Tuesday, 19 November 2013

Facts of MODO

There are a lot of conversations about why MODO (Magic Online) is broken. This post is designed to collect information to inform that conversation. People correctly criticize me for opinions without facts. So I am going to try and go the other way.

I do not have any access to truly insider information from Wizards of the Coast or Hasbro.

What I do have access to:
Hasbro Financials (this includes transcripts from Investor Day, Accounting and Financial Statements, Annual Investor Report).
Facebook Comments (assorted from friends and acquaintences)
LinkedIn Profiles for various WotC employees
Hipstersofthecoast.com historical review of the MODO program (highly suggested reading).
Various salary and employment websites (glassdoor, salarylist, careerbliss)
Reddit, Wikipedia, Google etc..

The TL;DR estimates
Magic Revenues: $360M
Magic Players Worldwide: 3.3M - 12M
MODO Revenues: $140M
MODO Employees: 50-150
MODO Players: 500,000 - 700,000
MODO Developer Salaries: $60,000 (Industy Median is $75,000)
MODO Costs: $60-120M

The biggest problem with accuracy is that my statements will aggregate data from 2011-2013. And the timeline isn’t exactly clear even to me. So you might feel that the following answers are an unfair characterization of the situation.

What is the Problem with MODO?
            Hipstersofthecoast explains the problem with version 2 (note current client is v3 and Beta is v4) as said by Randy Buehler:

            “You might think that we could add more servers to deal with this problem, but that’s just not how Magic Online works. We can add more game servers to handle as many games as people want to play, but there is only one master server that handles everything else that goes on (chat, trading, ratings, etc.). Every time any user does anything outside of a “duel,” Magic Online has to spend some time thinking about that user. As we add more cool new features to the game, the amount of memory that needs to be allocated to each user keeps going up. At some point, when enough users are logged in doing enough things, the whole master server comes crashing down.”

I would highly suggest reading the full article here:

From what I can tell they attempted to go from one server organizing all non-game activity to multiple, but that clearly has not worked. It is unclear if we currently operate on one server still or multiple servers which do not scale well. Further discussion on Reddit suggests that MODO is built on antiquated language/framework (.NET /non-scalable etc…). I am in no way qualified to tell if this is true (EDIT 11/20: Reddit has also since commented that I am wrong).
How is Magic Doing?
Very good. Based on my readings of financial statements, the has been between 150%-300% growth in revenues during the 4 years since 2008. Additionally there is an expected growth of 35% in 2013.

Based on those numbers we would have revenues of 250-500M (Million) dollars this year.

Alternatively Hasbro reports 12M active magic players (including digital). Assuming each only spends 30$ per year on average. Then revenues are $360M. Hasbro’s revenues from “Games” is $1.2 Billion. It has stated that Magic is the biggest brand in the portfolio. Thus the the estimates seem reasonable.

*EDIT 11/20: The Hasbro 2012 report states there are 3.3M players currently. Despite their being an NBC article which quotes 12M as of 2013. The only official Hasbro source which uses the 12M number is a few years old, so I will be editing the range of players.

How is Hasbro doing? Any reason to think they are pinching pennies?
            As a company Hasbro had a rough 2012 (in terms of stock price). It has since rebounded during 2013 (though that was simply consistent with US Large Cap market in general). During 2012 things were bad enough that Hasbro was engaging in layoffs and restructuring as a cost saving measure.

            However there is little evidence that Hasbro makes many decisions re: the Magic the Gathering brand. I have read (in a statement by Aaron Forsythe I believe) that Hasbro has little input on the decisions to manage Wizards of the Coast properties. Sean McGowan (an analyst at Needham & Co.) says “The Best thing [Hasbro] did was leave [Magic] alone for several years.” when discussing the explosion in Magic’s popularity.

            In all financial statements Hasbro touts Magic as its model product. They  reference digital (though in most cases Duels of the Planeswalkers) and paper growth. Many people associated with MODO since 2008 (when Buehler et al. were fired), have been promoted. This includes Worth, Arron and Elaine Chase. 
Unclear whether MODO growth has mimiced paper.

How many people play MODO?
Note I will use multiple methodologies to arrive at different estimate and see how much they align.

