Peter Freese (head of the Core Technology group over at NCSoft, and former coworker of my own) gave his thoughts about the Xbox 360 on the blog with the really long name He takes it on from a completely different angle than my own analysis, focusing on XBox Live and Microsoft’s desire to control the servers. It’s worth a read.

Clearly, it’s all about Xbox Live. Many developers have said that they have pursued a publishing relationship for MMO games with Microsoft’s Xbox, only to be turned off by Microsoft’s insistence that the game service be conducted through Xbox Live
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Even if a publisher were willing to allow Microsoft to host their game servers, allowing Microsoft to control the revenue stream is even more repugnant. Receiving royalties from Microsoft is not appealing to publishers who are accustomed to controlling 100% of the revenue generated by a title. Even if Microsoft’s cut were a mere 10%, the profitability of a title could be significantly reduced, particularly if the operating costs of the game are high. One way around this problem is for Microsoft to be the sole publisher of the title, being responsible for funding, marketing, and supporting the game. So far, this is a role that Microsoft has not managed to successfully see to fruition (True Fantasy Live Online, Mythica). Critics of this statement will point to Asheron’s Call, but it could be equally argued that AC provides another example in its defense.

The easiest way to think about it is to think about how many people have their thumbs in a particular pie. Let’s say, for example, that Vivendi, who owns the rights to make a Marvel MMO, finds a developer and gets them started on an XBox-based virtual world. Suddenly, there are four people with their thumbs in the pie: Microsoft, Marvel, Vivendi, and the poor developers. And since the developers are probably the only ones who are in threat of closing down if the checks don’t come in on time from the other three parties, they’re going to be on the losing end of a lot of battles. Hell, there will probably be a lot of battles happening above them that they can only sift through the wreckage of afterwards.

The problem is compouned by the fact that MMO games offer a relatively low return on the invested dollar. A successful console game can return 5 bucks per dollar spent to the publishers/developers making of the game, whereas with subscriptions, the amount earned is closer to 2 to 1. Of course, in theory you’re getting a lot more dollars from each customer thanks to the monthly revenue stream over the long run. But the fact is, the more ways there is to split the pie, the greater danger that your development studio will end up getting only enough money to support the game, without earning enough money to grow the studio, kick off new projects and gain independence. And despite what fans think, any business model that results in your entire studio treading water supporting one game is ultimately a failed business model.

As Peter points out, probably the best way to sidestep this is to deal directly with Microsoft as a publisher. Vanguard is taking this route. Other than Microsoft, they have no other publishers to split the pie with (and also no license owner to pay either), which means the pie gets split by fewer parties. Sigil could make out very well, if they signed the right contract.

One does wonder about how much of a stickler Microsoft will be for exclusivity. When Peter and I were with Ninjaneering, Microsoft was unwilling to publish our title unless we made it an XBox exclusive. Given that no one really knows if a console-only MMO will succeed (much less the social-sim one that Ninjaneering tried to sell them), walking away from the proven PC market may be more than most developers are willing to risk.