The Lawbringer: The relationship between Blizzard and PayPal
by Mathew McCurley 
Sep 16th 2011 at 5:00PM
On Wednesday, Blizzard announced that PayPal would be its payment service partner for the new Battle.net wallet and Diablo 3 real money transaction Auction House coming with the release of the next Diablo game. Was anyone really surprised at this announcement? I sure wasn't, but that's because I already knew PayPal would be the payment service partner for the Diablo 3 real money Auction House from the moment the Diablo 3 real money Auction House was announced. I'm not trying to be smug here, because you knew it, too. You just didn't know that you knew.
The relationship between Blizzard and PayPal is an easy one to decipher because of the nature of the business Blizzard is getting into with the Diablo 3 RMT Auction House. Auctions for real money are firmly in PayPal's wheelhouse because, shocker of shockers, PayPal is owned by eBay. When you think about the feasibility of the RMT Auction House and all of the legal ramifications that go along with it, you point to the eBay model of online auction facilitation for what works and provides the path of least resistance.
This article is not a critique of PayPal as a service. There are plenty of places on the web to find that type of article. Instead, The Lawbringer will look at the actual services that Blizzard provides with PayPal, why PayPal was the obvious choice for real money transactions, and how PayPal's integration into Battle.net is not the potentially apocalyptic scenario that a few have presumed.
Blizzard and PayPal are already friends
PayPal has been a payment option for World of Warcraft subscription time for a while now, as more payment options for the game open up new players who don't necessarily want to pay via a credit or debit card. You can also purchase game time directly from the Blizzard store, but you still need a credit card to purchase game time codes. There is an interesting relationship brewing behind closed doors.
What does it mean when companies are friends, really? Is it all about mutually beneficial corporate positions and ventures? That's part of it, sure. There are other factors, including motives and industry outlook, that are a large part of the PayPal/Blizzard paradigm.
PayPal's involvement with the fight against gold selling
Remember back when PayPal issued those letters to gold selling companies overseas that it was going to investigate their businesses and make judgments on whether to remove those companies' ability to accept PayPal as a payment option? Blizzard had originally complained to PayPal about overseas gold selling operations selling Blizzard intellectual property that violated Blizzard's rights. From there, PayPal sent notices to gold sellers informing them of Blizzard's report and asked these companies to fill out objection papers to the infringement claims. The entire effort was potentially hollow but also potentially a big step in terms of the Blizzard/PayPal relationship.
The most widely used payment option for gold selling is PayPal. As we all know, gold selling isn't really slowing down, and the dangers of gold farming have switched from in-game farming disruption to out-of-game account compromising. PayPal stands to make a lot of money from transaction fees based on gray market gold sales and doesn't exactly have the incentive to cut these gold sellers out of the loop. However, the endgame goals of Blizzard now fuse with PayPal's interests more than ever -- why have X number of potentially infringing transactions when we can give you Y number of acceptable transactions and adding the PayPal service as an accepted payment option for all things Battle.net?
PayPal was fine with fighting gold selling with letters and stern warnings before. Now, PayPal is in the position to cut sellers off completely, with Blizzard as an even bigger partner.
There was no question that PayPal was going to be the partner in this whole Diablo 3 RMT business. It makes sense because PayPal is in the perfect position to provide Blizzard with everything it needs in terms of mechanics and facilitation to make the RMT Auction House viable. Remember when I asked all of those questions about how Blizzard would have to deal with a bevy of legal issues associated with the RMT Auction House like issues with minors, tax concerns, etc.? Well, those questions are actually easier to answer than I imagined. All I had to do was take a look at eBay's terms of service and rules.
Basically, Blizzard is going to set up the Diablo 3 real money Auction House like an auction site in everything except the actual website online. A third party (PayPal) takes care of the cash-outs and everything having to do with the real money portion of the exchange. Since eBay and PayPal are synonymous, the expertise is already there. PayPal gets an established brand that will be pumping in huge amounts (potentially) of transaction fees, and Blizzard gets the expertise and (almost) decades of knowledge about online auctions from eBay. It's win-win-win.
A future without credit card issues
The final piece of interesting information is that Blizzard is having PayPal come on board in the future as a payment option for Battle.net, not just WoW subscription time. This means that you'll be able to purchase games, Blizzard products, and even game services with PayPal. The number of people who do not use credit cards for online purchases and video game subscriptions is still fairly high. How many times have you been in guild chat where someone is missing because they didn't get another game time card yet?
Opening up the payment options means that Blizzard is expanding the genre as well as the client base through accessibility of a different kind. The credit card is almost antiquated in this scenario, with digital money going back and forth, real money coming out on occasion, and digital games and services being paid for with Battle.net Wallet cash or PayPal money. With this much PayPal integration, you just might see the fight against infringing activity take the next steps into the battle, and more players OK with putting their money into the Blizzard system.
