Michael Pachter on the RMAH


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 (DiabloWikiRMAH). 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 DiabloWikiRunestones with DiabloWikiGems – 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.

Tagged As: | Categories: Auction House, Economy

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  1. We’ll see once the game actually releases – besides we get free postings every month / week don’t we?

    • You mean free auctions? I doubt anyone will be able to compete against people paying to list their auctions. There will be thousands and thousands of offers, what make you think your offers will excel the offers of the other players? And when you can’t you will waste all your free auctions without selling a single item. When you get a new wave of free auctions the same will happen and so on…

      People thinking they will manage to use the auction house without ever spending a dime will get very frustrated.

      • Well the idea would be to only use your free auctions on really good items. The downside is…you don’t get to use those items yourself if you want to sell them. So every time you find a super rare item you have to pause and think “Should I wear this, or sell it for real money?” That is the only real problem I will have with it :/

        • That if items are Bind on Equip, if they are not (all evidence so far points to they are not) we can use until we get better then flog the item.

          • But that will also lower the value of the item when you try to sell it, raising the change your auctions will be unsuccessful because once you used an item for a long period of time more and more items of the same type will be discovered by other players. The only items that will be easily sold in the AH will be the Uber ones but I don’t see any reason to sell them if you are a normal player and not a chinese farmer.

            I still think Blizzard should remove listing fees and give everyone a large, but still limited amount of auctions to prevent item spamming, so all players can use the AH in its fully potencial. Personally I hate all kinds of item selling but I would tolerate it in D3 if I could freely use the AH.

  2. We get free listings yes, they talked about each week but don’t know if its final

  3. If I could predict the future, I would say free listings are on the “wish list.”
     

  4. I think RMAH is about as inconsequential as he explains it.  The free listings are like the first free hit just to get you addicted.  That said, you will need a real account full of money to back those free listings with paid listings.

  5. Michael Pachter is a fucking idiot, and the fact that you even bothered writing anything about him is embarrassing.

    • I don’t usually agree with you, but that interminable run-on sentence that makes up most of the third paragraph just sealed it. I don’t think I’d trust this guy to talk to me about car wash packages, much less economics.

      • I must admit, his analysis was pretty terrible and his knowledge of Diablo was little to non-existent. He kept making ridiculous examples that sounded like he thought it was World of Warcraft.

      • I haven’t read the whole piece yet, just this excerpt, but as people keep IMing me about how bad it is, I fear I will not enjoy the experience.

        Based on those messages and the comments here, I suggest a name change to Michael “Trash Com” Pachter. 

  6. I can prove him wrong with one of his own quotes:

    “I think gamers are going to like it”

    Dude knows nothing about the gaming community.

    • well considering how well 3rd party sites did selling D2 items and how well free to play mmos do selling items I don’t see why you would think the gaming community does not and will not like the RMAH

      • It’s simple. Gamers don’t like anything.

        • “It’s simple.  Readers of diablo.incgamers.com don’t like anything”

          Fixed that for you.

          I don’t know Michael Pachter from a hole in the wall, but the fact that he doesn’t necessarily know the difference between a rune and a gem has nothing to do with his analysis, which if you know anything about economics is fairly on target.  Face facts, RMAH has become the defacto reason for anything Blizzard does per the community.

          Game delayed?  RMAH
          No general chat?  RMAH (and I haven’t seen any of the so-called luminaries on this site come out and apologize for their nonsense tinfoil hattism that surrounded that miscommunication by Bashiok)
          No more crazy unique deaths?  RMAH
          Removal of scrolls?  RMAH
          Town Portal button? RMAH
          Re-worked runes/skills?  RMAH

          Seriously, this has been going on too long.  Blizzard is going to release a great game, and I expect to see none of you internet forum superheros coming clean to admit all your nerd rage was completely unnecessary. 

          Captcha: ticked off

          • Please cry into your diary of heartbreak even further over what was obviously a joke.

            But on a serious note, this “analyst” is truly an idiot.

