Scarcity and Value in Diablo 3

So I've been debating the Diablo 3 RMT issue for the past week with a number of people, and a particular chain of emails got me thinking. In particular, when I argued that Blizzard is losing out on a lot of money by not selling items directly, the reply I got set me to thinking.

"Diablo's random item mechanic means that some items are literally one-in-a-million. Spawning and selling such items directly would undermine their scarcity and therefore their value, not to mention the very foundation of Diablo's roguelike legacy. It seems cleaner to keep all the loot commerce peer-to-peer."

Diablo's legacy? I remember playing Diablo 1 (on a LAN, mind you) and finding people to trade with at the local computer cafe. We all traded duplicated items using that bug where you pick up 1 gold off the item bar when grabbing the item. The fact that the items were duplicated did not undermine their value; someone else still had something we wanted. People hung out for hours there sometimes if they knew someone else had a great item they wanted. It was fun! And there was no scarcity at all!

Scarcity or Power: Where's the Value?

I think the problem is that an item's power and an items scarcity are directly related according to the game's core design. If the most powerful items in the game were incredibly abundant - if you could go to the merchant in town and buy the best of everything for 1g each - then all that one-in-a-million rare loot wouldn't be worth anything. In other words, people value powerful items, not scarce items. A sword of epic fail -10 might be just as scarce as a sword of epic win +10, but I doubt that the former would sell for much on the AH. The scarcity is incidental. Stressing the scarcity means missing the actual source of value; and missing the opportunity to monetize that value.

I'm not suggesting Blizzard floods the AH with stuff; that's just as bad as putting the most powerful item up for sale for 1g on the first merchant. But it seems perfectly sensible for Blizzard to seed the AH with some extra stuff, for the same reason that merchants in Diablo 2 sold rare goods when you didn't find what you wanted while adventuring. Blizzard could even use this to produce some truly unique items: create a one-of-a-kind item and put it on the AH; let the global market decide its worth.

Even that might be kind of tricky to do. How many items do you create for the AH? Which ones? Which types? How often are they refreshed? If nothing else, leaving loot commerce to users certainly is cleaner. And cleanliness is a big issue brought up by the people with whom I've discussed the issue.

Lessons from F2P.

Is there a way for Blizzard to make more money than just running an AH and charging fees? Although I was very tongue-in-cheek in my humorous article about Blizzard's "F2P MMORPG: Diablo Online!" I do think Blizzard should take some lessons from the virtual goods that have been very successful in F2P games.

Many F2P MMOs make a lot of their money by selling "treasure boxes" which have a small chance of having a valuable item. These items aren't valuable because they're scarce; they're valuable because they're powerful. Players buy lots and lots of boxes trying to get that item. Some players buy even more boxes to get extras of that item to sell on the in-game AH for gold.

That's a big, key point: that the items can be re-sold. It extends the economic reach beyond purchase-for-yourself. It's a topic I cover in detail in the forthcoming third part of my F-Words of MMORPGs, so I'll just brush over it for now and say "it's a good thing."

The F2P treasure boxes are basically the same mechanic as killing a Diablo boss monster: you've got some random chance of getting potentially good items. That's the one-in-a-million value: it's not that the item is scarce, it's that it's good. The only difference is that the F2P boxes cost money and the Diablo boss monsters cost time.

And that's just it, isn't it? That's the whole essence of RMT: finding a way to spend money instead of spending time. Everything about RMT boils down to that. Every time there's a game that makes you spend time, some people, somewhere, will try to spend less time by spending more money. Period.

If Blizzard is serious about countering RMT, they should simply look at everything you can get in Diablo 3 by spending time and offering that for cash: random loot and experience points, mainly. Note that Blizzard's RMT AH hasn't addressed the desire to buy power-leveling services. Oho! So maybe Blizzard should start selling potions that give you XP too!

Keeping it Clean!

