EA'S NEW MMOG-MEISTER

Nine years ago, "Ultima Online" launched to become the very first massively multiplayer online game to sign on 100,000 subscribers. This year, Blizzard Entertainment's "World Of Warcraft" stunned the video game world when, in June, it announced that it had accumulated 6.6 million subscribers. That's the kind of inspirational numbers that has newcomers flooding the MMOG sector and veterans redoubling their efforts to secure a bigger piece of the pie.

One of those veterans is Electronic Arts which, ironically, is the publisher of "Ultima Online." EA's plan to give its MMOG business a good shot in the arm calls for the largest video game maker to acquire Fairfax, VA-based developer Mythic Entertainment, known for its popular MMOG "Dark Age Of Camelot". Mythic's next release, "Warhammer Online: Age Of Reckoning," is scheduled for the fourth quarter of 2007.

HollywoodReporter.com columnist Paul Hyman chatted with Mythic's founder, president, and CEO Mark Jacobs -- who will soon become vp and general manager of what will be known as EA Mythic -- about why EA is buying Mythic, the failure rate of movies vs. MMOGs, and his take on the downsizing of E3, the industry's largest trade show.


The Hollywood Reporter: It seems that the unprecedented success of "World of Warcraft" (WOW) has single-handedly changed the dynamic within the MMOG business.

Mark Jacobs: Absolutely. It's brought in companies that traditionally had no interest whatsoever in games. Previously, traditional media would look at an MMOG, see that it was getting maybe a couple of hundred thousand subscribers, and say, "OK, that's nice." But when you hit 6.5 million subs, that's more than "nice." So now they're interested, they're analyzing why WOW is doing so well, and they're concluding that MMOGs are exciting the mass market, those people who are getting broadband (for the first time) and never gave a thought to playing an MMOG.


THR: What's the attraction of WOW to the mass market?

Jacobs: Blizzard has done a lot of things right. They've made it very easy for people who are not MMOG gamers to play. They've given WOW a beautiful interface, very appealing graphics, a very shallow learning curve ... they did just a great job on it and I give credit to [Blizzard's parent company] Vivendi for letting them spend that much time to get it right.


THR: What does Mythic and all the other MMOG developers have to do to beat WOW's numbers?

Jacobs: I'll be very clear on this ... I think anyone who shoots to beat WOW's numbers right now or in the next year or two is insane.


THR: Why is that? Because it can't be done?

Jacobs: Of course it can be done, but not anytime soon. And just because you don't beat those numbers doesn't mean you're not successful. WOW may have set the bar, but you shouldn't expect to surpass those numbers -- unless, of course, you're incredibly lucky, incredibly talented and are willing to make the same kind of commitment that the guys at Blizzard and Vivendi did to make it happen.


THR: So what is it about MMOGs that is attracting all these new companies?

Jacobs: It's the business model. In the non-MMOG space, a publisher gets to sell a customer a game maybe once a year, maybe twice. But with the MMOG subscription model, you sell the player the game one day, then you get a fee from him every month, and then you get to sell him an expansion pack a few months later.


THR: You've got the gamer hooked.

Jacobs: I don't like the word "hooked." I prefer to think that the gamer is just enjoying the heck out of your game and wants to continue playing. Nothing makes a filmmaker happier than when people come up to them and say, "I saw your movie eight times and I love it, it's brilliant." The same with game makers. We love it when someone says, "You know, I've been playing your game for two years now ...," or, "I bought the game and all the expansion packs and I love them."


THR: What about all the challenges of the business model which are ...

Jacobs: Immense! They dwarf the hurdles posed by any stand-alone game. You've got customer support issues, you've got hardware issues like keeping the servers going, and you have special design issues. Imagine designing a game when you don't know whether you'll have one or 100 characters on the screen at a time.


THR: Do you think all the companies that are rushing in to do MMOGs are aware of what they're going to face?

Jacobs: No. Some of them -- not all of them, but some -- are blind. They look at WOW and go, "We can do that." Many companies think that just because they've designed role-playing games, this will be a piece of cake. Then, whoops! That's why so many have failed. Either because they went in blindly or they went in without the right talent. Making games is hard. I's like making films. People think that because they have a camera and a story, that's all they need to make a good movie. But then they learn that they need the right story and the right people and the right equipment -- and everything has to click. Which is why you have so many very bright and creative people in Hollywood who thought they could make a movie but failed. Games are exactly the same thing.


THR: Do you think that's one of the reasons why EA chose to buy Mythic?

Jacobs: I think that's exactly what they thought. They needed some outside help and they turned to a studio that produced the single most successful independent online game of all time, at least in North America and Europe .


THR: Meaning "Dark Age Of Camelot?"

Jacobs: Right. No other independent studio has had the same level of success that we did. All the other MMOGs -- including WOW -- came from studios owned by larger publishers. And that was attractive to EA.


THR: So EA said -- what? That there was something so good about the MMOG space that it wasn't going to get discouraged after a few games that didn't work so well ... and that they'd bring in somebody to keep them in the market?

