As fewer and fewer MMO dealers offer 1,000 gold chunks we have updated our default WoW US Gold Chart to track the price for 2,000 gold. We remember when WoW Gold was sold in chunks of 100! Such is the result of the dreaded mudflation in any advanced MMO.

Happy New Year! By now most of our reviews should be updated for 2010. If you have any specific questions are comments about them feel free to contact us at gamerates@gmail.com

Castronova the economist noted for his work on MMO's and a co-founder of TerraNova recently released a great paper analyzing the EQII economy using real data provided to him directly from Sony. It is the first instance of published, peer-reviewed, basic economic tests using actual large-scale data from a virtual world. Some important points from the paper:

"First, the virtual world we studied appears to behave in the way a real economy does. The people there are as rational (or irrational) as we are offline. As a result, there are price indexes, an inflation rate, etc. This suggests some at least rough mapping is taking place for the world's economics, and that maybe, just maybe, these worlds might serve as testbeds for economic research and policy tests.

Second, the results were not particular to one server. A natural experiment occurred in which a new server came online, and it's economic indicators quickly approached and matched those of the existing ones. This suggests the powerful role of code in shaping and directing human behaviors in the aggregate. Another point scored for Lessig.

Third, the data give a much more accurate picture of the real-world value of the assets generated and translatable via RMT markets. Updating Ted's foundational work in the space, we now find that for this world at least, the numbers are lower than previously thought--about $130-160/year, or on par with Liberia and Congo."

What I found most interesting was the documentation of massive price inflation that anyone who has played MMO's is common with. In fact it has it's own name "Mudflation" (MUD standing for Multi-User-Dungeons the sort of first MMO's in a sense). Check out these charts:

This constant increase in money supply even when player population drops (and subsequent increase in item prices as you have too much money chasing too few goods) is a big reason why usd/virtual currency prices are almost always become cheaper (the other factor being that as the game progresses you can farm/earn money at a greater speed thus reducing the labor costs of farming).

IGE's recent newsletter to their customers was titled: "Let's Clean Up the Industry". The letter had a similar goal that we here at GameRates.com are trying to accomplish; the legitimization of an exciting new RMT industry that for too long was run by a bunch of thugs. The following are some important quotes and comments from the newsletter:

IGE® was established because its founders saw a need, to provide online gamers with services they were requesting at a fair price, with real customer service and with rock solid customer guarantees.

We personally know the founders of IGE (Brock Pierce & Alan Debonneville). Alan would later sue Brock for sort of screwing him out of a great share of the business. That lawsuit resulted in a huge document that more or less details a lot of the shady things IGE was doing at the time and how crazy Brock could be. Least we forget, Brock got his start first in Disney movies and later was a founder of Digital Entertainment Network (DEN) an internet startup during the bubble years that failed when it's three founders (including Brock) were engaged in sex scandals with underage boys. Furthermore, instead of fighting the charges they fled overseas and were living on a houseboat hidden in Spain evading Interpol. What better escape that nightmare than EverQuest (where IGE got started and where Brock met Alan)! In Norrath no one knows you are responsible for losing millions in investor money and are fleeing sex charges! It was Brock and IGE's early practices that created the criminal/thug image of RMT!

In the 7 years since its inception, the RMT industry has evolved greatly. Today, it is not driven by gamer-to-gamer trades. Instead, it is a billion dollar annual market place, with the majority of currency provided by professional “farmers” working in third world countries. While this has brought the convenience of more inventories for purchase, it has also brought with it a host of problems. The purpose of this newsletter is to discuss those problems, and what we can do together to help solve them.

The good news is that IGE have evolved a lot as well. It's under new management, Brock isn't involved, and  the company has made massive changes to shed it's old image. The new IGE is nothing like the old IGE and if anything it is an example of a more transparent ethical RMT company. However, we find it disgraceful they would start a newsletter about "cleaning up the industry" with a statement about how much the founders cared about the customers and low prices.

We believe that fraud hurts all of us. Unfortunately, because the industry is largely unregulated, and gold sellers are often located in countries where it is hard to prosecute fraud, there have been too many examples of abuse over the last few years. We would like to work with you to change that.

True.

Knowledge is power!

Knowledge is power? Come on, your customer's aren't 5th graders! I know this is most likely due to cultural/ESL factors of whoever wrote the article, but it just strikes me as silly! Knowledge is power! Right on!

We recognize that there is a significant shortage of trustworthy information available for you (the customer). It is practically impossible to find recommendations from experts that allow you to make sound decisions about where (and from whom) you can safely purchase virtual currency. Fortunately, a few excellent resources are emerging. Our favorite is www.wowgoldfacts.com

Maybe we are just bitter that they didn't give us a shoutout.

