When someone hears that we sell digital items in our games for, at the high end, more than $500, I’m often responded to with questions along the lines of, “Why would anyone buy something that doesn’t exist?” After I quietly sigh to myself, the resulting exchange might go as follows:
Me: Listen, understanding why people value digital items is no more difficult than understanding why people value physical items. It just involves abstracting the idea of value a bit more than you currently consciously do, but not more than you actually do.
Person: Um..
Me: Ok, first, consider that money itself is completely virtual. The paper you hold has no inherent value and serves merely as a symbol of the value itself. That paper hasn’t been backed by anything physical (like gold) in the US since Bretton Woods fell apart in ‘71. Money is entirely virtual and exists only by consensus enforced by the threat of physical force. In no way does the physical object represent any appreciable amount of the value of a $100 bill. What would you use a $100 bill for if the pattern of ink on it wasn’t exactly the same? You’d burn it for fuel or throw it away. In either case, it has virtually no value on its own.
Ok, ok, I admit: This isn’t a real conversation. It’s just a chance for me to present, in brief, the basics of why people value digital content like a virtual sword. Why do you have to be such a whiny little bitch? Why can’t you just accept my sage-a-liciousness and pit me a grape or two? I so enjoy a nice grape. Back to our blatantly fake conversation.
Person: Well, but that’s not a good analogy. Everybody uses money. The fact that money has value is essentially, and literally enforced at the barrel of a gun. The taxman says you will pay him in currency and that your in-kind trades will be valued in currency.
Me: Sure. Money is just the most extreme example. Let’s take a less extreme example. Golf.
Narrator’s note: For those who don’t know the game, golf is a sport involving some metal or wooden sticks, some round ball-type thingies, some holes, and a whole lot of unathletic pretension. It’s sort of like bowling, but for the yacht and horsie set.
Person: Golf? What in the Sam Hill does that have to do with anything?
Me: How much would you pay for 10 awkwardly-shaped metal sticks that had virtually no recycle value?
Person: Ok, I get what you’re saying, but still, when I buy a new driver, I have something physical. I can hold it in my hands, I can put it in my house.
Me: So the context, in that case, that creates value for you is the physicality of it, right? If you can’t touch it, feel it, hold it, lick it, make love to it, it can’t have value?
Person: I don’t do my golf clubs, dude. You’re a sick mofo.
Me: Physicality is a feature. It’s not the thing. That sounds incredibly over the top, but it’s true. It’s the invisible, non-physical, completely virtual context that creates almost all of the value for a golf club or a virtual sword. If you didn’t have the context that is the game of golf and the cultural institutions built around it, those golf clubs wouldn’t fetch $1. As it is, they go for thousands at the high end.
And that’s it. That is literally all there is to it, and don’t let anyone tell you otherwise. When people ask me why virtual items have value, I give them the golf analogy (shortened version), and explain that just as golf’s context has been strengthened by both physicality (an attribute rather than a fundamental, though I realize that sounds either stupid or pretentious to a lot of people) and popularity, so goes virtual item sales in MMOs. People pay for items because the context, which is the game world and community, has been strengthened to the point where they are willing to.
The context is the value. It’s not the item itself. The item only has value when reflected back from the context. Remove the context and you remove the value. Shut down World of Warcraft and your items have just as little value as your golf clubs would have if every culture on earth suddenly lost all interest in golf. The difference, then, in terms of the value of the items is in the fragility of the context. WoW is more fragile than golf, because the points of failure in WoW (Blizzard decides to shut it down for instance) are much more common than in golf (hard to see how golf would suddenly lose its cultural value).
Just remember that if you sell digital content in a game: The context is the value.
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November 26th, 2006 at 4:20 pm
Pingback from The Forge · DRM, Value (and all that jazz)
June 15th, 2006 at 3:19 pm
Hephos
One thing that comes to mind is that if you suddenly loose interest in golf, you could put your clubs on ebay and sell them and get some money back if another player buys it. When you buy a “physical” item you usually have the chance to resell it and get something back (somtimes even more than what you pay).
