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One dollar and fifteen percent

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Pop law abounds in The Lawbringer, your weekly dose of WoW, the law, video games and the MMO genre. Mathew McCurley takes you through the world running parallel to the games we love and enjoy, full of rules, regulations, and esoteroic topics that slip through the cracks.

Before we begin today's Lawbringer, I wanted to give you all your homework for next week's topic. Greg Boyd wrote an excellent article over at Gamasutra about improving the game industry's security and data privacy issues. Blizzard is one of the companies out there with huge online security concerns but seems to get by fairly well. I will examine Blizzard through Boyd's seven steps and show how Blizzard is leading the charge and how other game companies could benefit from Blizzard's trials and tribulations.

Fifteen percent is going to be the new number that people will be talking about for a good, long time. Why? Blizzard has set a standard in the American markets for real-money auction house cuts and fees. With Diablo III literally bursting from its hellish mother's writhing, pestilence-ridden birthing sack, players will soon be entering the world of Sanctuary and wearing out mice so fast that the stress on the peripheral market's demand crushes a generation of hopeful clickers. Diablo III will consume a lot of people's souls for a while, so it's best to get them all prepared now, not later.

Blizzard has begun the arduous process of educating the playerbase about these new and radical systems coming with Diablo III. The real-money auction house is the big ticket item here, proving a safe and secure place for players to interact and auction items, much like they currently do in the seedy, potentially dangerous gray markets for virtual item trades and sales. Going to these sites is the equivalent of going to gold sites, to compare it to a WoW phenom, with the same risks and hazards coupled with the same instant gratification. Why have a company with which you have no recourse have your credit card information, when you could give it to Blizzard instead? At least you know where they live.

The real-money auction house explained, finally

Here it is, the official FAQ on the real-money auction house launching with Diablo III. The first thing to notice is that, right up front, the real-money aspect of the auction house is not highlighted. This is an auction house document, not a real-money document. Choice is key; one of the biggest complaints lobbed at the real-money auction house was that it skirted too close to the unfairness line and coerced, rather than offered, a choice. The Diablo III auction house, up front, wants to be about choice, with a keen reminder that if you are going to play on hardcore, your real money is no good 'round those parts.

Regional houses

Much as World of Warcraft auction houses are separated by servers and WoW servers are separated by region, the Diablo III auction house system will be restricted based on geographical release. Each region, the Americas, Europe, and Asia, will have their own unique gold auction houses and unique real-money setups.

The American and European auction houses will feature a real-money option at launch, but the Asian regional auction house, which many consider partly why Diablo III's release was being held up, will not be active. Removing the real-money auction house from launch was a move most likely made to speed the process along and quell the fears that the buying and selling online aspect looked too much like gambling for the South Korean ratings boards.

The Americas regional real-money auction house will feature currency-based listings for the U.S. dollar (USD), Mexican peso (MXN), Brazilian real (BRL), Argentine peso (ARS), Chilean peso (CLP), and the Australian dollar (AUD). The European regional houses will support British pound sterling (GBP), the euro (EUR), and Russian rubles (RUB) as its currencies. Once everything is cleared up in South Korea and any other ratings boards having issues with the feature, expect to see a grand launch of the real-money AH in Asia.

The moment of truth: Fees

Ah, the moment we've all been waiting for -- how much will the damn thing cost me to use? Blizzard has stated in the past that the real-money auction house was not designed as a money-making opportunity for the perpetuity of the game's life. Rather, the development teams had to struggle with the looming issue of development and live costs associated with running what essentially boils down to an MMO-sized server architecture with no monthly fee. Where does the money come from to run Diablo III when you don't have to pay anything but the box price and have access forever?

Killing two birds with one expertly polished stone, the boys and girls at Blizzard (I am picturing Mad Men-esque, smoke-filled conference rooms, an angry director banging on a Formica desk) decided to try the real-money auction house, removing the seedy underbelly gray market item dealers and replacing it with a Blizzard-owned and -operated venture that would take a fee from the transactions associated with the service to pay for the entire Diablo III infrastructure. Ingenious, many said. Awful, said the forums -- and then two weeks later, nobody cared anymore.

Equipment versus commodity

The pricing scheme for selling items on the real-money auction house is broken into two categories: equipment and commodities. Equipment items are self-explanatory: [Gothic Plate of the Whale] is a piece of a equipment. It does not stack, it is tradeable, and it is one individual item up for auction. Commodities are items that can be listed in bulk, such as reagents for crafting, gold, and gems. Each category of item is subject to a different transaction fee.

For equipment, a flat fee of $1 (adjusted for other regions; see the table here for other currencies) will be taken from the final sale price only if the item is sold. For commodities, 15% of the final sale price is deducted as a transaction fee, due to the nature of the items stacking and not being up for individual sale. Basically, one item being sold for one auction has a set price, whereas my stack of items would cost the same to list as another smaller stack of items. This is unfair to the little guy and lets the system be easily dominated by high rollers, so the percentage fee is applied after the item sells.

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But what does it all mean?

Blizzard has just laid out the groundwork, foundation, blueprints, floorplans, and whatever other tired metaphor for the plan that you want to use for a functional, workable, player-driven marketplace at the Blizzard scale. Yes, other companies have done it before and are doing it now. There are tons of games out there with player-driven marketplaces, but nothing on the scale of what Diablo III has the potential to push. All eyes are on Blizzard to see if this crazy contraption flies. Much as Second Life was the canary in the coal mine for many virtual property issues a few years back, Blizzard will be the company to watch when it comes to real-money transactions, virtual taxation, issues with getting rich from video games, and more.

Battles in the virtual-to-real-money sales arena will be fought by Maximus Blizzardus Aurelius, father to a controversial auction house, no stranger to legal fights on principle, EULA, and protecting intellectual property. Blizzard is the big dog and, as big dog, must live up to the Rules of the Dog Pack -- the big dog goes first 'cause he's the biggest. And believe me, I'm a dog lawyer.

Why are $1 and 15% important? Every company now can point to the Blizzard pricing model and either canonize it or reject it. When players weigh in, the cycle will be complete, and we will have a new pricing scheme until something better comes along. Did we ever think MMOs would abandon the $12.99 a month pricing model? Preposterous. I'd never pay $14.99 for a game per month for ... wait ... for how long? Uh-oh.

Diablo III is important because it's not only a game that garners instant media attention based on the subject matter and violence alone, but tacking on the real-money component lives the whole debate open to that horrible, dreadful, potential conclusion: a story on Fox news. Or MSNBC. Or CNN. Any 24-hour cable news network will find that first kid who made $1,000 on a piece of armor on the Diablo III auction house and bring up the stupidest questions about virtual currencies and tax reform.

You know what? Good. Let it happen. I can't wait to hear President Obama and Mitt Romney have to answer questions from Twitter and YouTube about the Diablo III real-money auction house. Splendid.

This column is for entertainment only; if you need legal advice, contact your lawyer. For comments or general questions about law or for The Lawbringer, contact Mat at mat@wowinsider.com.

Filed under: Analysis / Opinion, The Lawbringer

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