“Extra Credits” on the D3 RMAH

Extra Credits is an animated gaming video blog — the usual episode is about 8 minutes of narration with lots of funny images and graphics for visuals — hosted by Penny Arcade. As several readers have mailed in to inform us, the most recent episode focused on the Diablo III Marketplace, specifically on the Real Money Auction House. And since we never *cough* get tired of talking about this issue, you might want to check it out. They don’t allow embedding, so here’s a link.

It’s a lively presentation with some funny visuals and some good points, but I thought they missed a few points and misrepresented some others. For one thing, they didn’t even mention that trades in the Diablo III Auction House can be executed with in-game gold, as well as money. True, people like our D3 Markets guru Azzure have argued that there’s no real difference, since gold will sell for money, thus creating an exchange rate, but it’s a valid point. (Assuming the flat fee for a trade in gold will be far less than the equivalent cost to the player of the flat fee on a RM trade.) They also don’t mention that Blizzard only takes a small fee per sale, and that everyone gets some free trades per week, which makes Blizzard seem much more grasping in this presentation than in reality.

I’d also disagree with their assertion that Blizzard’s *only* reason for making D3 online-only is to force everyone into a common economy. I’ve seen that asserted before, and while I’m sure that’s part of the reason, I think that simple piracy prevention is a much bigger factor. This Extra Credits goes into math on that point, estimating that the online-only requirement will cost D3 100-500k lost sales, since people with poor internet connections have no reason to buy the game. This is estimated to cost the company around $3m in lost revenue, but EC argues that they’ll easily make that back by taking their slices of the RMT pie. I’d say that’s pretty likely, but I think a bigger motivation, and a bigger short term profit for Activision/Blizzard, comes from all the extra $60 purchases they’ll get from people who would otherwise have downloaded a hacked copy of the game.

On a related topic, the show makes an interesting prediction — that one day we’ll see AAA-quality titles given away for free, simply to get more people into the game economy. In that model, developers would make their profit not from box sales, or even from DLC sales or a cash shop, but from taking slices off of the RMT pie, the way Blizzard is with D3. If you apply that concept to D3, it would behoove Blizzard to steeply discount Diablo III (or give it away free with a WoW subscription?) after the initial rush of sales tapers off, since they’ll make more money long term based on having more people using the RMAH. Devious!

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22 thoughts on ““Extra Credits” on the D3 RMAH

  1. That would be to assume the RMAH doesnt fail tho. Blizzard didnt design the econ in diablo and meant it to fail badly either, but it did. True that more thoughts have been put into it this time, but even the econ in our real world fails, let alone a virtual one. Selling game copies would be a more stable profit than hoping RMAH works.

    No one came up with a conspiracy that blizzard will actually secretly create game characters, generate awesome items, and sell it on RMAH to make money for themselves? 😛

    As for the online-only problem hampering sales, i dont think it will be that bad. Alot of ppl with less stable or crappier internet speed, like in Australia, will buy it just in the hope that it does work decently. Real D- fan in those areas wouldnt give up the chance without a try for themselves. As far as box sales is concern, it doesnt matter if the ppl end up able to play it, as long as they had paid for that try. I never heard blizzard has a plan of refunding the purchase if u bought it and ur internet cant handle decent play……

    • I’d like to argue that Blizzard didn’t design an economy for Diablo 2. Or if they did they had no clue what they were doing. Either way, things have changed this time around.

      • Yeah, I’d say that the switch to Diablo being a very trade and economy driven game was pretty much forced by the playerbase, working around the Diablo 2 restrictions (no real currency, no easy trading, no easy muling/storage).

    • “No one came up with a conspiracy that blizzard will actually secretly create game characters, generate awesome items, and sell it on RMAH to make money for themselves?”

      This is actually a fairly common point of debate, and not always as jokingly as you put it here. There’s been a big thread about it on the first page of our d3 community forum for weeks, and we talked about it on a RMAH podcast back in early August, just after the feature was revealed.

      My take on it remains unchanged from then; that Blizzard would be insane to try it. They’re looking at making millions a year, for years, a nickle at a time. Risking the credibility of that, in order to crank out a few $100 sales here and there, would be completely insane.



      • That’s a good theory that works for the most part, but not always.  The same theory applies to online poker sites.  Everyone said that they’re making so much money that risking their reputation by having their own accounts playing at the table seeing all the cards would be crazy.  Then a couple sites (they’re partners) did it.  It did hurt their reputation when they finally got caught, but not too much.  They were still doing just fine before the government cracked down on the three biggest sites serving the US.
        So, I don’t think that reputation alone will prevent this from happening.  Greed is a powerful thing.  Especially when you think it will be impossible to catch.  The only reason the poker site cheaters were caught was because people could statistically analyze how often they were winning combined with their play style vs others with similar stats and see how far off they were.  There will be nothing like that to catch Blizzard posting auctions to the RMAH.  As far as I know the auctions are still anonymous, right?

