THE BUSINESS OF ONLINE GAMING

MANILA, December 17, 2003 (STAR) By Lisa Gokongwei- Cheng - Kevin Go, 13, hasn’t been to the mall in ages. The honor student from Xavier School would rather spend his weekends at home in front of his PC playing Ragnarok, a computer game that is very popular with his classmates.

Outside Jose Rizal University, Ragnarok-playing students pack the row of Internet cafes. Café owner Jet Lorenzo, 26, says that her 40-seater café, the Blue Orb, has a bunch of students waiting for their turn to play. They are there from 8 a.m. to 3 a.m. every day. "Whole day, hindi sila pumapasok," she says. "Wala nang nag-aaral."

On MTV and MYX, one of the hottest music videos features the popular local band Slapshock paying tribute to Ragnarok.

In the Ateneo de Manila University, an enterprising student is selling pirated versions of the Poring doll based on a popular character in Ragnarok. He is hawking them for P200 more than the originals and they’re selling like hotcakes.

For those living under a rock the past six months, Ragnarok is the massively multiplayer online game or MMOG that has taken our youth by storm. While not yet as big as Meteor Garden, it is changing the way many young Filipinos are spending their leisure (and school) time. It is also single-handedly reviving the dying Internet café industry. Finally, it is connected to the story of how a young entrepreneur, Ben Colayco, 30, is making a fortune for himself and his investors by turning the geeky interest of gaming into a mainstream sport.

But first, definitions are in order for us older folk.

What is Ragnarok?

Ragnarok is a role-playing online game where players take on roles (thief, acolyte, merchant, etc.) and then interact with other players in real time. Unlike games such as CounterStrike, the world of Ragnarok is persistent. This means that even if you log off, the world continues to turn, and when you log on again, real time has elapsed.

It is massive because of the game’s ability to accommodate a huge number of players at any one time. In the Philippines, during peak times, there are 25,000 players playing concurrently. In Thailand, where it is also the biggest MMOG, Ragnarok registers 80,000 players at peak time.

Just like in the real world, players can converse, court, cooperate, and trade. But unlike in the real world, they can hunt and fight monsters for prizes. The goal? To get to level 99 from level 0. But really, it’s more than that. Read on.

To those in their 30s and 40s, I can only describe it as like Dungeons & Dragons with more hormones. For those in their 20s, the best way to describe it is…

"It’s a more high-tech chat," says Ed Geronia Jr., editor in chief of Games Master, a local gaming magazine.

Ragnarok was created in Korea, the mecca of MMOGs, by a company called Gravity Corporation. It is now among the dominant, if not the dominant, MMOG in Japan, Thailand, Indonesia, Korea and China.

In Thailand, at least five publications and a whole slew of merchandise (like lollipops and phone cards) are devoted to the game. In the Philippines, where fans have created at least 50 Ragnarok websites, the game has grown from zero to 60,000 players in six months. That’s about 10,000 new players a month and counting.

A player can download the game from the Web or through a CD distributed for free in Internet cafes, through magazines, and during events. Level Up, the company that brought Ragnarok to our shores, makes money by selling pre-paid Internet cards in three denominations: P50 for eight hours, P100 for a week of unlimited play, and P350 for a month of unlimited play.

Merchandising is the next step. Colayco brings out Ragnarok shirts, Ragnarok dolls, and Ragnarok magazines. "I see a complete immersion in the Ragnarok lifestyle," says Colayco. "When the player turns off his computer and turns on the TV, he sees Ragnarok on MTV, Ragnarok on the cell phone, Ragnarok T-shirts and dolls."

Colayco just signed a deal with Sterling to come out with Ragnarok notebooks.

The game is so popular that Level Up employs 50 games masters to police the players and that’s still not enough. Think about it – 60,000 players is as big a community as Pateros. The job of a games master is to make sure that the members are behaving well. If a member flouts the rules, he is banned from the game.

Why It’s So Popular

The world of Ragnarok is a microcosm of Filipino society. That’s one reason it has crossed over from the domain of gaming fanatics to the mainstream. Thirteen-year-old Go explains: "I like it ‘cause it has a Filipino flavor. You don’t see many games where players speak in Tagalog."