To correct this, about two years ago, we began quietly providing real insights to our customers regarding virtual currency supplies and industry matters as part of our commitment to ‘clean up the industry’. If currency is scarce, we admit it. If prices are moving up or down, we admit it. If a refund is requested prior to delivery, we give it. For years, we have taken a strong stand against spam and supplier fraud. We require those who work with IGE® to adhere to these same standards or we stop doing business with them. Period.

Not lying to your customers is a good thing and GameRates has long preached the need for greater transparency in the industry.

In January, IGE® began reaching out to competitive gold sellers, explaining our goal of building a group of trusted member sites dedicated to standardizing the industry, and stopping all fraud and abuse. Self regulation worked well for Hollywood as well as the video game industry. We think it will work just as well in RMT. We began by eliminating sites which don't meet the standards set above as well as those with histories of abuse, specifically; buying currency from suppliers who are known to commit fraud, account theft, dealing in stolen credit cards, power leveling abuses where customer accounts are used to farm currency, black hat SEO and SEM techniques which hurt everyone by driving up costs, false advertising, etc.

We are pleased to put forth below a list of companies who conform to the standards outlined above, and from whom you can buy with confidence. There may be other companies that meet these standards, and if so, we will happily recommend them. The list below is not meant to be complete or comprehensive. It is simply the list we have today. These companies operate with high standards of business ethics and you can purchase with confidence, knowing that if there are issues, they will work with you to resolve them fairly. You may ask, why in the world would IGE® recommend that you shop at competitive sites? It is because we believe the issue of “cleaning up the industry” is more important than competitive worries. We are confident that we can, in a fair and clean market place, earn your business.

The sites which we own are denoted by an asterisk (*).

Sites which you can trust (listed alphabetically):

1. www.EpicToon.com
2. www.Gamemasta.com
3. www.IGE.com*
4. Mogs.com
5. www.Mymmoshop.com
6. www.Mysupersales.com*
7. www.RPGtrader.com
8. www.Vipgamer.com
9. www.Videogamegold.com
10. www.WoWgoldpig.com
11. www.WoWtreasures.com

Our message is clear - You have the power to regulate this industry by only buying from trusted sites.

I think this is a great idea. I also like how they note the sites that they own with an asterick. The old IGE would have done this and then just listed 11 sites they owend. We are going to go through and do some fact checking on these sites and see if we can add them to our review database. Overall this is a great step forward for the industry and seems to be more than just a PR ploy.

According to a new study by research firm Magid Associates that was commissioned by Playspan 12% of the population have purchased virtual goods in the past year.

The survey also discloses that 46% of virtual world users and 33% of iPhone users have purchased virtual goods.

The vast majority (51%) of virtual goods buyers could not recall the amount they spent on virtual goods in the previous year. Of those who could recall, 27% said they spent less than $50 while 15% said they spent over $100. The average amount spent was $30. 

The survey was conducted on April 20-25, 2009 with a representative sample of the U.S population.

We just published a new review of the virtual currency seller GameGoody.

There has been much speculation that the global recession would cause an increase in crime. However, nothing has been said about an increase in virtual crime. That was until a player robbed Eve Online's biggest user run banks:

"Facing real world debts, a trusted figure in a popular online game stole money from the virtual bank he ran and exchanged it for cash through the black market.

The CEO of EBank, a 27-year-old Australian tech worker who identified himself only as Richard and used the online name Ricdic, embezzled about 200 billion interstellar kredits, the game's virtual currency."

Eve Online is known for letting it's players "role-play" crooks for a more authentic experience.

"He broke the rules of the game by exchanging the stolen virtual funds for $6,300 Australian ($5,100) with players who preferred to buy virtual money rather than earn it playing the game.

Ironically, if Ricdic had merely stolen the online money he could have stayed in the game. But exchanging the virtual cash for real dollars broke the rules and CCP banned Richard's EBank accounts."

And this is why companies keep spamming people:

"He said a spam email for a black market website that traded online money for real cash popped up on his screen, prompting him to exchange the virtual cash for real money to cover a deposit on his house and expenses related to his son's medical problems."

Here is what we don't understand however:

"Asked if he had any regrets about the scam, Richard said he felt he let down his fellow EBank staffers, many of whom he considered friends.

"I'm not proud of it at all, that's why I didn't brag about it. But you know, if I had to do it again, I probably would've chosen the same path based on the same situation," he said."