According to the Linked In of Vice President of Digital Technology – ( See description below).  He alludes to “Direct Brand revenue impact of 150M+”.

I remember seeing somewhere that MODO is equivalent to North American revenues for Magic, was also equal to about 30-50% of overall revenues. Assuming this is true (it was according to Worth in 2007), and using the base number of 360M revenues overall, we estimate MODO has a revenue of 144M.

Assuming the average player spends $100 a year (which seems reasonable), then there are 1.4M people who touch MODO in a given year.

Based on personal observation there are only ~5000 people on MODO at peak times. Assuming each person plays 24 hours a year on average there would be 730,000 players.

According to Reddit other sources place MODO playerbase at 500,000.

So the True Number is likely somewhere between 500,000-1,400,000.

Note if we use the low end, then the average player is spending ~$300 year. Making MODO the highest revenue game per player that I could find.

To keep scale in perspective - a year old estimate puts League of Legends players at 32M active per month. Their revenues are in the $200M estimate range (Wikipedia).

How much resources are thrown at MODO?
According to the Linked In of Vice President of Digital Technology he is “Responsible for managing the technology development and operations for the Magic Online, free-to-play digital objects business, Duels of the Planeswalkers game title (XBLA, Steam, iTunes, Android Market) and the subscription D&Di digital experience.

He states he has a Budget of 40M+. Note the budget presumably wouldn't cover the fixed costs of developing MODO that he has no control over (office space, legal etc). I would assume MODO costs at least 150-300% of that budget.$60-120M.

He also mentions having 200 employees (150 of whom work onsite). Wizards of the Coast has 1000-5000 employees total according to glassdoor. There are 550 on LinkedIn. Given that Hasbro has 6000 employees total (based on company documents), 600-1000 overall seems about right for WotC.

Assuming MODO comprises 2/3s of the Digital Team at WotC there are 100 people working on it.

To put this in perspective Riot Games which makes league of legends has 2013 estimates of 200M in revenues and 1000 employees. MODO should require less employees (because actual game design is not part of the product). Blizzard (with Revenues in the area of $2B) had 7061 employees in 2012.

Are WotC software developers underpaid?
            According to Facebook WotC software interns earn $4000 less for a summer then other major software firms in Seattle. Getting an accurate measure of compensation for senior developers is much more complicated since few people actually report salaries.

Salary List Reports the following for Developers:
                       “Wizards of the Coast Software Developer average salary is $59,000, median salary is $59,000 with a salary range from $59,000 to $59,000. Wizards of the Coast Software Developer salaries are collected from government agencies and companies. Each salary is associated with a real job position. Wizards of the Coast Software Developer salary statistics is not exclusive and is for reference only. They are presented "as is" and updated regularly.”

The median for Software Developers overall is $75,000 (average is slightly higher).

            If you look at the last 10 employee reviews on glassdoor.com for WotC, 7 out of the 10 rated Wizards 2/5 or worse on compensation. The 3 people who rated them higher worked in Graphics, Art and Game Design. A couple of people who interviewed for software positions complained that interviews were conducted by recruiters and not people working directly with the product. Those complaints cited that recruiters had a lack of knowledge (both technical and regarding magic). Take this with a grain of salt since I assume most complainees did not receive job offers. I am unsure how common the use of recruiters is in the software industry. Blizzard had similar people surrounding it.

Also note that Hasbro is routinely voted one of the best places to work in the United States (via Fortune Magazine). However most of the benefits are perks and not direct compensation.

Are 3rd Party Developers a realistic option?
            Hasbro already pays EA studios to develop games for 8 of its various brands. It has also acquired a majority stake in Backflip Studios (a mobile game developer). Duels of the Planeswalkers is developed by a third party and the original version of MODO was developed by a professional studio. Current versions are made inhouse.

Does wizards have a track record re: inhouse development. Are they planning to move it out of house?
            I would refer you the Hipsters’ article linked above. Wizards has repeatedly made comments similar to the 11/2013 blog post. They have also removed premiere events before. The last time they were down for about 4-6 months. The 3.0 version was delayed by about 18 months (on top of the 18 month schedule).

Wizards is currently hiring Senior Magic Developers/Testers/Technology Project managers to work on MODO (as of Nov 5/2013).

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