IP profile: RuneScape

RuneScape – The Stats

ESTIMATED USAGE AND SALES: 120m accounts registered to date, including 8.5m active accounts/month (5m every fortnight) and around 1m premium subscriptions (paying roughly £3.20/$5 a month)

NUMBER OF ITERATIONS: Two major versions (launched 2001, 2004)

TIMELINE
2001: RuneScape open beta launched in January, reaching 1m active players by the end of the year
2002: RuneScape subscription service launched
2003/4: RuneScape 2 launched as a more advanced alternative to the original RuneScape which is renamed RuneScape Classic
2005: Paying subscribers reach 500,000
2006: Paying subscribers reach 850,000
2007: Paying subscribers exceed 1m, German version launched
2008: RuneScape reaches 120m total account registrations. Jagex launches casual games portal FunOrb

OWNERSHIP HISTORY
2001: Earliest public version of RuneScape launched. Jagex founded at the end of the year by Andrew Gower, Paul Gower and Constant Tedder to take over the operation of the game which had experienced explosive growth

2005: Jagex secures unknown quantity of investment from VC firm Insight Venture Partners

2007: Jagex co-founder and CEO Constant Tedder leaves the company and is replaced by former PayPal Europe CEO, Geoff Iddison

GAME INCEPTION AND GROWTH
The story of RuneScape’s inception appears highly anachronistic, one more often heard about the UK games industry in the 1980s than in 2001.

The original version of the game was created by Andrew Gower (with the help of his brother and Jagex co-founder, Paul) whilst he was an undergraduate at Cambridge University. It was written in Java, usually considered unsuitable for hardcore games because of its performance constraints and inefficiency. The game was even launched from and initially hosted at Andrew Gower’s house, such were the budget constraints the original team were operating under.

RuneScape is a massively multiplayer online role-playing game set in the fantasy world of Gielinor. As is typical of MMO fare, players create and nurture characters which are taken on quests and adventures and can opt to undertake these quests alone or in conjunction with other players or enter PvP zones. Soon after launch, it soon became clear that the key to RuneScape’s appeal is the community-based gameplay. In fact, it appears that a significant proportion of many players’ game time is spent socialising rather than questing and levelling.

Unlike the vast majority of MMORPGs, RuneScape is played in a Java-capable web browser and therefore playable on almost any computer with an internet connection. It was designed from the outset to be a game with appeal in all demographic categories and its low technological barrier to entry is deliberate. Because of this low common denominator, the game is simplistic-looking. The RuneScape web site, the central hub from which all new games are launched, looks equally low-tech, despite the vastness of its user base and revenue currently being created. The original game was rendered in a highly simplistic form of 3D viewed from an isometric perspective. A higher quality 3D renderer was launched as part of RuneScape 2, an overhaul of the game engine launched in 2003 which also addressed numerous security issues deriving from the simpler original version. The gameplay and game engine has been maintained since then although it still looks fairly simplistic compared to most hardcore RPGs and MMOs.

Like all MMOs, RuneScape is more of a service than a product. The retention and expansion of RuneScape’s paying user base is heavily dependent on Jagex’s ability to maintain the game’s ongoing appeal. RuneScape’s content needs to be updated on a regular basis to keep the experience fresh for longer-term players and the game world needs to be carefully monitored to prevent cheating, hacking and any other activities that imbalance the gameplay. This necessitates a sizeable development team permanently at work maintaining and evolving the game as well as a large, dedicated customer support resource handling players’ technical, gameplay and billing enquiries. The need to provide adequate support for MMOs and to keep the gameplay evenly balanced is both exacting and extremely complex. The failure to do so has proven the undoing of numerous other MMOs in the past.

In between the end of 2007 and the start of 2008, Jagex implemented some major changes to RuneScape’s gameplay primarily aimed at curtailing the trade in RuneScape (virtual) assets outside of the game world. The changes resulted in 60,000 infringing accounts being closed by Jagex and a wave of user criticism, although growth is understood to have resumed since.

COMPANY INCEPTION AND GROWTH
Jagex was incorporated in late 2001 by Andrew and Paul Gower and Constant Tedder after it had become apparent that the RuneScape project, begun at Cambridge University, had accumulated a million (non-paying) registrants in less than 12 months and could no longer be operated out of the Gower house as an amateur concern.