Other players could have choosen to sell the currency as well and in effect Richard stole that money directly from other players. Even if it is a game, if you play poker with a bunch of friends and you steal a few extra chips from the pot, you are still stealing. With Eve Online it is a tad bit different as the rules of the game actually allow you to steal from others, but just because the authorities of a game don't punish you for it... doesn't mean what you did wasn't wrong. If you want to sell your virtual currency to pay medical bills then sell your own virtual currency. Don't use your power as head of a bank to screw over a lot of other real people who trusted you.

There still seems to be a great deal of disconnect that just because the person on the other end is represented by a virtual avatar that they aren't actually another person.

According to today's New York Times:

"HANGHAI — The buying and selling of the make-believe currencies used in online gaming has become so widespread that Chinese authorities fear it will affect the real economy. To quell that threat, those authorities said on Tuesday that they had issued new regulations aimed at restricting the trade and use of virtual money.

....Last year, nearly $2 billion in virtual currency was traded in China, according to the China Internet Network Information Center. Some experts say they believe there is a much larger underground economy in the virtual world.

......On Tuesday, China said that new regulations would restrict the trading and use of virtual money, and that virtual currencies would be banned from being exchanged for goods."

The official statement can be found at China's Ministry of Commerce.

The problem China is facing is that users have started to take virtual currency such as the widely popular QQ coins and exchanged them for real goods and services. This in effect bypasses the government's highly regulated currency which is subsequently seen as a threat to government control.

Via VERN: Dr Jack Qiu from the Chinese University of Hong Kong; who has been a regular observer of gold farming and other informal sector activities in China, observes four phases of Chinese gold farming:

"1. Globalization (c.2003-c.2006)
The growth that we are all aware of, serving the global and regional games market

2. Localization (c.2006-c.2007)
A very rapid expansion of gold farming serving the local Chinese market, spreading West from the Southern/Eastern coastal origins of gold farming.  In particular, related to Shanda's Legend games.  At least some of the livelihoods created in this way were "playbourers" who received payouts from Shanda itself.

3. Partial Decline (c.2007-c.2008)
A severe decline of gold farms ("workshops") serving the local market for the Legend games; particularly due to a furor over the business model that Shanda had been using, and a notorious case of "gold slaves" in which students at a South China university were found to be forced by their professors to undertake unpaid "internships" if they wanted to pass their classes.  These involved gold farming either all night (male students) or all day (female students).  As evidence of the decline, Jack cites the example of  his own home city of Wuhan (popn. c.6m), which had some 4,000 "workshops" that grew up during the second phase to serve the local market but which now has few, if any.

4. Current State (c.2008-date)
Gold farms serving the global market remain as, too, do farms serving the local market.  The latter particularly represent a very "footloose" form of capitalism.  Footloose in the traditional sense of readily closing down operations in one place and opening up in another that has low wage and low rent costs and has recently obtaining decent broadband access.  And footloose in the sense of games.  The workshops will target a new or growing game, and try to find ways to make money out of it for a month or so.  If it succeeds, they stick with it for the moment. If not, they move on to the next game. "

Weirdly, we had never heard of the "gold slave" controversy, although a lot never makes it to the western media.

What the War on Drugs and Virtual Game Currency Have in Common

Has the “moral” war on virtual currency created the same harmful behavior we are seeing in Mexico from the war on drugs? 

Recently, Steven Davis CEO of SecurePlay makes the strategic case for limiting the use of the Banhammer on virtual game accounts:

“I am not a big fan of banning. "The Banned" are (usually) paying customers, an issue I discussed at length recently in The Cost of Punishing Cheaters on Microsoft's Xbox Live. Even if The Banned one is not currently a paying customer, they are sufficiently interested in your product to use it.”

In particular he makes a comment about banning and the effects it has on secondary markets:

“Banning motivated players encourages even worse fraud. I would argue that the transformation of nuisance gold farmers into much more dangerous and damaging gold frauders was partially the result of banning.”

As we’ve discussed before banning gold farmers doesn’t really decrease gold farming. It merely raises the prices of gold (and usually only temporarily, as Mudflation always wins out). If anything banning can be seen as an covert tax on gold farm operations both in time/virtual currency (the time required to get the virtual currency and level the characters that were lost) and a monetary tax as the gold farmers have to purchase brand new game keys from the developer to start farming again.

Furthermore, almost every large MMO developer knows that a significant portion of their playerbase engages in secondary markets. This is because a large portion of their playerbase simply doesn’t have the time nor willpower to grind away at poorly designed boring game mechanics. This isn’t because developers are sadistic, rather it’s cost issue. You can either make a player “farm” an event 500 times to get desired effect X or you can create 500 fun original unique events to achieve the same result. Both take commitment and dedication to beat, but many people will pay someone else to play the repetitive boring event, but people will pay to play the fun creative events. No one pays someone to beat a fun game for them. There aren’t any companies that specialize in beating Halo 3 for you and taking a screenshot of the ending credits. (One such alternative to the content vs. cost issue is to outsource some of that work to the community, but that’s a different subject.)