For example, says Level Up founder Colayco, a merchant character calls himself "Henry Sy" as a tribute to the legendary entrepreneur. There are stores in the Ragnarok universe called SM Morroc and SM Prontera. (Morroc and Prontera are towns in Rune-Midgard – the Ragnarok world.) Then, says Colayco, there’s the thief character who goes by the name "Thief Ako."

Pinoy humor is all over the place in Ragnarok. Characters pretend to be the members of the F4 or the Sexbomb Dancers. "When a character dies," says Colayco, "the other players make lamay, kneel down, and throw flowers."

But Ragnarok also showcases the dark side of the Pinoy.

Grade 7 student Go says that he was once taken for 60,000 zenny (that’s Ragnarok currency) by a player who never delivered the promised goods – a set of thief’s clothes. The player logged off once Go handed over his zenny. Luckily, Go "screen shotted" the transaction and used this as evidence to have the cyber-thief banned. Unfortunately, players can return as other characters so effectively, banning is a band-aid solution.

Scams can take place in the real world as well. Geronia says that in Internet cafes, thieves program computers to steal user names and passwords, allowing them to steal another player’s virtual items. Accessories like "skirt of virgin" and "poopoo hat" (yes, it is a hat shaped as feces!) are very much in demand in this virtual world. So, a weird sort of crossover crime is being invented, where real-life crime is committed to steal objects that don’t exist except online.

Another crossover crime that will get a character is selling virtual items for real money. One player was so desperate for a Ragnarok item that he bartered his brand new Nokia 7650 for it. In the United States, selling MMOG characters is common on e-Bay, the big auctions website.

Being a games master is no easy task. Believe it or not, it’s a position of power. Colayco says games masters regularly refuse bribes from players who ask to be "leveled up." Sometimes, the games masters are even offered hard cash.

Colayco wants to keep the Ragnarok community clean. "Everyone gets equal treatment," he says. "We don’t want to create a negative environment."

The games master position is rather popular and Colayco receives hundreds of e-mails from games master-wannabes. Unfortunately, games masters are like federal agents; they are not allowed to reveal what they do to anyone for safety reasons. They get death threats from players whom they ban or punish. "We have players storming into the office," says Colayco. "That’s why our security’s so tight downstairs. Being a games master is both a blessing and a curse."

Besides its unique Pinoy flavor, Ragnarok has become so popular so fast because it’s a place where players can be themselves. Geronia explains, "There’s an infinite combination of accessories for you to be able to express your personality online."

It’s also a very democratic game where who you are in real life doesn’t matter at all. "It breaks social barriers," says Colayco. "A cousin of mine who studies in IS (International School) met a friend from Tondo in the game. My cousin said that this kid from Tondo saved his life a couple of times. There’s no other situation where kids have a lot in common."

Also, Ragnarok is attracting girls, not your typical gaming demographic. Suddenly, says Colayco, boys and girls have something to talk about. Girls comprise 30 percent of Ragnarok players and populate one of its more powerful clans, the Shadow Maidens.

How Ragnarok Saved The Internet CafÉ Industry

"Ragnarok pulled us out of our misery," says Mark Reyes, 25, the owner of Computer Center, a 24-seater Internet café located beside the Lyceum and Northwestern University.

Reyes claims that it has increased his revenues by more than 75 percent. "From 8 a.m. to 5 p.m., all are playing Ragnarok," he says. "I have no more network games. I consider Ragnarok my bread and butter."

Before Ragnarok, violent network games like CounterStrike and WarCraft, brought in the moolah. But these games do not have the organic quality of Ragnarok, and thus the public lost interest, and many Internet cafes saw their businesses take a nosedive.

"Halos one customer a day," says Jet Lorenzo owner of Blue Orb Internet café to describe the days before Ragnarok. "When we tried Ragnarok after a week, nag-boom ang sales. Waiting list pa ngayon."

Lorenzo claims that they sell P60,000 worth of Ragnarok cards a month. But this doesn’t even include the P25 an hour she charges for computer usage.

Ragnarok is a boon for Internet café owners because they make money on both computer usage and selling of cards. They do not only benefit from the increased traffic brought about by the game’s popularity but also from the double revenue stream inherent the game’s business model.

