Felix Salmon blogging at Reuters has some things to say about monetizing online magazines that has applications to gaming:
Which brings up a fundamental rule of online subscriptions: there is zero correlation between value and price. There are lots of incredibly expensive stock-tipping newsletters which have a negative value… And of course there’s an almost infinite amount of wonderfully valuable content available online for free…
Or look what happened when Newsweek and Sullivan parted ways: both of them started subscription products, at almost identical prices… That doesn’t mean the two products have almost-equal value; it just means that both…came to the conclusion that the $20-a-year range was more or less the point on the supply-and-demand curve where they would maximize their income…
But there’s another consideration, too: the more formidable the paywall, the more money you might generate in the short term, but the less likely it is that new readers are going to discover your content and want to subscribe to you in the future…
…on the internet, people prefer carrots to sticks. That’s one of the lessons of Kickstarter, too. To put it in Palmer’s terms: if you want to give money, you’re likely to give more, and to give more happily, than if you feel that you’re being forced to spend money.
I saw this last note most richly in Kingdom of Loathing, where players would buy the item/familiar of the month as a de facto subscription fee just to give Jick $10. I have donated to quite a few online games, some of which called it “donating,” but I find myself strongly averse to paying for flash games that added a grind you can pay to skip. Games with limited, optional, non-pushy cash shops probably see more purchases that the players think of as donations, and some shops’ opening saw pent-up demand to donate to the game (probably an influence on sparklepony’s revenue).
The third paragraph is most of interest to me. Aggressively monetizing can yield great short term revenue while harming your long term prospects. Without having revenue numbers, I suspect Turbine is seeing this: excellent initial numbers, followed by decline and aggressive monetization of dedicated players, and flirting with blatant absurdity. You can get a feedback loop if players start feeling like the game is being milked before it shuts down.
: Zubon
Hat tip: Marginal Revolution