Are You Elite?

E3 didn't deliver a great deal of new information on Activision's plans for their new Call of Duty Elite service, but the company that makes billions from the pay-to-play online game World of Warcraft is super-double-pinky-swearing that Call of Duty multiplayer will not go pay-to-play. If you listen very closely when Activision says this, you can almost hear the pause where they mutter under their breath: yet.

Activision is making so much money from their Call of Duty games that they needed to take over Scrooge McDuck’s money bin to store it all. (Rumor has it that certain Activision execs get to swim around in the three cubic acres of cash contained therein.) Naturally, when faced with such a staggering success, the question any good publishers must ask is: how can we make even more money from Call of Duty.

The answer came upon them like a Blizzard: a monthly premium service!

And that’s just what Call of Duty Elite will offer. For a monthly feed (rumored to be $9), you get a lot of social networking features and some ill-defined benefits. There are four channels: Compete, Connect, Compete, and Improve. Career is just a summary of your gaming activity on all games supported by Elite. Connect is CoD social networking, so you can create a profile and find other players with similar interests and perhaps post photos from Cute Overload and links to laughing baby videos. Compete is the channel for online events, tournaments, and prize opportunities. And Improve is kind of a tips and tutorial section. There’s also connectivity for Facebook, Twitter, and mobile devices.

Activision has created a studio, dubbed “Beachhead,” to create the new system. CEO Bobby Kotick has this to say about the project:

"Beachhead will create the best-in-class online community, exclusive content, and a suite of services to supercharge the online gaming experience like never before. The platform will support in-game integration and bring online experiences and console play together for the first time. The platform has been in development for over a year and we're very excited about the increased value we can bring to the community."

Activision CEO Bobby Kotick

If this all looks like a fancy leaderboard mashed together with Facebook, that's because it is. However, Activision will probably sweeten the pot by including new map packs, early and exclusive access to betas and demos, and other bonus content as part of the subscription. Map packs cost about $10 to $15 dollars, so although that’s some incentive, it’s not much. What, then, is the long-term plan for Elite?

Activision, of course, also owns Blizzard, which rakes in about $2 billion (no, that’s not a typo) each year from World of Warcraft fees. The trick lies in transplanting the pay-to-play service of a massively multiplayer online game to the multiplayer action arena. World of Warcraft gets people to pay a monthly fee by offering something unique, and it’s never been free. Call of Duty multiplayer is not unique, and it’s always been as free as dirt.

And therein lays the problem. Activision makes money on the initial game sale, and some more money selling additional map packs, but they have yet to discover a way to monetize online action gaming.

Rest assured, that state of affairs cannot continue indefinitely. Each new Call of Duty game averages 18-20 million sales. About 7 million people play Call of Duty online, and they average about an hour a day. That’s more time than people spend on Facebook or Twitter. And after the initial $60 sale, there is no money to be made from those users unless they choose to buy bonus content. In-game advertising has proven hugely unpopular with gamers, so the only way to make multiplayer gaming profitable is to charge for it.

The Elite service may be Activision’s way of testing the waters for pay-to-play online action gaming. All game publishers are looking to cut out the retail sector (or at least diminish their role) and move to digital delivery direct to the consumer. I haven’t installed a PC game from a disc in a couple of years, opting for 100% digital delivery. The future of console gaming will be similar, and services like Call of Duty Elite may lie at the heart of it. You’ll no longer buy a Call of Duty game: you’ll subscribe to a Call of Duty service.

Frankly, if they keep the quality and updates at the standards set by World of Warcraft, then I don’t see people having a lot of trouble with that model. It will, however, take a tectonic shift in the way gamers perceive the medium, and that will take time. It will also be incredibly risky. Publishers will need to ease gamers away from the idea of owning a game bought in a box at a retail establishment, and move towards a model akin to streaming video.

The best comparison is with the “Watch Now” features of Netflix, which allow people to stream movies straight to their televisions for a monthly fee. Netflix (and now Hulu) is tightly integrated into all the gaming systems, so gamers are already get used to the idea of streaming content.

I simply can’t imagine free multiplayer action gaming continuing indefinitely. Someone, at some point, is going to find a way to monetize it, and the candidate best equipped for the task is Activision. The Elite service goes into beta this summer, and should roll out with Modern Warfare 3 this fall. It will include support for MW3 and Black Ops. Once we see it in action, we’ll start to get a better sense of the future of the Call of Duty series, the Elite service, and the shape of multiplayer action gaming.