Chapter 5. Calculating and Expanding the Profit Margins: The Cost of Doing Business

KEY TOPICS

• Some Numbers

• Add-On Profits

Historically, persistent worlds (PWs) have been a 40 “50%-margin business. For a developer or publisher, the only niche with significant support costs are the PWs (we're assuming you don't run a web game portal or assume bandwidth or hardware costs for a hybrid).

In an ideal world, PW post-launch support costs would be limited to approximately 40% of the total revenue generated (or 40% of the revenue goal, for newly released games building a subscriber base). Often, the percentage is closer to 60%, due to a lack of concern in the past for providing the customer service (CS) staff with the right tools to do their job quickly and efficiently . ^[1]

^[1] Note that former SOE President Kelly Flock was quoted in the press during 2000, including the Wall Street Journal , as saying that supporting EverQuest cost the company approximately $1.5 million per month, which represented slightly over 50% of basic subscription revenue from SOE's then 300,000-plus subscribers. The last announced subscriber total for EQ in 2001 was 435,000. If EQ 's support costs have remained stable, SOE is coming close to the magical 40% operating cost number.

More and more publishers are learning the value of building adequate CS tools during the development process instead of tacking them on at the last minute. Well-designed tools allow each CS representative to do more in less time. During the next three to five years , support costs should go down across the board, and PW games will have a better chance of making the 40% or lower support cost mark.