The issue of cleanliness deserves some special treatment though. I think there's some deep-rooted feeling that buying something with real money from another player who "earned" that item by "properly" playing the game is more honest than buying it from the maker of the game who just spawned it and put it in the store. But, either way, the maker of the game just spawned it. It's just that, in one case, the maker gave it away to that other guy for free and, in the other, put it in a store. Is it really any different for Blizzard to spawn an item and put it in the real-money AH than it is for Blizzard to spawn an item and put it on an in-game vendor?

Maybe there's this sense that if Blizzard sold items on the RMAH the game would become flooded with over-powered items and people with tons of cash will pwn you with their uber gear. Of course, even without Blizzard spawning items, people with tons of cash will pwn you with their uber gear. That's just inevitable. But then again, Blizzard has assured players that they can safely play this online-only game single player without disruption from rich pwners.

I think, though, that Blizzard has already recognized that there's a significant group of people who don't want their experience of the game to be tainted by real-money transactions. There's people who think that the game should be "pure" from monetary influence. That's why Blizzard said that the Hardcore mode won't have the RMAH, just the in-game-gold AH.

So if the purists have hardcore mode, who's the regular server for? The people who DO want their game riddled with monetary influence, obviously. And there's only two categories of those kinds of people: the people who want to buy stuff and the people who want to sell stuff. And herein lies the real kink in the whole cleanliness argument: the hardcore mode already "cleans up" the RMT aspect of the AH. Which means the softcore mode can get as dirty (and monetized) as you want.

Cater to Your Clients (Hint: They're the People Spending Money!)

I think, ultimately, the solution to this problem lies in the very motivation that spawned it: the desire to eliminate "illegal" RMT. By "legalizing" RMT, Blizzard is acknowledging that people want loot and they want to pay cash for it. But by refusing to sell the loot themselves and insisting on user-to-user transactions, Blizzard is trying to humanize the sellers. It's almost like they're trying to make these supposedly "scarce" items more valuable by emphasising that some real person out there is giving it up.

They're totally missing the point. Do anyone really think that the people who buy gold from chinese gold farmers feel bad that the poor chinese gold farmer had to give up all this wonderful gold? Is anyone under the illusion that the main clients of Blizzard's RMAH care whether those items came from an honest, hard-working American player or a dingy Asian slaving away in a computer-gaming sweatshop? Would they even hesitate before clicking "buy" if that item was spawned by Blizzard instead of posted by a player?

The only people who seem to be riled up at the idea of Blizzard spawning and selling loot are either the people who don't want rich people spoiling the game by buying tons of crap (and there's the hardcore mode for that) and the "honest" loot sellers (and, frankly, I don't think Blizzard has any reason to care). In other words, there's no good reason for Blizzard not to sell spawned gear on the RMAH.

WTB: Virtual Economy, PST

Since the main topic of my expertise is Virtual Economic Theory, I feel it necessary to end on this last note. There's two closely related topics here: VET deals with closed in-game economies, such as (ostensibly) WoW's gold-based economy. VET is primarily a game-design topic, which asks how games should be designed to stimulate economic activity among players as a fun aspect of playing the game.

Virtual Goods Economics is another issue entirely. VGE is primarily a business topic, which asks how best to monetize users by selling them value-added content. Unlike VET, VGE is an open economy; that is, it crosses the boundaries between in-game and real-life.

Technically, Diablo 3 with no RMAH could be a topic for VET, though arguably an uninteresting one. There's no real meaningful economic activity going on: players are just trading loot and using money to grease the transaction.

Diablo 3 with an RMAH suddenly becomes a VGE issue, however, because the RMAH is a value-added service provided by Blizzard. From a VGE perspective, the question is clear: how can Blizzard make the most money with value-added products and services in Diablo 3?

The answer to that question I leave unto you. Do you think Blizzard would make more money directly spawning items and selling them than they will with a strictly user-supplied RMAH?