor. The are endless historical puns such as a Zeppelin airship operator named “Hin Denberg” as well as pop culture refences such as in-game innkeeper brothers “Norman” and “Bates”, an obvious ode to Hitchcock’s Psycho. An extensive yet amusing list of such references can be found here.

Blizzard has also capitalized on an asset that I regard as being clearly valuable, rare, and difficult to imitate under Barney’s VRIO framework. Customers of Blizzard Entertainment’s previous games might qualify as what Ken Blanchard and Sheldon Bowles call “raving fans” in their book of the same title. These customers are very loyal to the high quality visuals and the engaging game play that Blizzard has become synonymous with in the industry. These customers are also accustomed to the intricate fantasy lore of previous non-MMORPG games of the Warcraft brand which adds an element of familiarity that resulted in a virtual pilgrimage from older, more rigid play style MMORPGs to a game that sported a bright, vibrant look, with a very laid back gaming experience. The strategic focus of Blizzard Entertainment has resulted in a phenomenal number of players giving up their hard earned money. So large is that number that it would not surprise me at all if there were even more hunters in MBA 618 than Dr. Hunter and myself.