Personally, I think this is a non-story. PayPal is the leading player with the expertise, understanding, and infrastructure to make the Diablo 3 RMT Auction House a possibility. Blizzard is smart to bring PayPal on board. Then I started reading the comments on the post. Glad I did that after I wrote my article ...
This column is for entertainment only; if you need legal advice, contact a lawyer. For comments or general questions about law or for The Lawbringer, contact Mat at mat@wowinsider.com.
Filed under: Analysis / Opinion, The Lawbringer
Reader Comments (Page 1 of 2)
JJK Sep 16th 2011 5:24PM
Can't the argument be made that Blizzard is starting to venture into online gambling...
Mathew McCurley Sep 16th 2011 5:43PM
No, because it is all auctions, not games of chance or betting.
JJK Sep 16th 2011 6:15PM
In a poker game, the house takes a cut from people exchanging money based on what cards they were dealt randomly by the house. Blizzard is taking a cut from people exchanged gear that was dropped randomly... its not that far off. Just because people are using an auction to place bids, doesn't change the facts that Blizzard is randomly doling out items with money values associated with them like a slot machine. It just that the payout is being filtered through an auction house to acquire it's market value.
Brett Porter Sep 16th 2011 7:15PM
It's not gambling, just like using eBay or Craigslist to buy/sell things is not gambling. It is an intermediary service to buy/sell in game items for real money. Since you are not gambling... it isn't gambling.
BB Crisp Sep 16th 2011 7:20PM
Then you could argue that getting an item itself is semi-random (since there are loot tables, you know what could drop off of a mob), but that doesn't extend to the auction houses themselves. Sellers choose the prices at which to sell their products and buyers choose whether or not to purchase those products.
Even if I gambled and won something in real life, my selling that item to a buyer wouldn't be considered gambling.
Grogyre Sep 16th 2011 11:14PM
Yeah, it's online gambling (http://daeity.blogspot.com/2011/09/diablo-3-and-illegal-online-gambling.html) and everyone knows it. But the 'illegal' part won't be determined unless it goes to court.
Joseph Smith Sep 17th 2011 12:04AM
From the linked article: "They redefined the definition of "gambling" as any and all games which involves the use of both chance and skill to win a prize "
The RMAH does not involve chance any more than ebay does. I'm not putting money on the 'chance' that UberWarriorZ is going to get a Mace of the Sorcerer. He already has it and is selling it to the highest bidder. Also, you aren't paying for the chance to 'win a prize' You're bidding on how much you'd be willing to pay to own it. If you don't bid the highest, then you don't pay, unlike a raffle (which was cited as an example in the article) in which you pay whether you win or not.
I'm sure Mat will correct me if I'm wrong, but an Auction house satisfies NEITHER of the redefined legal qualifications to be considered gambling.
staffan.johansson Sep 18th 2011 4:00PM
The auction house itself would not be considered gambling. But *maybe* the auction house can make the game itself be - since you're paying money (game purchase and/or subscription fee) for a chance to get an in-game item worth real-world money. That's a pretty wide definition of gambling, but it's one that at least won't be laughed straight out of court. Whether it's enough to win a case, I don't know, but at least there IS a case.
vocenoctum Sep 16th 2011 5:25PM
Not sure if it's changed since I last interacted with paypal several years back, but they used to not back auctioning of electronic merchandise. If you sold someone a CCG code for example, you'd have to mail the card to them and have proof of mailing. If you just emailed the code to them and they contested the charge, you'd lose the money since paypal wouldn't accept any "proof" other than mail receipts.
Might have changed in general, and I"m reasonably sure Blizz would take it into account before tying them to the Diable AH.
MysticalOS Sep 16th 2011 6:36PM
it was always a gray area, they didn't officially back it but they didn't really take a stance against it either. They just assured you that you were not garenteed a refund for digital items and auctions on ebay with digital items were not really recommended buys. none the less i didn't really see any major stance baring it or taking them down, cause they get their cut either way whether you get ripped off or not.
BB Crisp Sep 16th 2011 7:29PM
The reason PayPal didn't condone those sorts of purchases is that there was no way for the buyer (or PayPal) to determine if the sale was of a legitimate item. Maybe it's an expired code? Maybe it's a fake? Only the seller knows for sure and PayPal wouldn't want to be held liable for questionable goods.
Operating directly with Blizzard is a different matter altogether, as there's no question that the goods being sold by one player to another are legitimate. The sale itself is still taking place in-game on Blizzards platform. There's no way for anybody to get ripped off, so there's no reason that PayPal wouldn't want a part of the action.
