As more games go to a virtual goods model where users buy virtual items and characters for real money, it creates a whole host of new game design issues. Developers are struggling with the balance between creating a fun experience while, at the same time, getting consumers to pay for the experience. If a game offers too much for free there is no incentive for consumers to spend money. On the other hand, if publishers try and hound consumers to get their wallets out at every turn it undermines the entire game experience and true gamers will leave in droves.
In the past few months, DFC Intelligence has published a series of research reports on the emerging market for virtual goods and games that are free-to-play but offer an optional microtransaction model. The latest DFC report, available on IndustryGamers, looks at a very specific issue: the aftermarket for trading virtual goods among players. Trading goods among players is different than buying virtual goods from the in-game store. For one, it is often done in many games that do not support buying virtual goods for real money. For example, subscription MMOG games like EverQuest saw users selling their characters to other users on eBay. Even when eBay shut this down, users just found other ways to facilitate trades.
Of course, publishers do not financially benefit from direct player-to-player trading AND it has the potential to seriously ruin the core play dynamics of a game. So the key issue is: what can and should publishers do about player-to-player aftermarkets? A secondary issue is: can publishers actually take advantage of player-to-player trading to earn an additional revenue steam?
Player-to-player trading is where one user of a game has acquired or earned a valuable virtual good and thus can sell it to other players for what is often very substantial amounts of real world money. In general, this type of activity is frowned upon by the majority of users who feel it is giving players who did not earn the item an unfair advantage. In a worst case scenario it can destroy the entire game design. Games become a target for opportunists that setup gold farming operations to build up valuable virtual goods and currency to sell to other players. Outright theft of a player’s account is increasingly becoming a problem.
Unfortunately stopping player-to-player trading can be extremely difficult, if not downright impossible. With the realization that player-to-player trading is going to take place, does it make sense for a game publisher to try and take control of the market? It is much like the debate about alcohol and drugs. Do you make it legal, tax and regulate it?
This new DFC report examines how a publisher may look to control the aftermarkets for virtual goods. The report includes results of surveys done of gamers in North America and Europe on their attitudes towards player-to-player trading. Also examined is how much money a publisher can make from controlling player-to-player trading. By taking a commission from each transaction there is potential for a publisher to earn an additional revenue stream AND cut down on fraudulent activity.
A significant portion of the report is based on a case study using actual numbers from Sony Online Entertainment’s experience with EverQuest. In 2005, SOE launched an aftermarkets auction service, the Station Exchange. Players on two of the twenty-eight EverQuest II servers were invited to auction virtual currency, quest items and even their own characters using the Station Exchange service. SOE charged a listing fee and a commission on each completed auction.
Sony Online Entertainment announced at the end of 2007 that their controlled aftermarket for EverQuest II would be handed off from their own in-house team to Live Gamer, a company that offers a package of commerce solutions for games that support virtual goods. SOE indicated that the escalating problem with policing organized gold farming had moved beyond their means on the Station Exchange. In short, the customer service burden became so great that the full focus of another company was required to help deal with the problem.
The experience of Sony Online Entertainment shows that publishers can still try and control player-to-player trading without necessarily dealing with the complexities involved in trying to directly service the market and deal with all the legal and regulation issues. Third party services like Live Gamer Exchange now offer a means to control aftermarkets.
While DFC surveys indicate that less than 15% of core users of an MMOG will engage in buying or selling goods among other players, this is still a substantial portion of the user base. In the end, the issue of player-to-player trading is something that almost all major games are going to have to consider. Even if a company chooses to take a "let the chips fall where they may" hands off approach they need to understand the implications of that action. In DFC consumer surveys, there seemed to be a fairly strong distaste towards the potential unfairness created by allowing other users to get ahead by buying advanced items. So at the very least, companies need to be sure that the experience of the majority isn't compromised by the minority of traders.
DFC Intelligence is proud to be providing IndustryGamers readers the opportunity to purchase the new DFC report, Controlling the Aftermarkets for Virtual Goods. This report is a 20-page PDF that includes a case study of EverQuest II, analysis of key issues in aftermarkets, results from DFC consumer surveys and six business model scenarios on revenue potential from aftermarkets for different products.
This report is part of a new series of custom targeted DFC Intelligence reports and briefs that will be available for purchase online through the IndustryGamers web site. The reports in this series will provide poignant analysis and forecasts on key topics facing the games industry worldwide. For a limited time if you signup at http://www.dfcint.com/ig you can get a free copy of one of these reports.