Out of curiousity (i’m not that into your business model atm) are players allowed to sell things between themselves? For example sell the sword of destruction to another player with RL money? If not… could it not be another way to make even more income to allow them to transfer these items between players by paying a certain transfer fee (size of fee related to the items original value) to the game? Or do you see any fallbacks with this?
June 15th, 2006 at 4:28 pm
Hephos
Actually, maybe it would just lead to less sales and it wouldn’t make up for the loss of new items being sold
June 15th, 2006 at 7:30 pm
Andrew Crystall
Essentially, MMO’s print cash. Now, this cash is usually not (at least by the rules) exchangeable for other forms of cash. The entire idea of a company backing a currency rather than a goverment is extremely interesting to a number of economists I know, mind you…
June 15th, 2006 at 9:23 pm
Sisca
Here’s the one I hear all the time…Why would anyone pay $15 a month to play a video game? Answer, why would anyone pay $50 a month to watch television?
I have to admit that I’ve always thought that anyone that would spend $500 on a virtual item for an MMO was a little off but then I also believe that anyone that would spend $500 for a new driver is just as demented. I guess if you feel you’re going to get $500 worth of fun out of either item then you got your moneys worth and who am I to judge.
June 15th, 2006 at 9:35 pm
damijin
Slightly off topic on the point of item value, but related to the business model that cashes in on that value- I know this is becoming a truth of the genre, this, the fact that our items in game have a value outside.
However, I can’t help but to think how disenchanting this whole scenario becomes for those who grew up with games and real life separated. I know that it looks like a great business model right now, and Korea is the future, right? Well… by at least 12 hours anyway.
But, if this adoption is continued it will seemingly bring us back to the age of hourly charge. Back then, the most important thing was to keep the “high rollers” happy. Keep the power gamers in game and suck their bank account dry hour after hour. With this model we will see a return to the catering of the high spender. Make sure the people who spend money are happy. Over time, this will make the people who don’t spend money so unhappy that I guess we’ll see a return to them as a viable market.
So I guess it’s potentially cyclical. Maybe. I guess we’ll have to wait and see
June 16th, 2006 at 1:30 am
Blake
The simple way to put why someone would buy virtual items is this, It makes their life easier and they enjoy it. No need to go into any more hard thought out details, or any need for something deeper.
People buy virtual items because they don’t have the time to farm endlessly to earn enough gold to buy that epic mount, for example, so they can better do the things that the game offers to them that is enjoyable.
Consumers will consume whatever it is that feeds the enjoyment bug inside them. Virtual items just have less fat content then tangible things.
June 16th, 2006 at 3:23 am
Damien Neil
A better question: Why would someone pay $500,000 to be allowed on a golf course?
June 16th, 2006 at 3:34 am
Matt
Hephos wrote:
One thing that comes to mind is that if you suddenly loose interest in golf, you could put your clubs on ebay and sell them and get some money back if another player buys it. When you buy a “physical” item you usually have the chance to resell it and get something back (somtimes even more than what you pay).
That is also the case with most RMT transactions on games like WoW or Everquest. Granted, that is not the case in our games.
Damien Neil, down below, points out that some people pay $500,000 to be allowed on a golf course, and sometimes, those memberships are not transferable. They also represent nothing physical.
Damijin wrote:
But, if this adoption is continued it will seemingly bring us back to the age of hourly charge. Back then, the most important thing was to keep the “high rollers” happy. Keep the power gamers in game and suck their bank account dry hour after hour.
You’re using some pretty loaded metaphors there! I used to play MUDs that charged by the hour, and I never felt ’sucked dry.’ I was more than happy to pay because I absolutely loved playing them.
Charging by the hour is -not- the future in any case, so I wouldn’t worry about it. There is a very high psychological barrier to entry in a pay-by-the-hour scheme, and the only real reason they existed in the first place was that network resources were very expensive back in the day.