  2. You are probably right that DRM plays some role in the OO as well, but adding to that, I don’t think it’s as trivial to make a single player version of the server-client model as many people seem to think. If you look at other games using that sort of technology, there has never been a hack that properly enables you to play that game as you could on the official servers and chances are, if hackers can’t do it, even for a game as popular as WoW, it’s not a trivial task.
    And it’s not just enough to port it once, they’d have to support it as well, every patch/expansion etc. It’d be much more similar to an actual port (like say, to console, the cheap kind) than just modifying a few code bits like say, SC2. I would guess that the payoff of making a few (and it’s really just a few, but vocal) players happy plus the other reasons (RMAH, Play Experience, Cheatfree, DRM) makes the effort not worth it.

  3. agreed. i don’t think RAMH is Blizz’s only reason for only online either. however, i do think part of the the motivation behind RAMH is the same motivation behind some MLB teams scalping their own tickets or some game developers charging buyers of used games for online access (EA Games for example). in short, the primary company couldn’t “wet their beaks” in the third party market’s profits and this is their way of rectifying the situation.

  4. Wow, that was a disappointingly poorly thought out video in some places.

    First off, I’ll throw in my agreement as well that RMAH is not the reason for online-only. Perhaps to the general public “it makes cheating more difficult” sounds absurd, I guess I can’t speak for the general public, but as a coder I see exactly where they’re coming from. Less client-side data files is less to for cheaters to work with. It also gives them some permanent secrecy of the drop tables – we will never be able to determine through anything but experience which areas are most worthwhile to grind for equipment. Which is good, it contributes to playing the game instead of playing Pindleskin.

    To further the argument, please tell me how requiring an internet connection will make people use the RMAH? If you want to play alone and skip out on the AH, you can play solo always and never use the RMAH. Yes, it’s inconvenient to actually lose the ability to play offline, but it’s not going to turn those people into paying customers. Some may argue that being forced to be exposed to the RMAH will pick up sales, but that leads into:

    As the article says, we get a number of free sales per day. The majority of casual marketplace users will wait for their free sales. I know I will, unless I have a particularly amazing week of loot or whatever.

    What else is there. Let’s see. He also uses numbers of profit from gold farming in WoW, and let’s be honest, D3 will likely be great but not a 10 million subscribers game. It’s hard to translate number of subscribers into active players which is a more compatible number with D3, unfortunately.

    Most importantly, he repeatedly suggests the idea that average people will make a living off the game which simply unlikely. There is certainly the chance that a player could make a small fortune with a few amazing near-release drops, but a continued income that someone could live off of? This is way overvaluing the market that we don’t even know will succeed.

    He also completely ignored that games with built-in real money trading have existed in the past, they just weren’t good. Project Entropia is an example, but ask anyone who has played it and you’ll know that you’re investing in order to spend hundreds of hours grinding in order to make your money back.

    The only place where he hit the nail on the head was continued returns. This is where games are going, which is somewhat good and bad. DLC has a bad reputation, for good reasons, as many developers love to throw out the most terrible DLC to make a quick buck. My only hope is that in the future developers will start to only use DLC for reasonably priced content, but we’ll see.

    Power creep is iffy. I’d imagine that having very very good equipment prior to a new expansion will give a significant advantage in finishing the content and getting new available loot, due to the fact that unlike WoW you wont be receiving new green items better than top-tier gear. The biggest mistake he makes is continually comparing Diablo to MMOs, which it is not. The auction house and chat rooms are massively multiplayer, the game is four-player. You could argue it has the same affect, but I disagree, the game has a different feel and therefore plays by different rules.

    That’s all! TL;DR: The only thing he got right is that Blizzard wants continued income from the players.

    • Power Creep should be interesting to see in Diablo, you are right that it’s downright stupid to compare to it to an MMO. They have stated that they do not expect everyone to reach Inferno or even Hell, so making content that simply adds to the top is out of the question. Whether it’ll be something like Diablo 2 remains to be seen, but in that case the difference in items was not nearly as dramatic.
      Anyway, good post.

      • thank you to those who are bringing up the “power creep” (never knew there was a term for it, my friend and I just called it “power inflation” but I like this version better).
        Blizzard made alot of correct decisions with WoW. But my god, the numbers are ludicrous now….. if anything, D3’s saving grace, in comparison to a true mmo is that there is a bit more of an accessible replay value and the fact that everything is instanced.
        Whether blizz wins or looses with this gamble of sorts, I can bet every dev and publisher is watching and waiting to see if this model explodes in a positive or negative way.

        I also want to comment and say that I think it’s going to be pretty hard to make a “living” playing this game. And of course, when something becomes work… then it’s just no fun (so why would you want to do that to something you love like gaming?).

        • It’s generally referred to as “mudflation,” but that portmanteau refers specifically to the inflationary effects of patches and expansions and such.  But since that term requires people to know what “inflation” is, “power creep” is probably destined for wider acceptance/usage.

    • Have any of you actually played WoW for more than one expansion and raided relevant content, or are you just making this comment because “Oh, D3 is an ARPG, how could anyone compare it to an MMO ? Silly video, HEEHEEHEEHEE”. 