The point is that some of these game mechanics are so ridiculous players are willing to spend hundreds of dollars to bypass them. However, if you let everyone bypass the treadmill the more hardcore portion of your community, the “early adopters” that often brings their casual friends into these games, blow through your game in a month, trash it, and move on to another. If anything secondary markets allow developers to market to different target markets at the same time multiple target markets the same way movie theaters create senior discounts (In this case you have the a movie showing that cost the same amount if there is one person watching it or if there are one hundred people watching it similar to a server of an MMO. The owners don’t want everyone to pay the lower price that would fill the theater as the younger people would be willing to pay more. However, the majority of seniors on fixed incomes can’t pay that higher price. If you just charge the higher price the movie theater won’t be full. So you create two payment systems and discriminate based on age which is hard to fake, therefore filling the theater and making the maximum revenue).

These casual players unlike gold farmers are not as likely to start a new account and continue playing the game if they are banned from it. As such “virtual currency stag operations” usually go after the suppliers and not the users.

To push the drug war analogy further, I’d agree with Davis that the war against secondary markets has weeded (no pun intended) out the small legitimate local sellers (who a banhammer bankrupts) that were prevalent when the secondary market wasn’t so heavily persecuted. In the profit power vacuum that followed the lowest common denominators often gained control. It takes certain connections to keep coming up with ways to mask your ip traffic, acquire massive new accounts with different addresses, and continue to find labor cheap enough that a ban doesn’t bankrupt you. Notably, these connections tend not to be available to the smaller mom and pop shops or the player selling a bit of gold on the side. The stronger the use of force against the gold farmers, and the further and further underground the industry is pushed the more and more shady people end up running these organizations. The Mexican Drug War provides a potent real life analogy.

The formation of GameRates was largely a response to such shady people taking over the secondary market.

However, I still think banning can be used as a tool to discretely rack up the costs of harmful virtual currency sellers without a full legitimization. If a virtual currency operation is constantly spamming, then developers should do everything possible to link their accounts together and ban them at every chance they get. However, those that are not spamming, annoying players, kill stealing, etc. are allowed to slide. This sends a strong market signal and once the farmers realize this they will start engaging in behaviors that doesn’t trigger the Banhammer. Perhaps the problem isn’t the Banhammer, but the random and untargeted use of it against the entire virtual currency secondary market instead of specifically targeting harmful behavior.

This is probably because the war on drugs and the war on virtual currency are both sort of wars of morality (Which makes Mark Jacobs virtual currency's version of FBI Director Robert Mueller). In the virtual currency wars some players that aren’t buyers often consider buyers “immoral” and think it’s unfair that they have to spend hours farming an item while someone else took a quit shortcut to instant gratification similar to those who find “joy” in a pill. Restricting others choices due to jealousy is childish at best. Furthermore, it misses the point that the journey is often much more important than the destination. If you take the shortcut because the journey is "hard", but if it is hard because it involves team bonding, skill, lore, puzzles and challenge which creates an amazing experience, then there really isn’t any reason to complain about those who are missing out. It's like complaining about someone reading the end of a great book, or looking up the answer to a puzzle instead of solving it. However, if the journey is boring and not even fun and is just a treadmill to maybe get to the fun part; why are you on that journey anyways?

The problem isn’t gold buyers. The problem is disruptive gold sellers, and this is who should be targeted. Those that sell and buy gold and don’t disrupt the game any more than someone farming the same items for themselves should not be persecuted. What’s the difference between paying someone to log onto your account and politely farm some items, and you doing it yourself?

The vast majority of virtual currency purchasers would prefer to purchase currency from legitimate operations that don’t harm the game they enjoy so much they are willing to spend hundreds of dollars on. These virtual currency purchases do little or zero harm to the game society just as a pot smoker does zero too little harm to our real society. Just as the pot smoker would much prefer not to inadvertently support Mexican drug cartels and organized crime, the gold buyers doesn’t want to support spammers and kill stealers. Fully legitimizing the market would make both of this possible. If that’s not a political reality, then at least on an organization level the destructive suppliers should be punished and the non-destructive suppliers should be allowed to flourish. In the meantime we at GameRates will do our best to expose those virtual currency sellers that are legitimate and those that are crooks.

For point-counterpoint debate about the ethics and legality of secondary markets check out the following.