Latest News with Tag 'Virtual Currency'

What the War on Drugs and Virtual Game Currency Have in Common

Has the “moral” war on virtual currency created the same harmful behavior we are seeing in Mexico from the war on drugs? 

Recently, Steven Davis CEO of SecurePlay makes the strategic case for limiting the use of the Banhammer on virtual game accounts:

“I am not a big fan of banning. "The Banned" are (usually) paying customers, an issue I discussed at length recently in The Cost of Punishing Cheaters on Microsoft's Xbox Live. Even if The Banned one is not currently a paying customer, they are sufficiently interested in your product to use it.”

In particular he makes a comment about banning and the effects it has on secondary markets:

“Banning motivated players encourages even worse fraud. I would argue that the transformation of nuisance gold farmers into much more dangerous and damaging gold frauders was partially the result of banning.”

As we’ve discussed before banning gold farmers doesn’t really decrease gold farming. It merely raises the prices of gold (and usually only temporarily, as Mudflation always wins out). If anything banning can be seen as an covert tax on gold farm operations both in time/virtual currency (the time required to get the virtual currency and level the characters that were lost) and a monetary tax as the gold farmers have to purchase brand new game keys from the developer to start farming again.

Furthermore, almost every large MMO developer knows that a significant portion of their playerbase engages in secondary markets. This is because a large portion of their playerbase simply doesn’t have the time nor willpower to grind away at poorly designed boring game mechanics. This isn’t because developers are sadistic, rather it’s cost issue. You can either make a player “farm” an event 500 times to get desired effect X or you can create 500 fun original unique events to achieve the same result. Both take commitment and dedication to beat, but many people will pay someone else to play the repetitive boring event, but people will pay to play the fun creative events. No one pays someone to beat a fun game for them. There aren’t any companies that specialize in beating Halo 3 for you and taking a screenshot of the ending credits. (One such alternative to the content vs. cost issue is to outsource some of that work to the community, but that’s a different subject.)

The point is that some of these game mechanics are so ridiculous players are willing to spend hundreds of dollars to bypass them. However, if you let everyone bypass the treadmill the more hardcore portion of your community, the “early adopters” that often brings their casual friends into these games, blow through your game in a month, trash it, and move on to another. If anything secondary markets allow developers to market to different target markets at the same time multiple target markets the same way movie theaters create senior discounts (In this case you have the a movie showing that cost the same amount if there is one person watching it or if there are one hundred people watching it similar to a server of an MMO. The owners don’t want everyone to pay the lower price that would fill the theater as the younger people would be willing to pay more. However, the majority of seniors on fixed incomes can’t pay that higher price. If you just charge the higher price the movie theater won’t be full. So you create two payment systems and discriminate based on age which is hard to fake, therefore filling the theater and making the maximum revenue).

These casual players unlike gold farmers are not as likely to start a new account and continue playing the game if they are banned from it. As such “virtual currency stag operations” usually go after the suppliers and not the users.

To push the drug war analogy further, I’d agree with Davis that the war against secondary markets has weeded (no pun intended) out the small legitimate local sellers (who a banhammer bankrupts) that were prevalent when the secondary market wasn’t so heavily persecuted. In the profit power vacuum that followed the lowest common denominators often gained control. It takes certain connections to keep coming up with ways to mask your ip traffic, acquire massive new accounts with different addresses, and continue to find labor cheap enough that a ban doesn’t bankrupt you. Notably, these connections tend not to be available to the smaller mom and pop shops or the player selling a bit of gold on the side. The stronger the use of force against the gold farmers, and the further and further underground the industry is pushed the more and more shady people end up running these organizations. The Mexican Drug War provides a potent real life analogy.

The formation of GameRates was largely a response to such shady people taking over the secondary market.

However, I still think banning can be used as a tool to discretely rack up the costs of harmful virtual currency sellers without a full legitimization. If a virtual currency operation is constantly spamming, then developers should do everything possible to link their accounts together and ban them at every chance they get. However, those that are not spamming, annoying players, kill stealing, etc. are allowed to slide. This sends a strong market signal and once the farmers realize this they will start engaging in behaviors that doesn’t trigger the Banhammer. Perhaps the problem isn’t the Banhammer, but the random and untargeted use of it against the entire virtual currency secondary market instead of specifically targeting harmful behavior.

This is probably because the war on drugs and the war on virtual currency are both sort of wars of morality (Which makes Mark Jacobs virtual currency's version of FBI Director Robert Mueller). In the virtual currency wars some players that aren’t buyers often consider buyers “immoral” and think it’s unfair that they have to spend hours farming an item while someone else took a quit shortcut to instant gratification similar to those who find “joy” in a pill. Restricting others choices due to jealousy is childish at best. Furthermore, it misses the point that the journey is often much more important than the destination. If you take the shortcut because the journey is "hard", but if it is hard because it involves team bonding, skill, lore, puzzles and challenge which creates an amazing experience, then there really isn’t any reason to complain about those who are missing out. It's like complaining about someone reading the end of a great book, or looking up the answer to a puzzle instead of solving it. However, if the journey is boring and not even fun and is just a treadmill to maybe get to the fun part; why are you on that journey anyways?

