The average price for 1,000 gold on US realms was $255, while the same 1,000 gold pieces could be had for about $32 in European realms. GamerPrice examines several possible reasons for this huge discrepancy, including the likelihood that US servers experience greater demand for gold and U.S. gamers have more disposable income. While these factors could certainly explain some of the price differential, GamerPrice believes that they don’t address the huge difference found in the study:

The cost involved in producing (farming) gold on Europe must simply be lower than the cost involved in producing the same gold on World of Warcraft USA. What this means is that Blizzard is policing its American realms far, far more rigorously than it is policing its European realms. The figures are so very different, that they suggest an extreme imbalance, even extreme negligence on behalf of Blizzard Europe. This suggests that in America, it’s actually harder for a farmer to produce gold than it naturally would be, because of an active and ongoing purge of these accounts, and indicating rigid standards, and good policing.

GamerPrice conducted its survey in “early 2007,” and provides server-by-server comparisons of the US and European realms. It’s one of a growing number of providers tracking trends in the game gold market. See the MMO RMT directory for a listing of services providing WoW gold pricing information.

How long will it be until there’s an aggregator of Sparter networks? Who knows. What we do know is that the genie is out of the bottle, cat’s out of the bag, horse out of the barn, and cow over the moon at this point. RMT is here to stay.

I agree completely, as I believe the changing audience demographics of virtual worlds/MMORPGs make this inevitable.

Mark Wallace of 3PointD (and a new Terra Novan as well) believes the launch of Sparter “could spell the beginning of the end of the wild-west atmosphere that currently holds around virtual item sales — though conditions will probably get more messy before they get neater.” An excerpt:

Why is Sparter important? First off, it’s gamer-to-gamer. … The second reason this is interesting is that it’s backed by some heavyweigt venture capitalists, the people at Bessemer Venture Partners, who have backed a number of winners not just in tech but in a range of industries. That doesn’t necessarily spell success for Sparter, but it indicates that a more serious breed of investor is looking at the space these days.

Mark predicts legislation and lawsuits ahead for game publishers and corporate RMT exchanges. It’s interesting that the grey areas around ownership of virtual goods and violations of game publishers terms-of-service, which were cited as a rationale for eBay’s exit, didn’t scare off the venture capitalists. That suggests the opportunity is promising enough that the VCs believe these issues will be worked out in a fashion that allows a white-market RMT business to go forward.

The Ding! Grats!? blog raises some interesting questions about Sparter’s business model:

Honestly, I don’t see how Sparter plans to turn a profit with their high- profile executives. If they really are only getting 10% of each transaction, and haven’t signed other exclusive deals with some of the larger currency providers, they will have to do a huge volume to meet their costs. Being an affiliate for one of the RMT companies typically pays 10% and usually more for better performing sites, and these affiliates don’t have to deal with any headaches that arise from problems during the transaction.

I have no direct information from the principals at Sparter, but it seems to me that their business model is all about the sellers. The sellers are the constituency that seems best positioned to benefit from the Sparter model. If it turns out that game gold suppliers can really make more money through Sparter than selling to IGE and other exchanges, the inventory at Sparter will quickly build critical mass. I suspect the model will involve other products and services before long, some of which will involve heftier margins than the 10% commission on game gold. The hosting and domain industries are examples of using the commodity product to acquire tons of customers and then upselling like mad.

Sparter has a reputation system for buyers and sellers (similar to feedback on eBay) and uses an escrow system to protect buyers and sellers and manage the transfer of goods. There is no charge to list virtual currency, but the company charges a 10 percent commission fee to sellers for every transaction. Now in beta, the Sparter marketpalce offers only currency for sale, and not game accounts or power-leveling services.

The company’s debut comes just two weeks after eBay discontinued sales of game gold, game accounts and other virtual assets. Sparter appears to represent a direct challenge to IGE and other existing market makers, offering gamers the ability to eliminate the exchanges who have dominated the marketplace for goods from World of Warcraft, Everquest, Ultima Online and other games..

“The current market for virtual currency is dominated by large companies that aggregate gold and charge significant mark-ups to gamers,” the company says on its web site. “Sparter allows gamers to trade with each other directly. Essentially, we connect gamers who need gold to gamers who have gold. We started Sparter because we thought gamers and the industry would benefit from a new approach, one founded on the principles of open, efficient, transparent and safe trade. While many companies exist to sell you currency, only Sparter gives you the option of buying direct from gamers and, if you want, making some money by selling to gamers.”

