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Gold Capped: How patch 4.2 broke the auction house

Every week, WoW Insider brings you Gold Capped, in which Fox Van Allen and Basil "Euripides" Berntsen aim to show you how to make money on the auction house. Capitalism is the best, and communism is for dirty, Soviet-sympathizing hippies. If you disagree, Email Fox or twitter him @foxvanallen so you can be added to the CIA's "list."

On June 24, 2010, I woke up at 4 a.m. I grabbed some coffee, got into my car with my roommates, and went to the Cambridgeside Galleria mall to stand in a ridiculously long line. The goal: to get an Apple iPhone 4. It was the latest and greatest thing, and we all had to have it.

A very similar dynamic is happening right now in the World of Warcraft. There are a slew of new-for-patch-4.2 items currently available on the auction house. New BOE gear from Firelands. New tailoring and leatherworking patterns. New blacksmithing plans. Living Embers. New PVP gear. They're all -- at least in theory -- high-demand items. After all, given players' insatiable lust for better gear, customers should be lining up around the (virtual) block to be buying all this stuff.

But on many servers, they're not. The demand is clearly there, but markets are struggling to function.

What happened? Why did the market break? What are players doing wrong? And how exactly are you supposed to play the market with these new-for-4.2 items?

Case in Point: The Living Ember

The Living Ember is a BOE Firelands drop that's obtained from killing bosses therein. It's this raid tier's Primordial Saronite, with one sharp difference: You can't buy Living Embers with valor points. This severely limits supply, which of course puts upward pressure on Living Ember prices. And because of that natural urge to buy the latest and greatest the second it's available, demand for Living Embers (the items you can craft with them) is high, too.

High demand plus low supply equals a seller's dream market. Huge profits are just sitting out there, at least in theory, waiting for any guild or PUG raider who gets their grubby hands on a Living Ember.

But very few sellers actually benefited from those perfect storm conditions. Why? The Living Ember market is broken.

Supply is far too constricted. In Wrath, Blizzard allowed raiders -- and indeed, even more casual non-raiders -- to buy each tier's crafting "orbs" for emblems. In Cataclysm, that's simply not been the case. Chaos Orbs are only accessible by running heroics (they're still bind on pickup), and Living Embers, though sellable, are only accessible through raiding.

Having Primordial Saronite available for immediate purchase at emblem vendors seemed to work well with managing supply. Quantities were still quite limited at first, but high prices convinced those sitting on Frost Emblems to forgo their tier 9 gear and buy Primordial Saronite to sell, instead. Initial prices were high -- often around 10,000g. But these prices were reasonably high. People were willing to buy at that price point.

And as the high rollers filtered themselves out of the market, prices on Saronite dipped quickly. A few weeks later, Primordial Saronite was 2,500 to 5,000 gold apiece -- a price that held fairly steady. Raiders and guilds sold Saronite for profit; raiders and guilds bought Saronites to craft epics. The market worked, even if many players could only participate on the "seller" side of the equation.

But in Cataclysm, without any other source for Living Embers but raids, there just aren't enough people participating in the market to correct it. There are very few sellers, and they're fumbling in the dark without a clue what to price these things at. People are listing them way too high, leaving them to languish on the auction house without a buyer. That doesn't help buyers or sellers.

Though demand is high, there's little motivation to sell. The people who want Living Embers the most are raiders. The only people who can sell Living Embers are raiders. Therein lies the problem with the market -- there's just little desire to sell right now. Most raid teams are keeping these hard-to-get items "in the family," so to speak.

Changes to the way guilds make money in Cataclysm are only exacerbating the problem with this market. The guild perk Cash Flow ensures that guilds with active members have money to spend on them. Further, for level 25 guilds, completing "guild challenges" -- as simple here as running heroics, battlegrounds, or raids in guild groups -- awards large sums of money each week:
  • 250g per heroic times seven heroics/week = 1,750g
  • 500g per rated battleground times three rated BGs/week = 1,500g
  • 1,000g per raid once/week = 1,000g
Granted, in the great scheme of things, the 5,000 gold or more that a guild can make each week isn't a lot when you divide it over the sum total of players in the guild. Still, it's money that the guild doesn't have to come up with elsewhere. Simply put: The more money guilds make without selling BOEs, the less incentive they have to sell BOEs.

The hardcore raiding guilds that are able to down Firelands content and obtain these Living Embers have treasuries that are flush with cash. Sure, they could rack up 250,000 gold every week for the next month by selling off its Firelands BOEs. But with all the gold coming in from other sources, do they need to?

No. And that's why few guilds are doing it. They're saving Living Embers for their raiders and giving away BOEs on /rolls like they were boss drops. Completely understandable, but all of it does little for the server economy.

