SoP3 Catch-up

At the State of Play III workshop on virtual property, Andy Zaffron of Sony gave us some live data regarding how their Station Exchange is doing.

The service opened on 2 of 22 possible servers mid-to-late July. As of Thursday last week, these two servers (taken together) had:

4200 accounts registered for Station Exchange (from 30,000 accounts in total)

$420,000 in total turnover ($180,000 in characters, $210,000 in coin, the  rest in items)

7736 successful transactions [exact amount]

Average amount transacted per account is $98.16 [exact amount]

Average amount transacted per transaction is $54.

Other stats:

1 platinum piece is $11 on one server and $19 on the other.

There are 51,000 characters on the 30,000 accounts.

The volume of trade is lower than I was expecting, and the amount per transaction higher. I thought we’d see larger numbers of low-value items traded, but instead it’s pretty much the same as on the open market. Maybe the $1 issuing fee is putting people off.

He also said that according to their user surveys, a third of their players liked RMT, a third hated it and a third didn't care one way or the other.

Richard

Comments

[Edward Castronova]

1.

I bet the median value of transactions per account is way lower than $98 and would represent more accurately the 'middle of the road' transaction. Most money distributions have extremely long upper tails.

Acct 1 $5 of gold
Acct 2 $5 of gold
Acct 3 $5 of gold
Acct 4 $5 of gold
Acct 5 $300 shaman
Average 320/5 = $64
Median = $5

[Mike Sellers]

2.

As of Thursday last week, these two servers (taken together) had: 4200 accounts registered for Station Exchange (from 30,000 accounts in total) $420,000 in total turnover

I'm not sure how to read that. Does that mean there are 4200 accounts participating in transaction rather than subscription accounts, or is the number of such accounts 30,000?

If it's 30,000, then the revenue seems pretty low: $420K divided by 30K divided by about two months (August and September) yields $7 per account per month -- about half of subscription revenue. I'm assuming, perhaps incorrectly, that as with Puzzle Pirates accounts people with such accounts don't pay subscriptions... if they do pay a subscription in addition to the transactions then this is a 50% gain in revenue for Sony over what they'd see otherwise, so I'm sure they're happy.

OTOH if there are only 4200 accounts participating (the rest of the 30K not doing so), the revenue number is $50 per month -- a much better figure from Sony's POV. If this is the case and these numbers hold up over time, subscription revenue could easily drop by the wayside: forget the box, forget subscriptions. MMOGs become a razors (the game) and razor blades (the stuff in the game) model.

Mean and median transaction amounts are interesting, but the bottom line is going to be how this compares with subscription numbers.

[Riley]

3.

So $420,000 / 4200 registrants = $100 each. So it looks like in 3 months, each of the participants has averaged about 2 transactions. IMO, thats a little less than impressive and what it really equates to is that (probably) most of the registrants have maybe done one transaction with a few power users doing many more than that.

Also suprising to me is that of the 30,000 people on the two servers, only 4200 have registered (I didn't even know you had to specifically register for SE, but I guess that makes sense). Read another way, 86% of the people on the servers are not even using the exchange at all. That suprises me since I did not think people would bother moving to these servers at all unless they had specific plans to make transactions. I am guessing that has something to do with the price of items - if there are not many small transactions, a lot of casual buyers likely have not found much use for the service. I would think larger transactions are generally from people that are leaving and entering the game. People do not seem to be using the exchange for day-to-day purchases (probably because of the high transaction fees).

[Shelby]

4.

What they don't say is how many accounts and subscriptions they lost as a result of them offering the service in the first place. I wonder if they've even come close to breaking even yet.

[Jim Self]

5.

I'm interested in what Shelby mentioned, but I would also be interested in the sustainability of SE. How long will it take high level players to twink out and get bored?

[Mike Sellers]

6.

Is there any reason to assume that Sony lost significant numbers of subscriptions when the added the Station Exchange? Frankly, this sounds like a bit of sour grapes from the anti-RMT crowd.

If Sony has added an average of $50 per user month in revenue via the Station Exchange (and if that's sustainable - something that may not be clear for a few months), then they can lose 3-5 subscription customers (depending on overhead) for each Exchange customer and come out even or ahead. In other words, if this average per-user revenue figure holds, in the largest case they could go from 200,000 subscribers to about 60,000 "exchange" non-subscription customers and not lose any money. And more likely they'd only dip to, say, 150,000 subs or so (given the prevalence of people threatening to leave MMOGs and not doing so), and end up with the revenue of a subscription game with about 500,000 subscribers. So I'd say the risk to Sony is minimal at most.