Sparter is also working with IGE, Brogame, MOGS.com and other exchanges, listing their inventory in the Sparter system (and presumably functioning as an affiliate so it gets a referral fee). Sparter believes its approach will result in cheaper prices than those found on major exchanges. “Sparter has built a marketplace where many sellers compete for your business” the FAQ notes. “By creating an open and transparent marketplace individual gamers are on equal footing to professional sellers thereby increasing price competition. Additionally, by connecting buyers directly to sellers, we are eliminating the middleman, making it possible to purchase currency at a cheaper price.”

Because Sparter uses an escrow system, holding the buyer’s funds until the seller makes delivery, pricing may be influenced by how quickly you need the money. Buyers can choose their delivery window, which will in turn influence the price. “Shorter delivery windows usually will be more expensive than longer delivery windows,” according to Sparter.

“Acquiring OGSi is a natural progression,” said Derek Wise, GNi’s president and CEO. “By combining their expertise in the games space with ours in managed services, we achieve increased economies of scale and efficiency to better serve our customers.”

“Combining our two companies clearly strengthens our ability to serve the game industry with innovative hosting solutions,” said James Hursthouse, CEO of OGSi. “We’ll also be taking our ‘pay-as-you-grow’ model into new areas such as interactive TV, video and music services, and social community websites.”

OGSi currently has more than 1,000 blade servers packed into 12 cabinets in 365 Main’s San Francisco data center. OGSi has been developing its game service provider business model since 2004, hosting sites for Ping0 LLC and GoPets Ltd. with the new Hellgate London online game. With its acquisition by GNi, OGSi expects to have over 4,000 additional servers operational for games clients in 10 datacenters worldwide by the end of 2007.

“We’ll be building out these gaming dedicated hosting infrastructure in other data centers operated by 365 Main,” said Hursthouse. “Our goal is to provide the industry with every excuse not to build data center infrastructure in-house. It’s a drastic reduction in risk and cost. Right now there aren’t many publishers that aren’t looking at MMOs.”

The numbers involves in MMORPG hosting are mind-boggling. World of Warcraft, the largest “virtual world,” has more than 7 million subscribers. DFC Intelligence, which specializes in game industry research, estimates that subscription revenue from online games was $2 billion in 2005 and will increase to $6.8 billion by 2011.

The market leader in MMO hosting is AT&T, which hosts both World of Warcraft and Sony Online’s MMOs, and has a specialized business unit for this sector. IBM also has a foothold in this market, operating a grid for the sci-fi MMO EVE Online that has supported more than 30,000 concurrent users on a single shard (instance). Valve Software’s Steam system, which hosts Half Life 2, Counter Strike and other popular games, delivered 10 million gigabytes of data during 2005, representing 50 billion “player minutes.”

Mr. Hani Durzy, speaking for eBay, explained that the decision to pull these items was due to the ‘legal complexities’ surrounding virtual property. “For the overall health of the marketplace” the company felt that the proper course of action, after considerable contemplation, was to ban the sale of these items outright. While he couldn’t give me a specific date when the delistings began, he estimated that they’ve been coming down for about a month or so. Mr. Durzy pointed out that in reality, the company is just now following through with a pre-existing policy, as opposed to creating a new one. The policy on digitally delivered goods states: “The seller must be the owner of the underlying intellectual property, or authorized to distribute it by the intellectual property owner.” Given the nebulous nature of ownership in online games, eBay has decided the prudent decision is to remove the possibility for players to sell what might be the IP of other parties via their service. Mr. Durzy made it a point to say that initial listings of virtual property would not have punitive actions. Their assumption, he said, is that most users break with policies because they’re unaware of them, rather than maliciously. Initial infractions will result in a delisting of items, and an attempt to educate the user on the policy. Persistent disregard for the policies, of course, will result in a removal of the seller’s account.

]]> http://www.virtualeconomies.net/2007/01/26/ebay-confirms-it-no-more-virtual-asset-sales/feed/ http://www.virtualeconomies.net/2007/01/26/micropayments-seen-boosting-virtual-assets/ http://www.virtualeconomies.net/2007/01/26/micropayments-seen-boosting-virtual-assets/#comments Fri, 26 Jan 2007 15:30:35 +0000 rmiller Real Money Trading Business http://www.virtualeconomies.net/blog/2007/01/26/micropayments-seen-boosting-virtual-assets/ The market for virtual add-ons to online video games is slated for substantial growth, according to a study of console and handheld online gaming by ABI Research.