    • I disagree. LOOK AT ZYNGA.
      Yes, you may argue that they are not what you mean by “gamers” but then, you’re up against 50 million people who think they’re right.

  7. So you say that everyone hates the RMAH?

  8. I know he’s pretty much a clueless bumbler, but I’m kind of embarrassed on his behalf when he says stuff like “those guys are going to need that rune badly because you are getting to get your ass kicked by whatever the next bossfight is if you don’t have the rune.”
    Even throwing aside really obvious points like runes not really having that kind of effect on the game, has there ever even been an RPG-esque game of any sort where one item was the difference between success and failure? I mean sure, there are sometimes quests which have items, without which the quest is not completable. But even where there are things like hard resistance caps for content, there’s not one item which is barring access. I’m amazed and appalled that he can get away with saying stuff like this…

    • Hahaha, that stupid the only time someone going to need to buy an item to win is if they are a complete fool, or if they been D2 style rushed and therefore got no good items at all. Even then there’s no reason to buy item A instead of item Z.
      The other group are the ones who want item X for some reason like to complete a set.

  9. But if the game world is ugly as hell then why would anyone want to invest money into a game they dont want to hang out in? Are we all really gonna be happy just grinding inferno and some investing money to proceed faster to find items faster to sell more faster…$$.. Might work actually even tho the game looks like my @$$hole

  10. This really wasn’t worth reading.  This guy brought absolutely no insight whatsoever to the table.  He wrote a crappy article that a 5th grader might do better at.  So much for being an “Industry Analyst.”
     
    The tl;dr for this article is basically, “Blizzard’s idea for the Auction House in Diablo 3 is a good idea and I think it will be great!” I can’t believe this guy is paid for what he “does.”
     
    edit: Apparently I’m behind the times and many people think this guy is an idiot. Surprise.

    • The article isn’t that crappy, he was just stating the ovious (he has read elsewhere). So much for being a PAID “Industry Analyst.”

  11. tl;dr.
    BTW, im totally confident about so Pachter is just old moron yet sometimes he tells interesting things.
    Anyway, he can tell only two kinds of things – being capitan obivious or being moron.
    Im really dont like to see his quoting at incgamers.
     
    to not be too oftopicable:
    My opinion on RMAH is that its the only possible solution and it also can make money for both gamers and blizzard. There is always peole who want make money and morons who want spend money. If not RMAH they will find or make their own ebays and so on. Because RMAH devs can at least control economy and dont let it collapse.

  12. Simple. I don’t give a f*ck about RMAH. I will rather farm four hours for one item (which is pretty fun by the way) than pay any additional dollar in game that I already paid with my money.

  13. The RMAH, quite simply, is a new low in gaming.  And that’s is much attention as it deserves.

  14. I think there’s no need to analyse this drivel, but this part cought my attention.
     
    “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.”
     
    Expanded to WoW? Did he even play WoW? First of all, you cannot get any good items outside of raids. Secondly, Nearly all of them are Bind on Pickup, which aleready cuts the possibility of creating a market on high end gear (and the few Bind on Equip drops that are useful will get outdated really quick). So what, he sees sellable gold? When gold in WoW has no use whatsoever? And is so freaking abundant that it has almost no value?
     
    Also, money based transactions in a subscription based game? With expansions you have to buy for a hefty sum? And micro transactions? I don’t think even Blizzard would be able to pull this off. They would get lynched by everyone who has a few working braincells. But there are idiots who will buy into this crap, yet again. WoW will remain a massive cash cow – And Bobby will remain Smiling.
     
    I dunno who Pachter is, but he seems to be a cretin.

    • I think you got that wrong. What he (probably) means is that – once WoW is nearing its end and “Titan” takes over – the subscriptions will be replaced by a RMAH to further finance the old MMO. Plus, Blizzard can alter the whole BoP model as well then.

      • I’m sorry, but you made a pretty interesting prediction and gave Pachter all the credit for it, when he’s clearly clueless. I doubt that he even knows that there will be Titan.

        • Azzure’s analysis is 1000x better than this clown. I’ve never heard such garbage in all my life. Has he even played a Diablo game?

