"The Healthy Economy" - Part 1

[TheElf]

MMO Players are often concerned about the economy on their favorite realm / server. They complain when the prices are high and they complain when the prices are low. But recessions, bubbles, booms, inflation and other nasty things are part of a normal / realistic economy.

Many people would argue about the effect of RMT (gold sellers) on the economy of their server. But lets see some key points.

We will use data from wowecon to speak about some key concerns, and we will use official market explorer data about Runescape economy as a way to compare two succesful games. As we will see both games took different approaches at fixing problems with the in game economy yet they share many common problems.

In a healthy economy you can make living just by smithing, tailoring, or using some professions. In a game like World of Warcraft these skills are often treated as a way to lose the hard earned money. Where the value of work tends to be negative we can't speak about a healthy economy.

Also we should consider the amount of people involved and the volume of sold items. We could also speak about the 10 gold tip and other strange bonuses.

Let me start with an old story.

At level 20, with a mount you have a good chance to gather a few stacks of copper per hour, it isn't much, but with 23 silver / copper ore, it is 4 gold and 60 silver per stack. If you work on mining and gather 3 stacks an hour, you can make 13 gold and 80 silver in an hour.

It seems to be a lot of money at level 20.

It is enough to prevent any new players buying copper for some equipment from the money earned by questing, grinding, etc.

Why?

The price of copper tends to be similar on different realms with different communities. Why they do gravitate to the same "market price", why wowecon works?

The trick is easy: forget about our level 20 for a few moments, lets see a level 80. He can farm a few more stacks of copper, or he can go and do some dailies and from the money he made buy the copper.

How will he choose? Many people will choose the most efficient way.

So 1 hour of mining copper at level 80 should equal to 1 hour of questing. But it means, the price of copper should be almost fixed on mature realms. The prices aren't set / dictated by players or any living economics but gravitate towards a price coded into game design.

But sadly the same balance isn't present for new players, ok, they mine a bit less since they don't have an epic mount yet, and normal mounts are faster. But if they quest, grind, etc. they would make far less money.

Certainly: It isn't "healthy economy" for them, and it isn't healthy mostly because predetermined prices.

It also means that in World of Warcraft the difference in costs of different ores aren't that huge.

As you can guess in Runescape where supporting alts are way harder, reaching maximum level is far more rare things can be different. Yet, even there you can see experienced and rich characters buying up materials to level one of their lower skills, and with this the price of materials are determined by how much money they are willing to burn... But it mostly depends on market prices and not on quest rewards. Market prices are determined by millions of players. Millions of players who have very different potential to make money.

The result is a more healthy economy. And in this economy prices of different ores are very different.

Also the Grand Exchange of Runescape and the Auction House of World of Warcraft are different. With Grand Exchange in Runescape players are "forced" to sell things for a price very close to the market price, no super good bargains and no super expensive purchases. But there are fluctuations in market price, and there are market clans.

But even Runescape economy is far from the healthy economy: Why? Because working as a smith, as a cook, etc. costs money. It costs limited amount of time, it increases total skill level, but it costs a lot of gold. Yes: almost everyone wants to level up these skills, and almost noone wants to buy finished products without a huge discount. Why? Because they consider the time spent with farming materials as expensive.

And when they level gathering skills they sell things at Grand Exchange and later they can buy materials, so for them the price of materials seems to be neutral. Why? Since using Grand Exchange doesn't cost a cent. Normal vendors, merchants are expensive, but GE is free.

Money lost with manufacturing an item can be a problem in games with more complex economic model such as Eve Online, and it can happen. Why? Since the demand isn't something you would see in a healthy economy.

In a healthy economy mass produced mainstream products are a good way to make money. Just look at Coca Cola, Pepsi, etc. they don't sell the excellent products. It comes from IP (intellectual Property), marketing, etc. end the fact: most people don't want to buy the best products and don't want a fair chance to get them easily... but are happy with mass produced mainstream items. And they are super cheap to manufacture.

In a healthy product this is where most of the profit is made.

In most MMORPGs that isn't the case.

In games where in game currency has a real world value and in game items can be bought and sold, we would have a different economy. And since it would be part of the real "healthy" economy we could say it is a healthy economy. If that is what you would care about. But it would also mean bringing real world differences to the game, which would be harmful if we consider game balance. And with this we would still have a problem with the value of work, unless we would also make designing items, making items, selling items, etc. time consuming.

[TheEvilDrSmith]

I dont get your poing Elf ... im sure it makes sense ... can you do an abstract

[TheEvilDrSmith]

The MMORPG space is about to not experience ecconomic theory but some very darwinian theory. Its called survival of the fittiest ...

You have a few company spending what people used to consider film budgets on developing MMORPG and every pimplely geek who can string 2 lines of code together making a game.

Where does it leave me ... Mr Average punter doesnt know where to start.

My current feeling is that both models miss the point of their own existace and that is meeting customer demand. Well never mind the customers dont really know what they want and they are going to change their mind anyhow. This is my bold preditiion

Social MMORPG .... if you dont align with the major service providors you are doomed to irrellevancy. Further more ....

Agile MMORPG ... if you dont adapt, change, grow, renew (while not alientating yourself) you will not sustain your following

[TheElf]

Most people think that the market price for items are determined by the player community, but in reality: Game design often predetermines the market price for items, since the real value of items / services aren't measured in gold, but in minutes.

[TheEvilDrSmith]

Most people think that the market price for items are determined by the player community, but in reality: Game design often predetermines the market price for items, since the real value of items / services aren't measured in gold, but in minutes.

I have a friend working on a MMORPG with a 3 year development period and budget of $12 million. That is one hell of a commitment to recover that investment. Which I think seriously goes beyond US$9.95 per month subscription.

I dont know much about the project apart from what is publically available due to the obvious confidential nature. But I can make a few educated guesses.

There is a long term plan and commitment to their development that goes beyond their consumer market.

There are disruptive market forces from publishers that are pushing game development into entering space that was formerly were the domain of media production. (even the streaming of HD games is more like media)

I dont think we are far away from interactive real time real life games like "interative TV" like has been in scifi for years in various laughable forms.

So as far as classical economics, MMORPG is a distruptve entrant. There is a limited opportunity to make a lot of money before it becomes the norm and the cycle of boom to bust rolls around again ....

In fact, I think MMORPG should aim at technology rather then content for a long term sustainable future

[TheElf]

That isn't in game economy, so your comment is mostly irrevelant.

But $12 million isn't much.

Say, wow has almost 12 million subscribers and with paid character transfers, paid renames, etc. and sold games, etc. it is probably around $150 million monthly income.

A small, not that well known game, that is sold maybe in 500000 copies, and ends up with 75000 regular customers who pay only $10 a month for subscribtion and some more for transfers, etc. would make profit from the 2nd year, and that is a pretty small game.

If you go for a micropayment based system where players buy their gear from you with real money, the income can be similar.