Market snapshot: Living Embers

To try and get a universal view of the Living Ember market, I headed to The Undermine Journal. Few markets have Living Embers currently listed. Those that do ... well ...

As you can see, the market for Living Embers is all over the place. No one seems to know where to price these things. The highest auction price shown is 429,496g each. (Really, dude? You thought they'd sell for that?) The lowest price (with active listings) was just over 15,000g. Most listings were somewhere in between, with a number in the 30,000 to 60,000 gold range.

Digging deeper into the Undermine Journal data, you find an ugly truth: Few of these, if any, are selling.

That's because none of these listings have found the fair market value for Living Embers. An item is only worth what a buyer is willing to pay, and buyers aren't willing to pay 429,496 gold for a Living Ember. They don't seem to be interested in paying a tenth of that.

So what's the fair market price for these things, the price at which they'll actually sell? Probably closest to the auction listed at 15,000 gold, but even that may be too high a price.

After all, no crafting recipe requires fewer than four Living Embers. At the lowest price of 15,000 gold, any ilevel 378 craftable would run 60,000 gold plus the rest of the materials. Given the history of epics and what bind on equip gear is currently selling for, 60,000 gold is just way too high a price for an epic. And worse yet, none of these markets seem to have a full four Living Embers available for sale. There's no instant gratification factor at play. Do you think someone will pay 100,000 gold for the ability to craft half an epic?

Sellers, when you've got something valuable in your hands, I know it's only natural to want to squeeze every last drop of profit you can get out of what you have. Living Embers are a valuable commodity, no doubt about it. The fair market value for these will never be higher than it is today. But if you don't list these at a fair market value, they won't sell at all, meaning you'll have to wait until tomorrow to sell them. Or next week. Or a couple of weeks. And by that time, the fair market value will have dropped. Living Embers are not unique goods. You're competing with the i378 BOE market, many items of which are currently selling for less than the price of a single Living Ember. You're also competing with valor point gear and Firelands raid drops.

Where would I list my Living Ember auction, if indeed I had one to list? Well, I'd probably list somewhere around 15,000 gold, and then bark around the trade channel trying to find a buyer at a cheaper price.

Pricing all those phat epix

We can easily extend the logic behind the Living Ember market to the rest of the new-for-4.2 markets. If you're trying to unload a raid drop like the Ranseur of Hatred, the fair market value will never be higher than it is right now.

Don't miss out on the opportunity. You might be the lowest-priced auction if you list Chelley's Sterilized Scalpel at 150,000 gold, but you should stop to take a moment to think, "Will it actually sell at that price?" With many DPS casters dreaming of picking up the legendary Dragonwrath, Tarecgosa's Rest staff ... likely not. If it's fair market value is 80,000 gold this week, it'll be 50,000 gold the next, and 30,000 gold a few weeks after that. Work [2. Trade] and make a deal.

On those tailoring, leatherworking, and blacksmithing plans

If your guild is getting tailoring patterns and blacksmithing plans left and right from trash mobs in the Firelands, the best thing to do right now is sell them. Sell them now. Don't wait. Now. The supply of Living Embers is so limited that you won't be able to craft these things for weeks anyway. And by the time you can craft them, you'll have seen the pattern drop again.

Plan out how your guild will be using the Living Embers that you get. If you decide the first item you'll make is, say, Boots of the Black Flame, then keep that pattern and sell the rest.

When supply isn't an issue ...

Not all new-for-patch-4.2 items are gated behind the walls of the Firelands. There are plenty of new craftables to be made. PVP gear sells, and it sells better than you'd think, even on a PVE server.

When I first logged on last Tuesday, the new cloth PVP Bloodthirsty Fireweave Bracers were being listed on the auction house for 2,600 gold apiece. The sellers had the right general idea -- these new items would command a higher than expected price. But when you consider that the materials to make these items might only cost 200 gold on that same auction house, would anyone be dumb enough to pay a 1,200% markup?

Not on my server, at least. They simply didn't move at any appreciable quantity. Buyers have a price they're willing to pay in mind, and it's nowhere near what these items are being listed for on the auction house. The new PVP gear didn't start selling until the markets got flooded with goods, and once the market was flooded, the time to profit had long since disappeared.

How should this market be played? Well, right now, on a number of servers, it can't. Too many people with dollar signs in their eyes made too much PVP gear, and now there's a glut. Bide your time, and check in with the market in a few weeks. Many of the early sellers will be discouraged by their inability to turn a profit (or even sell an item) here and will move on to greener pastures. If the market still appears to be profitable on your server, undercut and undercut hard, preferably through trade.

Maximize your profits with more advice from Gold Capped. Do you have questions about selling, reselling, and building your financial empire on the auction house? Fox and Basil are taking your questions at fox@wowinsider.com and basil@wowinsider.com.

Filed under: Economy, Cataclysm, Gold Capped

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