[nate combs]

7.

Mike>
then they can lose 3-5 subscription customers (depending on overhead) for each Exchange customer and come out even or ahead.

The one thought here is that not all subscriptions may be created equally (ref discussion here). In other words, more revenue over fewer accounts may also mean less revenue growth options longer term.

[Samantha LeCraft]

8.

$420,000 in total turnover ($180,000 in characters, $210,000 in coin, the rest in items)
7736 successful transactions [exact amount]

Maybe I'm reading this wrong, but I don't think $420,000 is Sony's cut of the profits. I think the $420k is the total amount that has changed hands through SE, which means that there are some players who are making a bundle off selling things to other players (just like they were before SE, anyhow). Sony has made $1/transaction (so $7736 so far), plus whatever percentage they take, if any. Anyone know what percentage Sony takes on each sale?

In any case, Sony has made far less than $420k off SE in the last two and a half months, so I'd be surprised if this payment method replaces subscriptions anytime soon.

[Cory Ondrejka]

9.

One other comment that Andy made -- and, IMHO the most interesting -- was that Sony could detect no difference in behavior on the RMT shards versus the non-RMT shards. Half-full explanation: RMT has no impact on behavior. Half-empty explanation: IGE has RMT so completely covered on the other shards that creating shards with Sony approved RMT had no impact on behavior.

Thank you to Andy for sharing these numbers!

[Mike Sellers]

10.

Samantha's right - I made the mistake of conflating gross (really gross) revenues with net income. There's a lot of money per user flowing through the Sony Exchange, but it's not clear how much of it Sony gets to keep. With one or two sales per user per month, it's not going to be as much as subscription income.

[Chris Bateman]

11.

To be honest, I don't think it matters to Sony how much revenue they get from managing the exchange as long as they are in control of the market. Provided they can take control of all related commerce, they have options. Large corporations never like tangential markets that they do not personally control; witness the absurd grumblings at pre-owned game sales, despite the fact the second hand game economy actually helps drive sales of new titles, albiet indirectly.

[Richard Bartle]

12.

It looks like the formatting (or lack of it) of my message has led to some ambiguity, so here's an effort to address some of the questions raised:

Mike Sellers>Does that mean there are 4200 accounts participating in transaction rather than subscription accounts, or is the number of such accounts 30,000?

It means that there are 30,000 accounts on those two SE-enabled servers, of which 4,200 have registered to participate in SE transactions. I don't know how many of those 4,200 accounts have actually undertaken transactions, but Andy's comments at the time would suggest that pretty well all of them had.

Shelby>What they don't say is how many accounts and subscriptions they lost as a result of them offering the service in the first place.

This isn't the kind of information they'd have in a spreadsheet...

Samantha LeCraft>Maybe I'm reading this wrong, but I don't think $420,000 is Sony's cut of the profits. I think the $420k is the total amount that has changed hands through SE.

That's correct. Andy did say that he wasn't certain whether or not the $420K figure included the $1 transaction charge, but thought it probably wasn't. I believe this is because they get $1 for each object listed for sale whether or not anyone actually buys it (but I could be wrong there).

Cory Ondrejka>Sony could detect no difference in behavior on the RMT shards versus the non-RMT shards.

Interestingly, when specifically asked if there were differences in farming, Andy said that he wasn't aware of any. I'd have expected it either to have been better (no industrialised farmers selling their wares through IGE) or worse (the gloves are off!), but I wasn't expecting it to be the same.

Richard

[greglas]

13.

Cory> One other comment that Andy made -- and, IMHO the most interesting -- was that Sony could detect no difference in behavior on the RMT shards versus the non-RMT shards. Half-full explanation: RMT has no impact on behavior. Half-empty explanation: IGE has RMT so completely covered on the other shards that creating shards with Sony approved RMT had no impact on behavior.

IMO, I also thought that was the most interesting comment. As long as there is significant profit to be had from taking RMT in house, and there really are no noticeable downside effects on play, the conclusion seems obvious if the PR issues are put to one side.

[Daniel Speed]

14.

That's not the entire equation though: At the very least, there's also the original reasoning for bringing the trade transactions inhouse, which is lower support costs due to fewer fraud based support cases.

[greglas]

15.

Right -- and from what Andy said, it seems like that hypothesis has also been proven correct.

I guess what Cory and I are impressed by is that regardless of the exact numbers (which are of course very important), the bottom line is that for EQII, taking the RMT in-house has seemed to pay off without any empirically observable community disasters.

