Feature: Legitimizing Real Money Transactions

The Internet went ablaze yesterday when various sites reported that Diablo III, the highly-anticipated title from Blizzard Entertainment, would feature an auction house which allows players to sell items to other players for real money. At first, I was skeptical of a real money auction house; I have never been a fan of the idea of other players increasing their power by paying real money. But after thinking about it for a while, I now believe it will work out just fine.

Looking at the Past

Even though Diablo has never been an MMO in the classic sense, there certainly some elements in common. Most notably, Diablo III will have an online persistence; your character and all their items will exist on the server, not your local machine. All major gameplay arbitration will likely also occur on the server, much like in an MMO. Because of this, I figured it would be worthwhile to discuss how other MMOs have approached the problem of real world money entering the game.

With the ability to see the history of past auctions, you'll be able to see how much money you spent or earned in Diablo III.

In general, there are two main financial models for MMOs. Subscription-based games and “free-to-play” games. Games with subscriptions typically only allow you to buy vanity items for real money, while the “free-to-play” games nickel and dime you with micro-transactions that make your character stronger. For the most part, these transactions are done directly with the company who runs the MMO. If you want to get a special vanity pet in World of Warcraft, you go to the Blizzard Store and buy it directly from Blizzard. If you want your Ragnarok Online sword of domination, you buy it directly from the Korean developer.

The one big exception to this is Eve, where subscription renewals can be bought with in-game money, and as a result there is a pretty clear conversion between their in-game money and real money. And because Eve has a fully-entrenched crafting system, that in-game currency can then be used to purchase the best space ships in the game. The caveat is that there is no “official” way in Eve to convert in-game currency to real money. But like every other MMO, there certainly are unofficial ways to perform these conversions. Companies like IGE buy and sell currency for the most popular games; in World of Warcraft, for example, $1 will net you roughly 300 gold at current prices.

In Diablo II, there were several trading websites, like d2jsp, where you could buy and sell Diablo II items to other players. It was somewhat shady at times, because there was no way to guarantee that the transaction would go through. You’d have to pay the money first and then hope the person would give you the item in-game (or vice-versa). The peak of my Diablo II play occurred well before selling items became common, so it’s not something I ever participated in. I did, however, sell my account in World of Warcraft the first time I quit the game.

Your personal banner will show everyone how awesome you are.

One difference between Diablo and modern MMOs is that in modern MMOs, items mostly bind to a character. If you get your sword off of the big bad boss in the new raid dungeon in WoW, that sword can never be traded to anyone else. So even if you buy 30,000 gold from IGE, you won’t be able to just buy a top tier item on your own. Of course, enterprising players get around this by paying gold to guilds who carry them through the raid dungeon, but this typically will not be possible until a few months after the dungeon is released.

In World of Warcraft, it’s actually somewhat challenging to get those top end items when they first come out. If you are a casual player that logs in only a couple of hours a week, you won’t be accepted into a guild which is capable of killing new raid bosses. Because of this, you have to wait some time before you’ll be able to pay a guild for the run.

In Diablo, however, there never really has been a “difficulty” in getting a top end item. It’s not that hard to finish the game, even on the hardest setting. In order to get a top tier item, all you need is a great deal of patience. You kill the same boss over and over in rapid succession, and just hope and pray you get the item you want. Some call it the “slot machine effect” since you’re literally just spinning the dial and hoping to hit the jackpot. And you can do this all on your own, without the need for 24 other friends.

Conversion

The big boon that the real money auction house provides for players is that it will be easy to convert several “somewhat rare” items into one “jackpot” item. You sell those somewhat rare items on the real money AH, and get a bit of balance added to your Battle.net wallet. Once you have accumulated enough balance, you’ll then be able to use said balance to purchase the jackpot item you want. This allows you to participate in these real money auctions without ever actually taking out your credit card and spending more money on the game. And it allows you to get a jackpot item that you otherwise wouldn’t have been able to get.

In the old Diablo II system, if you have several “somewhat rare” items, it didn’t get you a jackpot item. No one was going to trade you a Zod Rune for 20 Stones of Jordan. If you were a player who was getting Zod runes, you didn’t care about Stones of Jordan anymore. The only way to trade for a Zod rune in Diablo II was by trading items which were almost as rare. But if you were stuck with less rare items, there just was no way to trade up.

The auction house will allow you to use advanced filters to find the exact item you're looking for.

Now an argument to this might be that the same could be accomplished with the gold auction house. And I think for the vast majority of items, this would be the case. But I suspect that those really top end items would never have found their way onto the gold auction house. Even though Blizzard has stated they have made an effort to make gold more valuable in Diablo III, I wouldn’t be surprised if it ends up that gold is more in demand by early and mid-level players, but once you get to the high end your need for gold will be decreased.

The Value of Gold

That’s not to say that gold will necessarily be rendered worthless in Diablo III. Because you can directly sell gold on the real money auction house, there will be some conversion rate implicitly applied to gold. It will depend on what you can do with gold, of course. If you can’t do much, it may be something ridiculous, like 10,000 gold = $1. But if it’s implemented well, you may have a reasonable enough conversion rate. This means that if you had a large stash of gold, you could sell it to add balance to your battle.net account, and then use said balance to buy your jackpot item.

The monk class is a tempting first class to try out.

The other factor to consider is that some players will engage in arbitrage, and they will attempt to make money off of price differences between the gold and real money auction houses. I’m sure that will be possible, but I also suspect that without a tool like the Auctioneer mod in World of Warcraft, it will get pretty boring and time consuming to make significant money in this fashion.

Blizzard’s Gains

Of course, Blizzard is also mindful that there will be distinct advantages for them with the real money auction house. First of all, they will likely make some amount of additional money, since every transaction has a fixed fee associated with it. But because their fees will be a fixed nominal amount, and not percentage-based as with sites like eBay, I don’t anticipate it being an absolutely huge amount of money. There will be some costs associated with the hardware and software necessary to run the auction house, as well.

We won’t know for sure until the transaction fees are announced, and the system is out in the wild. But I would be very surprised if the real money auction house makes Blizzard more than a couple million dollars per year. That sounds like a lot of money, but when you think about how much money they make off of World of Warcraft, it really is a drop in the bucket for them.

Parties being limited to 4 players is a little disappointing.

I think the bigger advantage for them is that they will cripple the 3rd party trading sites in one fell swoop. By doing this, it saves them from legal fees that they’ve spent in the past trying to shut down these trading sites. It saves them any time they may have had to spend policing the players, and making sure they aren’t breaking the rules. It also means that they greatly reduce the amount of customer support time spent on players trying to get things restored from scammers. So they shut down the sites, get a cut of the action at the same time, and provide a service that at least some players want. From that perspective, it does seem like it makes sense for Blizzard to pursue the real money auctioning.

Final Thoughts

Overall, as announced, I don’t mind the real money auction house. Of course, I’d have to see it in action to be sure, but I’m cautiously optimistic that it will work out okay. My only concern would be if Blizzard eventually reneges on their vow not to sell game items themselves. If it’s just vanity items, I’m fine with that, they’ve been doing it in World of Warcraft for a while, and it doesn’t really affect game balance if someone buys a mini-Diablo pet or something.

If, however, they start straight up selling items that have use in the game, then it becomes disappointing. Because at that point it will be no better than the Farmville and all those other games where they nickel and dime you the whole time you’re playing. There’s a reason why I hate Facebook games and other “free-to-play” scams. I certainly hope that reason doesn’t come over to Diablo III.

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