The study predicts that a growing percentage of gamers’ budgets will go towards the purchase of in-game virtual assets such as “maps, game related add-ons, casual game titles, and, eventually, full core console titles.” Micropayments for consoles alone will account for over $833 million by 2011, as console vendors and their publisher partners look to monetize both in-game and game-related assets beyond initial game purchases.

This is obviously a trend with implications for MMO gaming, particularly as we see more console-based MMOs. Having said that, micropayments have been overhyped before, and some of these companiesa re still failing (BitPass, which got $13 million in VC money, closed its doors this week). Read more at PaidContent.

]]> http://www.virtualeconomies.net/2007/01/26/micropayments-seen-boosting-virtual-assets/feed/ http://www.virtualeconomies.net/2007/01/25/ebay-to-halt-virtual-item-sales/ http://www.virtualeconomies.net/2007/01/25/ebay-to-halt-virtual-item-sales/#comments Thu, 25 Jan 2007 23:05:08 +0000 rmiller Real Money Trading Business http://www.virtualeconomies.net/blog/2007/01/25/ebay-to-halt-virtual-item-sales/ eBay has reportedly discontinued all sales of virtual items from online games, according to numerous accounts from traders. This would obviously be a significant event for the virtual economy, as eBay has historically been one of the major methods for traders to sell assets and game accounts.

UPDATE: eBay has now confirmed that it is no longer selling virtual goods. See Slashdot and our follow-up post for more. Additional commentary from Valleywag, Joystiq, Revenews and VTOR.

In his 2005 book Synthetic Worlds, Edward Castronova estimated that eBay hosts about $30 million a year in virtual goods trading. No official announcement or rationale has emerged, but eBay’s decision certainly reflects the challenges real-money trading presents for corporations. Was eBay influenced by conversations with Sony, Blizzard or other operators of MMORPG games? No one’s saying yet. Some accounts suggest that a high level of fraud in these sales has been a major headache for eBay. Market maker Markee Dragon provided one of the early reports. Here’s an excerpt:

As of 2 weeks ago eBay made an internal decision to no longer allow the sales of video game intangible goods. Stuff for World of Warcraft and Sony games has been getting removed from eBay for a long time. but now eBay has decided to make it a blanket policy. No sales of virtual goods for video games will be allowed. There is no official statement made by eBay on this. But when we called our inside sources they confirmed that this policy went into place about 2 weeks ago. since that time they have been Veroing posters of virtual goods. They estimate that they will have all of the virtual goods removed within the next several weeks.

Obviously, this would be a huge development for the virtual economy. The Broken Toys blog has a screenshot of a chat with an eBay rep that appears to confirm that these sales have been discontinued, but also found some auctions that appear to still be offering game gold. Here’s some commentary from BrokenToys:

eBay’s proactively removing RMT auctions is huge in and of itself. However, there’s another side to this: note the MMO being referenced in the CS chat. Note that UO (Ultima Online) is one of the few MMOs that permit RMT, so eBay removing UO RMT auctions would be… pretty huge. Previously, eBay’s official policy is that they would pull an auction at the original copyright holder’s request. Of course, this then mandated a race between an MMO’s CS department and the thousands of RMT dealers to see who could keep an auction up the longest.

If there has been a policy change at eBay, it would likely be good news for IGE, the market maker described recently in Wired as “the Wal-Mart of virtual goods,” as well as many of the other real money trading marketplaces listed at our Virtual Economies directory.

]]> http://www.virtualeconomies.net/2007/01/25/ebay-to-halt-virtual-item-sales/feed/ http://www.virtualeconomies.net/2007/01/23/50-of-wow-users-bought-crusade-in-first-24-hours/ http://www.virtualeconomies.net/2007/01/23/50-of-wow-users-bought-crusade-in-first-24-hours/#comments Tue, 23 Jan 2007 21:16:50 +0000 rmiller Business World of Warcraft http://www.virtualeconomies.net/blog/2007/01/23/50-of-wow-users-bought-crusade-in-first-24-hours/ Blizzard sold 2.4 million copies of the Burning Crusade expansion pack for World of Warcraft in North America and the EU in the first 24 hours alone, making it the fastest-selling PC game ever. At $40 a pop, that equates to $100 million in sales in one day, which is exceeded only by Microsoft’s $125 million first-day total for Halo 2, its powerhouse Xbox title.

Of the 8 million subscribers to WoW, there are 3.5 million players in China, 2 million in North America and 1.5 million in Europe. That means only 3.5 million current subscribers live in areas where the Burning Crusade went on sale. This suggests that up to 65 percent of WoW subscribers in those areas bought the expansion pack on the first day. By the end of the first day of availability on both continents, a total of more than 1.7 million players had already logged in and upgraded World of Warcraft to play The Burning Crusade. Even if we assume that some of the buyers were new players, that’s an incredible buy rate on a $40 product.