Jacobs: Exactly. I mean, EA takes a lot of heat, as you know, for being afraid to take risks, supposedly for not being innovative. But they backed "Ultima Online" when nobody believed in online games. And even though they weren't as successful as they'd hoped, EA was bankrolling MMOGs like "Earth & Beyond" and " Motor City " and "The Sims Online" when other publishers weren't. So now EA is willing to put its money where its mouth is on this part of the industry. I think that takes a certain amount of chutzpah.


THR: Publishers are experimenting with a lot of different MMOG revenue models. Some, who don't want to go the subscription route, are trying their luck with not charging the gamers and getting all their income from advertising. Others intend to sell virtual items within the game ... and I know you've been adamantly against that.

Jacobs: No, what I'm adamantly against are microtransactions that affect the balance of the game. For example, if I, as the publisher, started selling special magical swords for $10 that would give you the edge in online fighting, I'm against that. I have no problem selling extra bling for your character -- clothing, jewelry, whatever.


THR: Let me run one by you. Codemasters is coming out with its "ArchLord" MMOG which enables players to buy such benefits as teleportation spells, health boosts, and other so-called enhancements that help players in the game's virtual world.

Jacobs: That's a great example of what I'm talking about -- micro-transactions that can negatively change the game dynamic. Those items for purchase that enhance your powers or skills can detract from the fun of a game. I'll give you a real-world analogy. I used to play paintball when it first came out and I loved it. You know why I stopped? Because people started bringing automatic guns into the arena. And I said to myself, this is ridiculous. Even if I played smart or were a great shot, I was no match for the guy who was willing to spend $200 to buy a gun that could rapid-fire 100 paintballs in my direction. In my mind, you should win because you play better, not because you spent a few extra bucks.


THR: And what about not charging the gamer to play but getting your revenue from selling ads within the game? Is that OK?

Jacobs: Sure. If you tell the players right up front that, look, this is an ad-supported game ... and that's why you're getting in for free. If they know that going in and they still want to play, that's fine. I think selling ads is a great way to bring in some ancillary revenue that might help defer the cost of game development. But if you think you are going to be able to support a game on ad revenue, good luck.


THR: Sounds like you believe that the subscription model is the best.

Jacobs: Absolutely. I want to give players the best experience they can get, and, for that, they need to pay a little money, which is the subscription price. Look, MMOGs aren't cheap. For instance, I think Sony has said publicly that it spends $25 million or so on building one. Then add on the bandwidth costs, customer service costs, bug-fixing costs, and the hardware costs. If you want your game to be successful, you'll always be fixing and improving things. So your costs don't stop when the game is released. Maybe one day advertising in games will allow a company to do all that. But not today.


THR: Let's talk about over-saturation of the market. I think I counted about 28 new MMOGs that are in development and are scheduled for release in the next year or so ...

Jacobs: Oh, it's more than that!


THR: Do you think the market will become over-saturated? How many profitable MMOGs can the market support?

Jacobs: Well, add up the number of people in the United States who have broadband and high-end computers ... and compare that to the number of people who play MMOGs. Do you think we're reaching even 50% of the market.


THR: So what are you saying?

Jacobs: That there's this huge market here in the States that remains untouched. How can anyone possibly say the market is oversaturated? Besides -- and I call this my 25% rule -- even if there are 28 games in development or 58 or 78, the one thing I can guarantee is that, at most, only 25% of them will reach the marketplace. The others will either be cancelled before they reach full development or they won't work technically. It happens all the time. Look what happened at my company -- and we are guys who know the space well. We postponed the game "Imperator" simply because it wasn't working. So we said, "Let's shut it down for now." That happens to MMOGs as often as or more often than in stand-alone games. The bottom line is that 75% of the games fail simply because it's the nature of the creative process to fail.


THR: Talking about shutting things down, how do you feel about [the game industry's largest trade show] E3 being drastically downsized for 2007?

Jacobs: It's the worst thing to happen to independent game developers in years. And it really bums me out. I mean, yes, E3 was having problems, absolutely. But with these changes as I understand them, independents won't have the same opportunities for success that they always had at E3.


THR: But wasn't that the problem with the old format? That the only companies that got any attention were the ones with the million-dollar booths and the booth babes?

Jacobs: I don't believe that. And I'll give you two examples. Look at Funcom, which is a European company that was relatively unknown in the states. But its "Anarchy Online" MMOG won a whole bunch of awards at E3, generated a lot of buzz, and, on the first day of its launch, it sold a record number of units. That wouldn't have happened without E3.

Similarly, when we were developing "Camelot," not a lot of people took us seriously because we're a small independent who had never done a game of that scope. But journalists who came to E3 saw us running an MMOG 24/7 that never went down, not once during the entire show ... and that allowed us to get the publishing deal with Vivendi, to get a lot of buzz, and to have the most successful launch of any MMOG at the time. If we hadn't been at E3, it wouldn't have happened at all.

One last point. Do you think it's any coincidence that our game "Warhammer Online" won a lot of awards at the last E3 ... and that, after the show, we did the acquisition deal with EA? Do you think that might have helped just a little bit? That's the sort of thing that independents won't be able to do anymore -- not without E3. At least not as easily as before. Yes, there are other great shows -- like GDC -- and independents will be able to show their wares there. But not in the same way as they could at E3. I know that I, for one, mourn its passing.