Gene Hoffman, CEO of Vindicia (a billing and fraud protection company), has some words of wisdom regarding the headache that is billing and payment for MMOs — be they the more 'traditional' subscription model or the free to play model. Obviously, there are benefits and downsides that come with each model, and companies are constantly trying to negotiate a balance between profit and player happiness. Even the vaunted subscription model comes with its own problems and a variety of structures within that model:
Hoffman notes that subscriptions have a downside: When it looks like there's a fixed monthly price until eternity, even a game's most dedicated fans can eventually balk. Many publishers entice retention with discounts for longer commitments, but Hoffman also suggests that creating a demand for multiple subscriptions per user can prolong the average customer's lifetime value.
Games can also offer add-ons to the base subscription — Hoffman notes that these "allow more devoted and less price sensitive players to more routinely pay for more value and drive the ACLV higher."
Pure subscription models, by their very nature, keep out that portion of the player population who's not willing to pay that amount, however.
"So, while the modelling of the revenue equation is easier, there will always be inherent elasticity to the game," Hoffman says.
Tiered subscriptions wherein the first tier is free can also help a game reach price-sensitive players, but then it adds to the publisher's objectives the need to optimise conversion rates from free to paying — while still maintaining the value and integrity of the free experience.
I'll be trotting up to USC in a few weeks to attend a workshop on MMO design considerations and pricing structures in free to play versus subscription environments, and though it's nothing I have to worry about except as an end user, I'm always curious to see how and why companies arrive at the structures they do.