Wednesday, June 4, 2008

Steven Davis (PlayNoEvil) Interview: Risks and Opportunities of Gold Farming for MMORPG companies

How would you describe the services you and your company can provide for the MMORPG industry?

Our company, IT GlobalSecure, is a IT security company that provides game security engineering services, training, and products to the game industry. We provide anti-cheating software, SecurePlay, and I write the game security blog PlayNoEvil.

Game designs like Second Life and Project Entropia support and even encourage the exchange of virtual currency for real dollars. Which risks and opportunities do you see for the game companies in these cases?

The biggest risks the online game industry faces related to player-to-player transactions is not taking virtual items and virtual currencies seriously enough. Players certainly do. Criminals do. And governments are beginning to as well. According to one report, a World of Warcraft account is worth more to a thief than a credit card number. That is both impressive and frightening.

I think the largest untapped opportunity is to figure out how to turn gold farmers from a customer support problem into a business asset. This is an open opportunity that really interests me.

What are your thoughts on SOE's "experiment" with the Exchange Servers that allow those transactions on specific servers? Is there a take-away message for other game companies?

As I wrote at the time, SOE seems to have shown that bringing these transactions in-house substantially reduces their customer support costs. Basically, RMT went from being the source of 40% of their support calls to 10%. With those kind of savings, even if Sony charged 0 commission, they would come out ahead.

Players call the game company when they have problems. No matter if they are violating the Terms of Service or not.

Currency sellers argue that RMT helps keeping casual players as subscribers of time-intensive games. One might also think that for every RMT account game operators ban, a new copy gets bought. How do things really look for the MMORPG companies that do not permit RMT? Are they profiting more of it than they admit?

No one has done a systematic study on the effects of RMT or effectively eliminating it from a game so it is hard to tell. That being said, there are obviously a lot of gold buyers out there who are paying subscription fees as well and seem to be getting more enjoyment from the game by using RMT services.

The game copies bought are probably not the biggest factor. I suspect customer support costs are the driver. Obviously, a good number of people find the behavior of gold farmers annoying enough to complain to the game companies - and so they respond accordingly.

How do you think will this market develop in the future and what are the deciding factors?

The biggest trends in this area are towards eliminating the need for gold farming by changing games to a Virtual Asset Purchase model. This is rapidly becoming the dominant model in Asian games. Basically, everything is purchased by microtransactions with the basic game free to play. Since you can buy everything from the game company, the benefits and opportunities for gold farming plummet... and, for the game company, free game play means more customers. Games like Nexon's MapleStory are probably the future.

There will always be subscription games... and they will likely always have gold farming. Eve Online is interesting in that everyone is gold farming - its mature and sophisticated economy pretty much means that gold farming does not cause as much trouble for regular players.

There are a couple of kinds of games that will continue to be of interest. You have Magic: The Gathering Online with its collectible card model which is pretty straightforward and then you have games like Entropia Universe and Second Life. I really don't know how these user-created content and player economies will play out in the long term.

Is a switch to asset purchase models the solution for subscription-based MMORPGs that are in decline or failed? Could it work for games like Dark Age of Camelot and Dungeons & Dragons Online? Or is the gameplay or subscriber base of games like that incompatible with this business model?

I just recently blogged about this issue. I think that the virtual asset purchase model could be a great way to revive the fortunes of some older MMOs and expose the genre to new audiences. China's Shanda aging suite of subscription games was facing this problem a couple of years ago, switched over to a virtual asset purchase model and have completely turned their business around. The change does require some rework of the game design... but those costs are insigificant if it can help keep the service going or, even better, growing.

How do you think will US companies react to the success of the Virtual Asset Purchase model in Asia? Do you see US companies developing their own successful products of the same kind or will localized versions of Korean games succeed in this market?

So far, the success with the virtual asset purchase model in the US has come from smaller, independent game operators. The traditional computer game firms seem to have missed the real power of the virtual asset purchase model.

Instead of free games with numerous, low-cost, but useful or fun items to purchase, they are tacking on relatively expensive items to games that customers have already paid full price for. Customers see it for what it is - greed. The Asian "Virtual Asset Purchase" model is free to play - this opens the game up to a much wider audience who can check a game out at no risk... if they like the game, then they wind up buying a ton of stuff. Read Matt Mihaly of Iron Forge or Daniel James of Three Rings to get a taste of the potential of this model in the US market.

Some Korean games are beginning to break through in the US. MapleStory is growing nicely here and KartRider and Audition have a lot of potential. I suspect that the games that are going to cross-over best, at least at first, are the casual MMOs. If the importers start bringing more of the Virtual Asset Purchase games, they may take off. The biggest problems that I have seen with Korean games in the US is that they have not been marketed well. There are a lot of cool games, such as Shot Online, an golf MMO, that could potentially reach a huge audience.

Do you play any MMORPGs yourself?

Alas, I don't have much time to play games. It is more than a full-time job keeping up with what game developers, publishers, gold farmers, hackers, cheaters, pirates, and others are plotting.

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