Pach-Attack is a weekly videocast where Industry Analyst, Michael Pachter answers questions on the economics of Videogames. This week one of the questions asked him what was the most interesting economic system he has recently seen. At the top of his list was Blizzard’s Real Money Auction House (RMAH). His full quote is transcribed below and the video is after the break. While he’s a little off with the game specifics – I think he’s confusing Runestones with Gems – he’s graspsed the concept behind it.
I think that the Diablo auction house is going to be the most interesting economic system. The reason I think it is going to be the most interesting is it is real money. I think that the geniuses at Blizzard and I mean that sincerely, have figured out a way to monetize exchanges of items in games.
I think that Diablo is perfect for that. I think ultimately that you’ll see that expanded to World of Warcraft. You actually get the gold farmers to participate within games to sell stuff that they mine on EBay. But I think that is a real smart system because you keep everything in-house, you have an auction that is open to everybody.
So I think the idea is if you need a rune for your sword in Diablo, to make your sword more powerful, they are going to populate the universe with, let’s say 125 runes for every hundred players, and the thought is 50 guys are going to find two each and 25 guys are going to find 1 each and 25 guys are not going to find any. The guys that are going to find more are the guys that don’t care for the quests, they worry about finding runes. The guys that don’t find any are the guys that are trying to go through the quests as fast as possible and those guys are going to need that rune badly because you are getting your ass kicked by whatever the next bossfight is if you don’t have the rune. So you’re going to have 25 people that are buying runes and 50 people selling them. It’s a case of guns or butter, supply and demand, profit deal runes are not going to be very expensive if there are 2 for every one buyer.
I think they’re structuring it that way to keep the prices pretty low. The Auction House takes, as I understand it, 50 cents for listing and I think another 65 cents for a sale. If something sells for a dollar that’s not a very good deal if blizzard gets 80 cents. If something sells for 500 dollars it’s a great deal but the idea is that they are going to create an environment where you can sell stuff and feel good about being paid and you don’t have to worry about PayPal or trusting somebody. You don’t have to pick it up, its just going to happen. I think that’s the smartest economic system I have seen and I mean that. Serious props to the Blizzard guys because I think gamers are going to like it. I don’t think anybody is going to feel ripped-off by paying 80cents for a trade”
If you want to just listen to the portion on the RMAH then jump to the 2:00 minute mark. Pachter works as an analyst for investment bankers Wedbush Morgan and is not shy in voicing his opinions when discussing the videogame sector and you’ll often see him quoted when a a big story breaks. He’s not always right with his predictions, but he makes sure he’s heard.