      Imo, blizzard tends to self cannibalize concepts from franchise to another (not necessarily a bad thing) and D3 and WoW are closer than you think. All u have to do is make everything outside of town in WoW instanced and you have a pretty close approximation: A big world to roam about killing shit and doing quest, all alone for loot and what not. Yes, you may slit your wrists now, D3 is conceptually similar to a friendless WoW player imo.

      Now let’s go on and presume that WoW and D3 can be compared even if the above was wrong. Your comment on the way gear scales post expansion is STILL wrong, because it’s factually incorrect. In WoW, all items have an attached ilvl (item level), which is correlated to the “budget” available for the total stats of an item. 

      In D3 terms this means that each affix is quantified and assigned a value per point, so an item in D3 dropping could have 10 points of affix A and 5 points of affix B or 7 points of affix A and 6 points of affix B could have the same item budget if the design team quantifies affix B to be of higher value than affix A. What this means: ilvl has nothing to do with the type of stats/affix on the item. ilvl has nothing to do with the distribution of stats/affix on the item. 

      Now back to our WoW case study. You’ll note that quest rewards and drops in just the beginning expansion areas already have ilvls extremely close, if not sometimes higher than the top tier epics pre-expansion. HOWEVER, the distribution of stats, or even the type of stats of the gear are often non-optimal for your char. That is not the case for most top tier epics, the stats present and their relative quantities are often fairly well designed. Furthermore, the epic armors tend to have very potent set bonuses that no one in their right mind would drop simply. The non-set epics will eventually get replaced as the player levels but often these epics with set bonuses can last till reaching the new level cap, where they may eventually be replaced by level appropriate rares or even new epics.

      TLDR for the impatient bastards: What does this mean for D3 ? If you were able to get high quality gear from Inferno (and to a lesser extent Hell), you won’t be dumping them immediately for the common magic items in a new expansion and WoW is a good case study of that.

      Power creep is difficult to avoid in attempts to dazzle players in a new expansion. The fact that the char at the end of an expac is expected to be more powerful than before an expac is pretty much the cause of it. As for not expecting people to reach Hell or Inferno, I highly doubt it. Players have been shown to do nearly anything that is better for them in terms of content progression. Ie. if they can’t reach inferno or hell with their shitty homebrew dual wield staff warrior or watever bullshit, they will just google and follow a “best” warrior build that will help them creep into those difficulties, subject to skill level.

      • I have to disagree with you somewhat. While I cannot speak of epic PVE gear, when it comes to PVP ditching your epic lvl 70 PvP gear for Cataclysm greens means doubling all your relevant stats except for damage reduction. But when you hit twice as hard and have twice much life, who cares about damage reduction anymore? Hell, even lvl 80 PvP weapons are subpar to lvl 77 cata greens. 

        Also, there’s a reason there MUST be some power creep. Often times players return to WoW for the expansion content. If their current epic gear will still be superior to new quest rewards for too long, there are not short term incentives to continue to play. 

        I also think dismiss the “ARPG <> MMO” argument to easily. In WoW, if all your characters are lvl 50, you can hardly experience any of the latest expansions content (outside new professions and some new low level quests). In Diablo it doesn’t matter if you’ve never gone past normal, you’ll still be able to see most of the next expansion content. And this is precisely because Diablo is fully instanced while WoW is a persistent world where you cannot have end-game content instanced at 3 or 4 different difficulty levels.

  5. “Blizzard to steeply discount Diablo III  after the initial rush of sales tapers off, since they’ll make more money long term based on having more people using the RMAH. Devious!”

    Valve did exactly this with Team Fortress 2. Made it free with the hope that they will gain money from people who buy their in-game items.

  6. I disagree that piracy protection is a “bigger factor” to being online-only. I would wager the RMAH is the real reason:
    1) Guaranteed market penetration for RMAH and other ATVI products/cross promotions
    2) Guaranteed dupe protection (i.e. item drop code is always server-side)
    3) No open Battle.net to scare off anyone from the RMAH
    4) Ever-evolving items in the economy to promote trading and increase profits. A win-win for everyone! We get updates, they get cash 🙂 🙂  happy happy!
    However, piracy protection is a big plus to this model.

  7. Decent video but a lot of his stats were off and as Flux said, I don’t think the justifications he makes about why Blizzard did an RMAH is completely correct.

  8. Flux your bullshit is starting to peek through.  I don’t mind anyone advocating measures to counter piracy its been proven over and over that the so called “lost” sales is a non starter.  I love the Diablo series as much as the next fan but you constant bowing to the developments is tiresome and betrays how vapid your  erudition is.

    • Your thesaurus is misleading you, and you sound like an idiot. You also have zero reading comprehension.

    • Reminds me of that episode of Friends when Chandler gives Joey a Thesaurus on his laptop:)  Even the extra space before erudition betrays his copy paste from dictionary.com 🙂

    • Can we get the people who say this site sucks because all I do is hate on Blizzard, and the people who say this site sucks because all we do is kiss Blizzard’s ass, in a cage match?

      Admittedly, the first group would probably outnumber the later, but perhaps sheer ferocity could even the scales?

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