Are microtransactions and legitimized RMT ruining MMOs?

I was sitting on the beach yesterday, reading a recent Wired feature by Julian Dibbell describing the rise and fall of Internet Gaming Entertainment (better known to most MMO players as IGE) and its founder, Brock Pierce. Dibbell’s article went into some detail on Pierce’s life during the dot-com bubble, as well as his shady partners who ended up forced out of the US due to a variety of unsavoury, non-business related activities that effectively aided in bringing about their downfall in the end. Pierce, however, did quite well for himself nonetheless, and IGE’s reign as leader in real money trading, an element of virtual economies commonly known in the industry as RMT, was a polarizing point among many MMO players and developers and is still a hot topic of debate, even after IGE’s implosion over the course of 2006-2007.

This article, combined with recent unconfirmed rumours that Bioware’s new Star Wars MMORPG may be (at least partially) microtransaction based, got me thinking about all of the negativity surrounding RMT and microtransactions in the North American and European MMO marketplace. For the layman, microtransactions are basically for-cash transations inside online games of any kind, be they free-to-play or subscription-based systems. The common model amongst these games is to allow anyone to play for free by downloading the client online, effectively lowering the barrier to entry to nothing for Joe Gamer, but then requiring real money transactions, though small (think anywhere from a few pennies to a few dollars), to acquire appealing in-game items, skills, or anything that strikes the game developers’ collective fancies.

This stuff works, you know

Along these lines, I watched an interesting and thought-provoking talk by I’mInLikeWithYou’s founder and lead developer, Charles Forman, at the Web 2.0 Expo in New York this past September (you can read my recap over here.) Foreman spoke at length about a variety of aspects of bringing the gaming mindset — especially of the collaborative/multiplayer genre — over to the web (be it in the business world or in a web-based gaming environment) from the traditional thick-client game development industry. He also discussed building applications to support and feed this mentality. He touched on microtransaction systems and their popularity in Korea and other parts of Asia, which I listened to with interest. Huge microtransaction-based game publishers like Nexon and NetGame are supremely popular in Asia, but haven’t really picked up traction in North America thus far.

There are other business models for MMOs out there too, from Guild Wars’ free-to-play but pay for expansion packs model, to adver-gaming, etc. I played TCGs like Chron X and Sanctum back in the late ’90s while I was in university (as did, surprisingly, IGE’s Brock Pierce), and they worked relatively well on microtransaction models (though slightly larger, in the $5-$20 range per transaction, although one could argue that the materials purchased were somewhat more valuable than items in MMOs) prior to their popularization in Asia later on. For the time being I’m going to stick to discussing subscriptions versus microtransactions.

So why doesn’t it work here?

The reasons for this are pretty nebulous to an industry outsider like myself, but it looks as though most of it just has to do with the existing comfort level with the subscription model. Monthly subscriptions have been the norm for the western world, dating back to the early MMORPGs like Ultima Online in the mid-1990s and moving well into the current generation of MMOs, ranging from World of Warcraft’s massive 11 million subscribers to Age of Conan and Warhammer Online.

Maybe it’s a Western culture thing, but games like NetGame’s Holic Online and Nexon’s MapleStory have created player bases substantially larger than many of the biggest North American (and European) MMOs (we’re talking in the several million accounts, here) have subscribers. Obviously, having a half-million monthly, paying subscribers versus 5 million non-paying accounts is a pretty easy win for the subscription model.

Hey, wait a minute… maybe it does?

But wait: if we consider your traditional internet sales funnel, let’s say 10% of your registered accounts start making microtransaction-based payments for in-game items, upgrades, pets, etc. That’s a half-million of your 5 million accounts creating revenue, but you still have the traction of 5 million players spreading the word and virally marketing your product. Now it’s not so easy to judge what’s better, right? My fiancée plays Holic and enjoys it tremendously. I can see why: she’s a student with no income to drop on a monthly fee, and although she enjoys games like World of Warcraft, she can’t afford to play it on her non-existant income. She’d much prefer to play Holic for free, and she’s willing to accept a slight quality drop in order to play an MMORPG.

So, what of these RMT-based games were higher quality, produced by a company with a notable track record in North America and Europe, and attracted a little more discerning user base?

Star Wars: The Old Microtransaction Fallout

I read gaming blogs quite regularly and noticed quite a backlash against the possibility of Bioware’s upcoming MMO, Star Wars: The Old Republic, potentially going with a microtransaction-based model. While the whole kerfuffle was temporarily cleared up as a misunderstanding (as reported over at Broken Toys), Keen over at keenandgraev.com had a post last week fundamentally denouncing the entire model and refusing to play the game if it ended up going that way. As both a gamer and someone who works in enterprise software development for a living, I find that I can distance myself from the emotional “allowing and legitimizing RMT is bad and microtransactions will ruin the game” mentality because I see the value gained by going with an alternate business model. It’s really nothing new, at least in the world-wide marketplace. But I also feel a little bit of a common bond with Keen in that I don’t want to see what could potentially be an awesome next-gen MMO turn to shit because of money-related “business” issues. But we have to remember an important fact here: all MMOs are still businesses and not charities, and if they lose money and close their doors like so many have in recent years (Richard Garriot’s Tabula Rasa being the latest notable fatality), it not only hurts the industry, but the consumer — including you and I — in the end. Less competition out there for games like WoW mean less innovation and less of a drive to be the best, and less innovation means that we have to wait another year, or two, or five, before we see something that’ll knock it out of that top MMO slot.

Cutting out the middle-man

Back to the IGE and real-money transaction issue. The other benefit here is that moving to a microtransaction model effectively cuts out the middle man. Companies like IGE made money off gold farmers’ backs, and sold in-game items and currency for real cash. Allowing the gamer to make these transactions legitimately, in-game, using systems built by the game developers to do as such, drops the hammer on these grey-market middle-men and puts the power back in both the gamer’s and the developers’ hands. And money in our hands is much better than money in theirs, don’t you think?

At the end of the day, I still find it comical that many in the western world complain about “yet another pay-to-play MMO” and shell out what many would consider a hefty (and slowly increasing, as we move to more complex, richer MMO experiences) monthly fee, yet were willing to pay tens, hundreds or even thousands of dollars on eBay or IGE for an in-game item. It seems ridiculous, doesn’t it?

So, is it so wrong to capitalize on that mentality? Will it ruin the industry, or more importantly, your gameplay? Food for thought.