“The Burning Crusade has already exceeded even our most ambitious expectations,” said Mike Morhaime, president and cofounder of Blizzard Entertainment. “We’re pleased that so many players are eager to see all of the new content that the expansion has to offer, and we look forward to seeing everyone online as additional players continue to upgrade in the days ahead.”

]]> http://www.virtualeconomies.net/2007/01/23/50-of-wow-users-bought-crusade-in-first-24-hours/feed/ http://www.virtualeconomies.net/2007/01/12/8-million-subscribers-for-world-of-warcraft/ http://www.virtualeconomies.net/2007/01/12/8-million-subscribers-for-world-of-warcraft/#comments Fri, 12 Jan 2007 18:53:37 +0000 rmiller Business World of Warcraft http://www.virtualeconomies.net/blog/2007/01/12/8-million-subscribers-for-world-of-warcraft/ Blizzard announced this week that its blockbuster MMORPG virtual world World of Warcraftnow has more than 8 million subscribers around the world. That total includes 3.5 million players in China, 2 million in North America and 1.5 million in Europe. That’s a ton of players, and clearly represents a huge revenue stream for Blizzard.

How much is WoW making? It’s hard to say for sure, as many of those subscribers pay less than the $14.95 monthly fee paid by most U.S. players. Blizzard’s press release say that subscribers include “individuals who have paid a subscription fee or have an active prepaid card to play World of Warcraft, as well as those who have purchased the game and are within their free month of access. Internet Game Room players who have accessed the game over the last thirty days are also counted as subscribers.” Game rooms (also known as “game bangs”) are huge in South Korea.

WoW is reported to have North American revenue of about $200 million. Income from Warcraft’s massive base of China gamers is much lower, as noted by Wagner James Au at GigaOm: “Chinese pay to play by the hour, and what they pay isn’t much: the yuan equivalent of $.04/hour. And while they play a lot, this also means total revenue from China is just 15% of WoW’s Western market. ($30 million versus $200 million, in 2006’s second quarter.)” WoW is available in seven different languages and is played in North America, Europe, mainland China, Korea, Australia, New Zealand, Singapore, and the regions of Taiwan, Hong Kong, and Macau.

For additional coverage, see WoW Insider, Joystiq, Blue’s News and Clickable Culture.

]]> http://www.virtualeconomies.net/2007/01/12/8-million-subscribers-for-world-of-warcraft/feed/ http://www.virtualeconomies.net/2007/01/05/why-net-neutrality-matters-to-mmorpg-gamers/ http://www.virtualeconomies.net/2007/01/05/why-net-neutrality-matters-to-mmorpg-gamers/#comments Sat, 06 Jan 2007 03:41:33 +0000 rmiller Infrastructure Business http://www.virtualeconomies.net/blog/2007/01/05/why-net-neutrality-matters-to-mmorpg-gamers/ Does Net neutrality matter to users of MMORPG online games, and the companies and markets built around them? Ramprate believes it does, and outlines its thinking in an article titled Every Time You Vote Against Net Neutrality, Your ISP Kills A Night Elf. The article’s premise - that ISPs who get no direct revenue from online gaming would handle MMO and FPS (game server) traffic in a fashion that would degrade latency - is being discussed on Slashdot.

As we noted over at Data Center Knowledge, while there’s a certain logic to some of the scenarios presented by Ramprate regarding phone companies and ISPs, bear in mind that the largest online games are actually hosted by a phone company. AT&T hosts World of Warcraft and Sony Online Entertainment’s major games. At this year’s E3, AT&T announced the expansion of its online gaming operation. Given the hosting fees coming in from Blizzard and Sony, it’s reasonable to conclude that AT&T/SBC has a vested interest in their success. Does the nation’s largest phone company have leverage in dealing with ISPs who might be tempted to mess with their customers’ MMO traffic? I suspect they do. I’d be interested in comments/feedback on the Ramprate scenario and whether AT&T’s hosting role supports or undermines it.

If Net Neutrality did squeeze online gaming, it might create an opportunity for someone like GameRail, a high speed network that directly connects online game players to the servers that host popular FPS titles. GameRail peers directly with ISPs, universities and game server providers (GSPs). The question is whether game server hosts see usefulness in that type of middleman. The answer to that question might change in some of the scenarios imagined by Ramprate.

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