How Can Developers Combat Secondary Loot Markets?

The California Gold Rush of 1849 flooded the West with prospectors chasing dazzling riches.

It also created a boom market for general stores, taverns, brothels, and government where previously there had been only desert.

If the current boom in the profitability of virtual worlds is any indication, we may be seeing a Gold Rush for by 21st Century standards.

Pixels and Policy investigates how virtual goods dealers are growing rich supplying busy gamers with the rarest in-world items and weapons, and why this stands to change the future of gaming and commerce.

Supplying the Virtual Frontier

Online gaming statistics are notoriously difficult to track, but the number of online gamers hovered around 217 million in 2007. It is entirely likely that this population has doubled after the release of anticipated games like Aion, Fallen Earth, and the expansion of several free-to-play worlds.

Looking at an interesting chart on the number of active accounts in each of the major pay-to-play online worlds, it's clear the ground belongs to World of Warcraft, Lineage, and Dark Age of Camelot.

Other well-known games, including Everquest 2, EVE Online, and City of Heroes make up a smaller share, but have a significant American market that makes them ideal for virtual goods dealers.

With games drawing in active accounts by the millions, it stands to reason that a substantial service sector would arise. Not all gamers will have the time to play through a 40-man raid in World of Warcraft for the chance at a rare sword. For time-pressed players, real money opens up the opportunity for an enjoyable play experience.

From Dave Rosenberg's CNET article, linked above:

One out of two sellers made a sale in a social network game over the last 12 months and earned a median of $50, while one out of four sellers made a sale in a free-to-play game over the last 12 months, with their median earning being $98, or nearly double that on social networks.

Eric Hartness, chief marketing officer at PlaySpan, told me that the secondary market is a boon for games, adding value, real and perceived, to all players by associating a real world dollar value on their playing time, game accounts, and digital items.

What the Virtual Service Sector Means

As noted in a great video clip from the wonderful Virtual Goods News, developers of closed-economy virtual worlds are staunchly opposed to secondary markets in their game goods, threatening bans and deleted accounts if black market trading is noticed.

These threats have yet to stop black market trading, and it's unlikely they will stem the growing secondhand virtual goods industry.

What's obvious is that virtual worlds are losing a lot of money fighting a losing war against online markets in their goods - at least $1 billion by some counts - and the only sure way to prevent potential in-world swaps of illicit goods is to remove trading modules from closed-economy games. 

Does this mean all virtual worlds will eventually have to accept open markets, with U.S. Dollars readily convertible into Warcraft Gold or EVE ISK in a system similar to Second Life's Lindex? The better question here might be: How does one stop a black market without eliminating the ability of all players to trade with each other?

The quickest fix would be to create a sharded server system where specific worlds are designated as "USD->Game Currency," thus allowing developers to profit from the booming interest in transferring real money for game items while preserving the experience for those who don't want the game economy altered by outside forces.

What are your thoughts? Will all games eventually be open-economy? Are there more effective ways to prevent illicit markets in game goods and currency?

Comments

[Zulwiga]

I have a response to this, but it got kind of long for a comment so I'm turning it into a blog post once I have a chance to really think about it.

In summary, there are good ways and bad ways to do RMT, and these concepts have been tossed back and forth since the MUD days. I think Blizzard is on the right track using vanity items rather than essential items to boost its profits.

[Jonmatonis]

I believe Jan Pontzen (December 2009) has proposed a solution. See below...

http://themonetaryfuture.blogspot.com/2010/01/resolving-goldfarming-through-concealed.html

--Jon