With hosting costs mounting as well as the growing need for constant maintenance and improvement of the RuneScape game world, Jagex began to seek ways of monetising the vast, rapidly growing traffic the game was generating. Advertising was an obvious and easily implemented first step. This was followed by the more important development of an optional premium subscription version of RuneScape that for between £2.50-£4 per month (depending on payment method and subscription duration) gave players access to exclusive game areas, features, content updates and support. The free play version was retained and remains a crucial draw for new players to whom subscriptions can later be up-sold. Critically, RuneScape’s subscription price was, and continues to be, a fraction of that charged by most other MMORPG providers and, partly as a result, RuneScape remains second only to World of Warcraft in terms of premium subscriber numbers in the West.

With some 150 servers located in eight countries servicing around a million paying subscribers, and some 7.5m non-paying active players per month, Jagex has become a major player in the Western online games market (a market that remains, due to cultural reasons, largely segregated from the even larger Asian online games market). Some 55 per cent of its user base is said to be based in North America with the majority of the rest in the UK and other parts of Europe. Although Jagex has RuneScape servers in Holland, Sweden and Finland, the game remains almost entirely English-language based. However, Jagex launched a localised German language version of RuneScape in 2007 and is working on a French language version.

Part of Jagex’s success can be attributed to a carefully controlled affiliate marketing scheme which sees RuneScape promoted on a limited number of high-traffic third party sites. The most important of these has been UK-based miniclip.com, one of the largest casual games portals and community sites on the internet (receiving in excess of 30m unique visitors per month and featuring a high degree of demographic cross-over with RuneScape).

In 2005, Jagex announced that it had sold 35 per cent of the company to Insight Venture Partners, a US Venture Capital firm, for an undisclosed sum. The purpose of the investment was stated as being to allow the company to ensure its “explosive” level of growth was properly supported and help take the company into more international markets. Since then, the company has expanded rapidly, growing its headcount to around 380. RuneScape’s average revenue per paying subscriber, at $5 to $6 per month, suggests annualised sales of some $60m to $66m. In its last available accounts (2006) Jagex reported a pre-tax profit margin of some 61 per cent (£10.2m) making it one of the most profitable independent games companies in the UK.

As an online games business, Jagex’s business model is very dissimilar to traditional computer and video games developers. Its principal business partners are not games publishers but hosting and bandwidth companies, payment service providers, advertisers and distribution companies. Jagex operates with the sort of creative and commercial autonomy that most other developers could only dream of. It remains one of the quietest and least publicised developers in the UK (a stance taken deliberately by its management team). In addition to being one of the most profitable, Jagex is also the UK’s largest independent developer by staff level, and one of the biggest employers. Its commercial model should make it a poster boy for the disintermediation of publishers and the ‘direct to consumer’ distribution channel in which so many developers place their hopes.

ANALYSIS
At a time when the concept of ‘bedroom’ hit games development was thought to have long since passed into history, RuneScape arrived to shatter this misconception and turn Jagex, its creators, into the largest indigenous independent games developer in the UK. Of course, much of Jagex’s financial success can be attributed to the fact that most online games such as RuneScape tend to be published by the companies that developed them and thus, unlike traditional games developers who derive a percentage of a third party’s net percentage of sale proceeds, Jagex books 100 per cent of the sale proceeds itself. As a result, RuneScape should be counted as one of the most valuable IPs to have originated from the UK whilst having its sales, profits and ownership retained by a UK company.

RuneScape’s mass-market appeal lies in its simplicity and accessibility (both financial and technical). It has tapped into the vast market of games players unwilling or unable to spend premium prices on PCs capable of playing the latest, expensive, processor-intensive games. Its core gameplay concepts are very similar to its retail-distributed RPG and MMORPG analogues. The (re-)popularisation of fantasy milieus by The Lord of the Rings films has undoubtedly helped games such as RuneScape and World of Warcraft by making such universes acceptable to teen and even pre-teen players. These age groups are responsible for a global explosion in the popularity of avatar-based online community games and services in which communication and social interaction are key. RuneScape has been able to tap into this trend by appealing, in particular, to 13 to 18 year-olds (who comprise at least 60 per cent of RuneScape’s users).

CONCLUSIONS
– The game maximises its addressable market by being web browser based and thus capable of being run on most computers
– The free-play mode, relatively low (and entirely optional) premium subscription price and multitude of payment mechanisms is attractive to younger and less affluent players
– Strong community features encourage broad and open socialisation between players
– The game exhibited a strong growth momentum that, to a degree, is self-sustaining as the addition of more players increases the socialisation opportunities and enhances some aspects of the gameplay
– Strong role-playing gameplay features (e.g. character building, virtual asset accumulation) encourages loyalty and reduces churn
– The affiliate deal with miniclip.com allowed RuneScape to tap into one of the largest casual games communities on the internet