Raymond Ricafort, 37, president of 68-store Netopia, the largest Internet cafe chain in the country, says that the sale of Ragnarok cards accounts for 12 percent of their business. That’s worth about P2 million a month for Netopia alone. Ricafort is also happy about the fact that Netopia does not have to shell out money for gaming software anymore. In the past, they had to pay a P900 licensing fee for games like CounterStrike and NBA Live. For Ricafort, whose 100-seater cafes are average-sized, that’s a lot of saved overhead.

Both Reyes and Lorenzo have plans to put up new branches because they do not see the sudden demise of Ragnarok. "‘Yung CounterStrike, pag napatay ka, patay ka na," says Lorenzo. "Sa Ragnarok, pataas nang pataas ang level."

Colayco is also very optimistic about the life span of Ragnarok. Level Up plans to introduce new patches and innovations every three months to prolong the life of the game. A patch, like the Comodo version being introduced this weekend at the 2nd Annual Comicbook, Gaming and Anime Convention, contains enough new characters, accessories, and maps to keep gamers interested.

Unorthodox Management Style

All, dark, and handsome, Ben Colayco claims to be a geek at heart. But he is also the first to tell you that he wants to take the geek out of gaming and make it mainstream. His 1 1/2-year old company seems to have struck gold with Ragnarok. "It is easy to get into and is deceptively simple, but is one of the deepest experiences you can have. It is designed to have people interact."

But even a good product is a tough sell without the right marketing moves. Colayco has used guerilla marketing and won. He chose to give away Ragnarok-loading CDs for free instead of selling them, lowering the barriers to entry for the user. He gives the game free to Internet cafes instead of charging them a licensing fee, earning their support. For the first three months, Ragnarok was free for all users, thus getting the market addicted to the game.

"There’s no front-end cost for the customer," says Netopia’s Ricafort. "It’s essentially sachet marketing. It’s the correct marketing approach, now it’s just a matter of the product."

Colayco is also present in events like anime and gaming conferences, venues that other youth marketers dismiss because they are considered too fringe. This ability to go where the market goes is particularly important when you’re dealing with skeptical youth who know when they’re being sold to. Key to getting the youth is through schools.

Normally schools would be the last organizations to support a gaming company, but Colayco is trying to get schools on his side. He builds relationships with schools by accepting every invitation to speak or be on a thesis panel. He also has internship programs with universities. Best of all, he just started a new program that awards Ragnarok points to students who get A’s and bans students who flunk exams from playing. This way, he gets the support of teachers who would have been the first to blame Ragnarok for kids flunking.

Colayco is also unorthodox in the way he manages his people. He practices an open-door policy. "People can just come in and tell me ‘Ben, you suck,’" he says. "I give them a long rope but they have to show they can do the job. If you can’t run with the pack, you’re out."

The loose management policy seems to work in this company where the average age is 24. Internet café partners like Reyes and Lorenzo are full of praises for Level Up’s support team. "They give CDs, they supply us with marketing materials, wala silang pagkukulang and that’s why we support them in return," says Reyes.

But the management policy might just be too loose. Level Up has 150 employees and still has no HR manager!

The Future

Now that Ragnarok has paved the way for MMOGs, expect many competitors to join the fray. Level Up is looking for new games to bring in but won’t say what they are.

But Colayco believes that gullible competitors who think the MMOG industry is easy money will be in for a surprise. "It took me two years to make the business plan. Look at me – I think I had a clue, but didn’t. It’s not just about getting a game from Korea and selling prepaid cards. We’ve been doing a lot of work with just one title." Is Level Up making money? Colayco will only say, "We’re doing okay."

Meantime, Colayco needs to focus on keeping Ragnarok interesting. Go, the Grade 7 student from Xavier, says that some of his friends have stopped playing. "They’ve got to speed up the new patch, the new second-class jobs, or else people will get tired," says Go, before going back to his PC to spend another couple hours in Rune-Midgard.

* * *

Tip for youth marketers and parents: If you want to know what the youth are up to, go to the Second Philippine Comic book, Gaming & Anime Convention 2003 this weekend at SM Megatrade Hall 2. Organized by Culture Crash Comics and Level Up, this trade show is expected to attract at least 10,000 kids.


Reported by: Sol Jose Vanzi

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