June 16th, 2006 at 3:58 pm
moo
What is the value of an hour of entertainment?
How exotic does that entertainment have to be before it’s worth $5, or $10 to you?
I can see a two-hour (newly-released, Hollywood blockbuster) movie at the theatre for $10. Of course I can only do that once or twice a month (or I end up seeing really bad movies and/or seeing the same movies more than once).
At $15 a month, I can potentially get 100 hours/month of entertainment out of an MMORPG (or maybe more). Total cost? $0.15 per hour.
Why would people pay $0.15 per minute to talk long-distance on the telephone? But they do. I’m getting considerably more value out of my MMORPG fix (I can talk to any of my friends who happens to be online, or several of them simultaneously — while doing some sort of skill-based virtual theme-park ride together with them!) for one-sixtieth of the cost of that long-distance call.
$500 for an item may seem pretty ridiculous. But what about $50 for a high-end item? Even if it only saves me 20 hours of dull, boring work–that might still be good value. In effect I’m paying someone else $2.50/hour to do that 20 hours of dull, boring work for me.
If you think of RMT as buying a one-time service (rather than buying virtual assets) then there are lots of examples to compare it to.
I hate cleaning my kitchen. I could pay someone else to come in every week and clean my kitchen—probably cost me $20 an hour, or something. If my time and/or comfort is worth more to me than my money… then its a good tradeoff. The same goes for RMT. Which is worth more to you–the $50 for the item, or the 20 hours you’d save if you paid someone else to get it for you, instead of doing the unpleasant and repetitive task of grinding it yourself?
June 16th, 2006 at 8:14 pm
Harrison Rose
The description of value for virtual items follows the rules of economics that start with the definitions needed for the most primitive barter system. A virtual object has a market value when it can be exchanged on a free market. The “central bank”, which is the game, authenticates the currency used for the barter and verifies the accepted reality of the object being exchanged. Until there is a system that allows a virtual item to carry its own self authentication that supports a non-repudiation scheme, then the buyer must turn to a central authority to validate the item in a similar way that they authenticate the currency. This future scheme could also be applied against currency so that a “game credit” could live outside of the game. This is the difference between paying cash or by check. When someone pays by check they are providing the seller a promise that the check is good while cash is a financial instrument with non-repudiation.
There are a number of ways that this can evolve, including a central authority to handle “currency exchange.” I have heard some claims of software under development to support a digital currency. While most people working on this problem are dealing with the real world, such as buying a Coke with your cell phone so that the transaction debits your cell phone’s internal “bank account” and credits the Coke machine’s, it would also apply to the worlds of games.
If there is no market, then it is a closed economy and fundamentally at the whim and control of a “government”, in this case the game operator. As long as the player believes they are purchasing value with a transaction that can not be later challenged, then the purchaser will recognize the risk.
Without allowing market forces to work within the economy, then the purchaser is taking a high level of risk that they are going to get their expected value from the purchase. As long as they are happy, the market for other virtual objects in the specific marketplace of the game will florish. Otherwise it could create a collapse, similar to the bank collapses in the U.S. of the early 1800’s. The U.S. economy has evolved, and so will the general concept within games.
Meanwhile, an enchanted pig knuckle may be worth it to the buyer and lone consumer, but not as an item that carries intrisic value because the buyer can’t turn around and sell it. And that’s not kosher.
June 17th, 2006 at 4:22 pm
Chrissie
Whoaa….you know, I’d never have thought the discussion over whether spending $500 on virtual items is foolish or not was actually this deep (or much deeper than “It’s so worth it!” “Is not, it’s not real and I can play over a year of WoW for it!” “Is too!” “Nuh uh!” “Yuh uh!” anyway)!
Guess I now have fresh ammo for this type of discussion, except I don’t have this type of discussion because I always lie about spending money on MUDs. *shifty*