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Is the MMO dying?

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Star Wars: The Old Republic (Credit: EA)

Just a few short years ago, massively-multiplayer online games (MMOs) were considered the future of gaming.

Virtually every publisher was running one, building one, or contemplating one. A lot of those failed. A few struggled along with small but loyal audiences. And all of them acknowledged that they lived under the shadow of perennial champ World of Warcraft.

These days, though, massively-multiplayer online worlds are beset by bad news. World of Warcraft lost 1.1 million customers in the last three months. It's lost 2 million in the past year. Meanwhile, EA's highly anticipated entry in the field -- Star Wars: The Old Republic -- failed to take off, with subscriptions dropping to under 1 million last quarter. It was an incredibly rapid drop from the 2 million subscriber peak of earlier this year.

With these two behemoths having serious issues, is the entire genre on the outs? Not necessarily, but it's definitely changing -- and that could be great news for consumers who have grown sick and tired of forking over monthly fees for online games.

The Old Republic, in fact, will be turned into a free to play games later this year. A year ago, that move would have been unthinkable. EA spent $200 million to develop The Old Republic with the expectation it would be the first serious competitor to World of Warcraft. Given the pedigree of Bioware and the popularity of the Star Wars franchise, that seemed within the realm of possibility. But a weak player vs. player component and easily attained level caps hurt the game. And as players began to leave, so did their friends, causing a slippery slope that led to the drop-off.

In addition to lowering the retail price of The Old Republic to $15 and adding a free-to-play option, Bioware is pledging to speed up the pace of expansions -- a vow that sounds a lot like the one Blizzard made a year ago, when World of Warcraft subscriptions began to decline.

While World of Warcraft lost 10 percent of its player base last quarter, the developer says it's not overly concerned and expects those players (and more) to return later this year when the Mists of Pandaria expansion hits shelves.

[ Related: Mists of Pandaria Screenshots ]

"Historically, we have seen usage decline towards the end of an expansion cycle," says Blizzard studio chief Mike Morhaime. "We saw a similar drop in subscribers in the months before Cataclysm, followed by a substantial number of returning players around the Cataclysm launch. We're also seeing that a number of players took a break from World of Warcraft to play Diablo III."

Expectations are certainly high for the expansion. The last World of Warcraft add-on, Cataclysm, sold over 3.3 million copies in its first 24 hours on shelves. That's 18 percent better than its predecessor, Wrath of the Lich King. In its first month, Cataclysm sold 4.7 million copies in its first month of release -- again, an 18 percent improvement.

Blizzard, in fact, is one of the very few companies that has successfully stuck to the pay-to-play formula. While its numbers might be dropping, 9 million subscribers is nothing to sneeze at. Still, the company has at least acknowledged the rise in free-to-play games by offering the first 20 levels of WoW entirely free (though, as any WoW player will tell you, that's really just a start).

And while turning subscription games into free-to-play games seems like a major concession, it can actually pay off in the long run.

"The conversion of Star Wars to a free-to-play game has the potential to actually drive overall revenues higher," notes Michael Pachter of Wedbush Securities. "We think that a franchise such as Star Wars has the potential to attract 30 million or more monthly active users (MAUs), suggesting that the free-to-play version of the game has the potential to generate $120 —150 million in annual revenues. … We envision that ultimately Star Wars will be free-to-play for all players, and we expect that it will be able to attract at least 10 million MAUs indefinitely, with upside to perhaps 50 million."

Free-to-play has certainly helped things at Sony Online Entertainment. The one-time king of MMOs is on track to transition to a completely free-to-play model — even with new and upcoming titles like Planetside 2 and EverQuest Next.

"You're much more focused on the player themselves and listening to what they tell you," says John Smedley, president of SOE. "When you're at retail, there are two transactions. You are selling your game to the retailer and also selling to the public. Now it's just us putting our games out there and saying 'bring it on'. If they like it, great! If they don't, they don't spend a dime. … We think we can get a part of their life. That our games are good enough they'll spend their time with us and once they do they'll spend some money with us."

A wealth of new free-to-play MMOs -- headlined by this month's Guild Wars 2 and upcoming doozies like strategy game End of Nations and giant mech romp Hawken -- are coming soon, too. While that spells bad news for Warcraft and Star Wars, it means even more choice for fans and more life for the genre.

So are MMOs on their death bed? Not really. But they are in the midst of a transition that's forcing game makers to alter their expectations. Done right, they're still cash machines. They just aren't dispensing quite what they used to.

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