Whether you take that as Cory's glass half-full or half-empty, it is what it is. Andy didn't say this, but here's a wild guess: new SOE titles will be launching with RMT in-house and integrated, and on more than 10% of the servers.

[Jim Self]

16.

Were there any numbers about the RMT activity on the non-SE servers? Have they also remained the same?

[greglas]

17.

No, there weren't any numbers on that.

[Richard Bartle]

18.

greglas>As long as there is significant profit to be had from taking RMT in house, and there really are no noticeable downside effects on play, the conclusion seems obvious if the PR issues are put to one side.

That's "if the PR issues are put to one side".

Sony has been here before. While EQ was growing, they didn't care that they were losing customers only slightly less quickly than they were gaining them. They were still a success. The fact that if they'd managed their PR right they could have been an even greater success didn't seem to matter. WoW has much better PR than EQ had in its early days, and has a far better retention rate than EQ ever had. Of course, whether this is to do with PR, gameplay, critical mass or something else is very hard to judge.

As I've said before, what concerns me about SOE's Station Exchange is not the effect on gameplay so much as the precedent it sets. If SOE wants to enable RMT between players for virtual goods, well, that's sad but it's their business; if they do this by conceding that virtual goods are property actually owned by players, then suddenly that's everyone's business. One bad judgment in a court and we could all be suffering the consequences.

Richard

[Matt Mihaly]

19.

Richard Bartle wrote:

If SOE wants to enable RMT between players for virtual goods, well, that's sad but it's their business

It's sad that Sony is enabling greater play options for its players that choose to be exposed to this new option? That is a strange point of view from you.

--matt

[Mike Sellers]

20.

...if [Sony concedes] that virtual goods are property actually owned by players, then suddenly that's everyone's business.

Of course, they've done everything legally possible to show that they do not consider virtual goods to be property (other than their own IP). This is reflected in their EULA and the Station Exchange agreements. Thoughts to the contrary remain a somewhat fanciful notion held by some of the avant-garde; but in any practical terms it appears to be a chimera unlikely to make an entrance into custom or law.

[Richard Bartle]

21.

Matt Mihaly>It's sad that Sony is enabling greater play options for its players that choose to be exposed to this new option?

No, it's sad that they want to enable RMT between players for virtual goods.

Richard

[Richard Bartle]

22.

Mike Sellers>Of course, they've done everything legally possible to show that they do not consider virtual goods to be property (other than their own IP).

It was probably a step too far to say that the virtual goods are their IP. The whole game is their IP; components are just part of the IP. Flagging them as somehow separate from the whole makes virtual goods extractable as a legal entity: it's possible to envisage a judge deciding that they're not SOE's IP but the rest of the game remains so.

>but in any practical terms it appears to be a chimera unlikely to make an entrance into custom or law.

The basic conclusion of the workshop on virtual property was that some people want players to own virtual property and some don't; some people want RMT and some don't; some want a magic circle and some don't; all want whatever legal standpoint is taken to reflect all these different points of view.

As Josh Fairfield put it (paraphrasing), he and I may disagree as to the best way to make games enjoyable for players, but neither of us wants the law to come down on our side if it means excluding the other side.

Richard

[Mike Sellers]

23.

Richard said, Flagging them as somehow separate from the whole makes virtual goods extractable as a legal entity: it's possible to envisage a judge deciding that they're not SOE's IP but the rest of the game remains so.

Except that they're not in any way flagged as separate from the whole. If a sword or other object in a Sony game can be removed from Sony's database and used elsewhere, then such an object might begin to have the status of a "virtual good." As it is -- and as has been said innumerable times -- what you're talking about is a database entry that exists solely within (in this case) Sony's computers, not any sort of independent object which can be treated as separable property. What's bought and sold is the privilege to access (often not even edit) that entry, and only for so long as the owner -- the company maintaining the database -- keeps it available.

I'm not talking about gameplay or a magic circle, which are irrelevant here. I'm talking about simple real-world practicalities. This isn't an uncertain legal question; it's not like the law hasn't already "come down on one side." It has. Game operators own their own code and software "objects" contained therein. Again, outside of some parts of the avant garde, I don't believe there's any question about this at all, no matter what people may want.

Several months ago I went on a cruise. I would have loved to have taken home a clock from my stateroom, but I understood that I had bought access to it, not the clock itself, and that the owner retained control over it at all times. "Virtually" the clock was "mine" during the cruise. In fact, it was never mine at all. This really isn't a difficult or murky issue.