Joseph Smith Sep 16th 2011 11:37PM
Well, the way I understand it is that you get the item as soon as it's paid for. The difference between using a game card and the RMAH is that Blizzard has direct control over the item being delivered. THEY are the ones doing the transfer, you aren't waiting on the other person to send it after payment is received. For lack of a better analogy, Blizzard is the impartial party, you hand him the goods to sell on consignment, he does so, takes the money and gives it to you (less their cut) after giving the buyer the item.
Murdoc Sep 16th 2011 6:01PM
Overall, this news is comfortably received. While many people have been upset by Blizzard's decision to incorporate the use of real-money auctions, at least they are taking steps to properly implement it. I think it's safe to say that modeling eBay's design for auctioning will be beneficial to everyone using the real-money auction house.
I'm sure this isn't new information, but PayPal also their own authenticator for added security. (https://www.paypal.com/us/cgi-bin/?&cmd=xpt/Marketing_CommandDriven/securitycenter/PayPalSecurityKey-outside)
With all these safeguards, it really seems like Blizzard is being proactive when it comes to these matters - whether you agree with the real-money auction house, or not.
Infinite Duck Sep 16th 2011 6:10PM
Oh that's good. PayPal is the only site I trust now with my credit info. After the scare with the PSN, I pulled my credit info from all things online except PayPal. If it doesn't accept PayPal for payments, I won't use it.
And another random fact, Monaris is a popular credit card handler for websites, and my old boss discovered how to fake payments on sites that use Monaris and get free stuff a few years ago. I'm sure they fixed this security hole by now, but it was amusing when we tripped over it. And horrifying how easily you can bypass certain security... So I was already wary before PSN was hacked.
OldPossum Sep 17th 2011 12:01AM
If you seriously trust PayPal that much, then your eyes aren't open to the chaos they've caused from acting like a bank but not being as accountable as a bank.
Cromlech Sep 16th 2011 6:25PM
@Matt
"Then I started reading the comments on the post. Glad I did that after I wrote my article ..."
I'm surprised you were glad you did it at all!
facepalmer2 Sep 16th 2011 6:57PM
What is "Battle.net Wallet Cash" if its some sort of service, I have not heard of it. Or I may be interpreting it wrong...
Brett Porter Sep 16th 2011 7:14PM
Everyone who plays Diablo III will have a Battle.net Wallet (I assume anyone with a Blizzard game will, but it's the only one that will use it at first).
You can put real money into this wallet, via PayPal I'm assuming, and use the money in the Wallet for buying items on the D3 Auction House using real money. You can also sell items you find in game on the D3 AH and get real money for it. IIRC, not all items can be bought/sold with RMT, but I'm sure plenty can be.
You can then take the money from the Wallet and transfer it to your bank account, again probably via PayPal.
TL;DR: it's a temporary place for your cash to buy/sell things on D3 AH.
Brett Porter Sep 16th 2011 7:11PM
I am more than a little frustrated with PayPal, and I'll tell you why.
I used to have them be my subscription payment source, but during the most recent "re-up" there was a bit of a hiccup. The payment went through just fine, the money was in the bank account, the money left the bank account to PayPal, and then went on to Blizzard. Then, for whatever reason and I still have never received a satisfying reason why, they denied the transaction (PayPal did).
So they take the money back from Blizzard and put it back into my bank account. Of course, now I'm a week or so into a 3 months game time without actually paying Blizzard. So Blizzard, rightfully so, cancels my account. I end up calling CS and they get me set back up with a 3 month game card with a credit card.
So I was able to get back in the game in about 20 minutes, but there was also the warning from Blizzard that if my PayPal bounces again, they will cancel the account forever. It was just very frustrating that PayPal rejected the payment without notification, and never actually told me why they did.
Needless to say, I will not be using PayPal for recurring subscriptions anymore, at least not with Blizzard. It was a bit of a letdown on their part, customer service-wise.
BB Crisp Sep 16th 2011 7:38PM
(Second attempt at posting a reply)
That sucks. I wouldn't want the shadow of a permanent cancellation hanging over me when I didn't even do anything.
I had a similar non-WoW issue happen to me within the past week. I had a Bank of America account closed without notification and without reason and the account was still accepting my checks at the ATM! I got the matter settled, though the host of CS people I spoke with over the phone and in person could never explain to me what happened. They didn't know and each representative I spoke with said they had never seen anything like that happen before, as I hadn't violated any of their terms. In the end, all it cost me was about 2 hours of my time and a bank visit to get it sorted out, but it's still stressful to have something out of your control mess with you without ever understanding why.