Having played Medievia before finding out what kind of slime ran it, I found it to be a good H&S. However, it was still INFERIOR to the FREE H&S that I played at the time (since then, I've given up H&S altogether, but that's another story). Why pay to play the third-best H&S when you can play the two best for free? Therein lies the answer. It's because "pay-for-perk" MUDs are "pay to succeed" MUDs. Sure, you can get almost everything without paying. But those who pay will always have an advantage. Since the purpose of H&S MUDs is advancing, acquiring, and competing, if you don't pay, you're not going to achieve the maximum potential of the second goal and won't be able to truly achieve the third.
So, with all the insecure, competitive people that play H&S MUDs out there who simply have to succeed and be better than everyone else, charging for "perks" really turns into charging for success and can generate a lot of money (amazing how many people compensate for real-life deficiences through online games).
So, if Medievia's failing to make profit, it's not by trying, it's just because they're inept. They're still violating the DIKU license, just not as financially-successful as those who have morals (excluding the_logos obviously).
Take care,
Jason
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