  15. I always thought this guy was a joke, haven’t paid attention to anything he’s had to say in years and it seems I’ll continue to ignore him.
     

  16. Most people will probably only buy/sell gold on the rmah and use the gold ah imo

  17. I suggest IncGamers create a videocast called Azzure-attack! and show this guy how it’s done!

  18. “i think i think i think”
    I think what he says is either obvious “i think there are people that are going to find runes and people that are going to sell runes and people that,…” or so vague “i think there are people that are going to find runes and…” or just wrong “i think the people that are going to rush to farm runes will need runes the most because else they can’t kill boss x and progress” that his opinions about the matter are completely irrelevant.

  19. The revolution in D3 is not so much that you HAVE a real money auction house to trade … But the fact your loot and mats will get a real money value attached to it.

    And that real money value will be set by the players themselves.

    Trust me, this real money value added to an in game dungeon crawler with gear chase and challenge … Is going to be … HUGE.

    As Pardo said: players will keep playing with such a system LONG TIME after they already hit level cap and gear cap.

    D3 will be published … And soon the rest of the bunch will be history.

    Of course Wow will transfer to this system over time as will Titan.

  20. I dont like it because Blizz has the Monopol. 3rd party sites are in  competition to each other with all consequences (building an awesome UI may give one site an advantage for example)

    EDIT:

    OOps this should have been a reply to this

    JamesL:
    well considering how well 3rd party sites did selling D2 items and how well free to play mmos do selling items I don’t see why you would think the gaming community does not and will not like the RMAH

  21. A tale told by an idiot, full of sound and fury, signifying nothing.

    Nice article full of rhetoric and meaningless statements. 

    “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.”

    What does that even mean? Why again don’t I have to worry about paypal (in the end I still need to cash out with them don’t I…).

    Honestly I feel like I just read a 6th grader’s oral report on his favorite new video game.

  22. Ideally, you want to trade items in gold to avoid the fees and then trade the gold in large quantity for money. That way, instead of paying a fee for 100 items, you pay the fee for the gold transaction alone.

  23. “Now no one has a computer faster than a PS3.”

    Are you ****ing kidding me? /headdesk Stopped watching it after that.
     

  24. I really hate it when people like him who claim to be involved in the gaming industry, even though its the financial side of things, to start spouting information on a game that he clearly has done little to no research on.

    It takes less than a minute to go read about runes to know that they aren’t meant to be socketed into gear. Let alone his view on what he thinks on how those mechanics work in the game. Ive watched his show for a long time, his knowledge on games is piss poor on a regular basis. It’s embarrassing really.

    It’s a universal thought process, that if you don’t know what your talking about, and don’t care to read about it so you are sufficiently well informed, then you should keep your mouth shut.

  25. I had never heard of this guy before this post, so when I saw his image on the embedded GT video, I thought to myself: “Huh… A middle-aged guy analyzing video games. This should be refreshing or at least somewhat interesting.” But then I actual read what he had to say and thought to myself: “F***. Just what we need, another idiot that people give more credit than he deserves.”

  26. There are examples of games that look like utter crap but still can manage to rake in some hefty cash. One example is Tibia, a freemium game wich limits nearly 70% of its end game to premium players. It looks like crap but still brings in money. The game is highly addictive, and so will D3 be. In the end its all about money. Blizz wants to make money. RMAH is a smart way to make the money that used to go to third party sites go to them. Its a great idea from a buisness point of view. A shi**y idea from the gamer point of view. Honestly i hope it worls out ok. I hope people will be buying and selling and the people who are really into it get self sufficient at it at one point. At that point u’ll be selling and buying without having to drop more (or alot more) money than ur initial investment. And by initial investment i mean the gear that makes you take on inferno difficulty with less of a problem making ur farmning faster in return making you money faster.

  27. Michael Pachter. A hack and con-artist if Ive ever seen one, and also the most famous gaming analyst in the world. I think that says a lot about gaming journalism in general.

  28. “I think” “I think” “I think” Ok, we get it, these are your thoughts. You don’t have to say it every time.

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