[greglas]

24.

Richard> If SOE wants to enable RMT between players for virtual goods, well, that's sad but it's their business; if they do this by conceding that virtual goods are property actually owned by players, then suddenly that's everyone's business. One bad judgment in a court and we could all be suffering the consequences.

Well, I dunno Richard... We've already got things like Frequent Flyer Miles and Pepsi Points, but that hasn't made your generic air travel or your soda consumption generally a form of property against airlines and soda companies that don't enable those markets. It is obviously quite possible, I think, for some limited contractually-generated player-exchangable property-like right in virtual objects to be enabled by a game company without turning virtual swords into chattels across the board. And to the extent these markets are merely internalizing and pre-empting an already existing and apparently unavoidable external black market, maybe a vertically integrated system is better in the long run?

[Matt Mihaly]

25.

Richard Bartle wrote:

No, it's sad that they want to enable RMT between players for virtual goods.

Yeah, it's always sad to me when consenting adults are allowed to engage in something with each other.

--matt

[Matt Mihaly]

26.

Addition: PARTICULARLY when said consenting adults are under no particular pressure to give consent (as is sometimes the case with prostitution, for instance).

--matt

[Daniel Speed]

27.

On the other hand, do you really want said consenting adults curb crawling and loitering on the sidewalks in your local community?

[Richard Bartle]

28.

Mike Sellers>"Virtually" the clock was "mine" during the cruise. In fact, it was never mine at all. This really isn't a difficult or murky issue.

So if you'd sold your clock to another person from a lower-deck cabin who didn't have a clock, and they'd taken it and put it in their room - all the while accepting that you hadn't sold the clock, just access to it - then would that have been OK?

Richard

[Richard Bartle]

29.

greglas>We've already got things like Frequent Flyer Miles and Pepsi Points, but that hasn't made your generic air travel or your soda consumption generally a form of property against airlines and soda companies that don't enable those markets.

I was at a conference in the late 1990s where a speaker argued that the only reason Frequent Flier miles were sustainable was because they weren't tradeable. If you could sell your miles, then airlines wouldn't be able to honour them. He also argued that if they were tradeable then they might take on enough aspects of currency that governments might want to intervene, but I'm not wholly with him on that...

As someone who at the time would have liked to have sold 31,000 KLM air miles if I could, I appreciated both sides of the argument.

Richard

[Richard Bartle]

30.

Matt Mihaly>Yeah, it's always sad to me when consenting adults are allowed to engage in something with each other. PARTICULARLY when said consenting adults are under no particular pressure to give consent (as is sometimes the case with prostitution, for instance).

For me, it's sometimes sad, sometimes not sad.

It's not the act itself so much as the side-effects that impinge on other people which make it sad. I don't mind if a young couple want to make out in a field for the thrill of it, but I do mind if they do it on a railway track and I'm on the train that's derailed when it hits them.

Less sensationalist, I read today about a shop in Whitby, Yorkshire, that sells Fish & Chips so good there's a long line of people outside it every day waiting to be served. This is affecting business in adjacent shops, because the queue goes past their entrances and passers-by don't go in. Consenting adults may be willing to engage in a perfectly innocent and everyday activity (buying and selling fish & chips), but in doing so they interfere with what other people are doing.

Just because something happens between mutually-consenting adults, that doesn't mean it's none of anyone else's business. Sometimes, it is someone else's business.

Richard

31.

I can tell you why their transaction count is low, but their per transaction median is high.

How about the 10% fee. That is more then Ebay. So not only is there a $1 listing fee, the 10% is huge. Its plain simple math.

The account listing fee structure is way too high.

Seriously, who did they hire to come up with the pricing structure and the role out for the server exchange.

Make half the servers market driven and the rest for RPG and then allow everyone to move servers according to their taste.

[magicback (Frank)]

32.

The high transaction cost does skew the number.

It would be more revealing if they announced a promotional period of low fees (at least as low as eBay) and see the volume generated.

Frank

[Jestor Rodo]

33.

Ask Sheriff Andy if he has recieved a registered letter yet?

[Graydon]

34.

What's the ultimate evolution here - this was Sony's experiment but how does it play out over the next year? Does anyone know from gamers themselves whether they're satisfied or not with Station Exchange? I know there was a lot of noise (negative) at the announcement in April... but that was inevitable. I wonder whether it's making a dent in IGE commerce for EQ2...

The thing that's most interesting is to figure out what the other publishers' responses will be. Do you think they will follow Sony's suit, or are they still undecided?