The problem isn’t gold buyers. The problem is disruptive gold sellers, and this is who should be targeted. Those that sell and buy gold and don’t disrupt the game any more than someone farming the same items for themselves should not be persecuted. What’s the difference between paying someone to log onto your account and politely farm some items, and you doing it yourself?

The vast majority of virtual currency purchasers would prefer to purchase currency from legitimate operations that don’t harm the game they enjoy so much they are willing to spend hundreds of dollars on. These virtual currency purchases do little or zero harm to the game society just as a pot smoker does zero too little harm to our real society. Just as the pot smoker would much prefer not to inadvertently support Mexican drug cartels and organized crime, the gold buyers doesn’t want to support spammers and kill stealers. Fully legitimizing the market would make both of this possible. If that’s not a political reality, then at least on an organization level the destructive suppliers should be punished and the non-destructive suppliers should be allowed to flourish. In the meantime we at GameRates will do our best to expose those virtual currency sellers that are legitimate and those that are crooks.

For point-counterpoint debate about the ethics and legality of secondary markets check out the following. 

In December we reported that New York was considering a tax on virtual goods to come up with some much needed state revenue. The NY Daily News reports:

"Citing a huge infusion of stimulus money, Gov. Paterson and state legislative leaders agreed yesterday to scrap $1.3 billion in nuisance taxes and fees the governor proposed in December. The eliminated taxes included the 18% fat tax, which Paterson intended to charge on nondiet sodas, and the digital property sales tax, which would have extended state sales taxes to downloaded software, games and entertainment."

So, seems like we still don't have any taxes in the U.S.... yet.

Well, of course not really. But when states are suffering massive budget shortfalls the first thing they start taxing is products that don't have a well-organized consumer group/union/lobbyists behind them. They also like to tax products that the general public looks down upon (see Virginia's recent proposal to double the tobacco tax)

Is virtual game currency next? Maybe if you live in New York according to Game Politics:

The New York Daily News has coverage of Paterson's budget plan:

Gov. Paterson's proposed $121 billion budget hits New Yorkers in their iPods - and nickels-and-dimes them in lots of other places, too.

Trying to close a $15.4 billion budget gap, Paterson called for 88 new fees and a host of other taxes, including an "iPod tax" that taxes the sale of downloaded music and other "digitally delivered entertainment services."

Indeed, a review of the budget document reveals the details of Paterson's plan to tax all forms of digitally-delivered content:

Close Digital Property Taxation Loophole. Imposes state and local sales tax on purchases of prewritten software, digital audio, audio-visual and text files, digital photographs, games, and other electronically delivered entertainment services to achieve tax parity. For example, with the passage of this bill, a book, song, album, or movie would be subject to sales tax no matter if it was bought at a brick and mortar store or downloaded online.

It seems like not only would that include the latest instant expansion downloads, but virtual currency as well. Will it be enforced? Probably not for most virtual currency companies (although legally any that are based in the U.S such as MOGS will probably consider adding a tax if you select that you live in New York). Developer sponsored virtual currency such as SOE's Station Cash (which just announced yesterday that it was hiring more people due to overwhelming demand)  most defintely will start collecting tax from New Yorkers. However, will your average chinese gold company start collecting taxes for New York? Don't count on it (they don't even pay taxes in China apparently).

The trend towards virtual currency public legitimacy continues....

Sweden always seems to be in the bleeding edge when it comes to civil/legal rights and privacy concerns don't they?

Although they were one of the first countries to tax virtual currency income they are now one of the first to offer wills for their players.

That's right according to Swedish news site GP (English translation here) the "Second-Life"-like Project Entropia (700,000 players) published by Swedish company MindArk will start drafting wills for it's players so that their virtual assets can be passed on after their death. 

This begs the question, which one of your kids get's your decked out character with that castle in prime virtual real-estate? Let the sibling rivalry begin.

Vili Lehdonvirta asks the question:

"Greg Lastowka over at Terra Nova writes about the way Sulake limits the amount of money users can spend on virtual goods in Habbo. I've written a little bit about the topic in a paper that has been in review for a long time. Basically what interests me in it as a researcher of consumption is how a certain type of spending is legitimized and becomes socially acceptable. Lots of products from jazz music to microwave meals were initially "improper" consumption, not something a respectable person would buy. Gradually, in a process were advertising played no small part, people accepted those goods and started to consume them. At the same time, they left behind some of their earlier ways of consumption.

As for virtual consumerism, most people probably currently consider spending money on virtual goods irrational or at least a bit silly. Buying virtual trinkets does not reflect well on a person. But because this form of consumption currently takes place largely in the privacy of one's home or office and is shared with other likeminded individuals only, virtual consumers have not really had to engage in much debate.

Habbo is different, however, because it targets teenagers. Young teens are still accountable to their parents over their money use. In the eyes of many parents, spending money on virtual goods is not a really proper form of consumption. Hence calls to the consumer ombudsman and letters to the editor. Sulake has responded quite cleverly by comparing their offering to cinema tickets. Neither involves a tangible product, but the latter is a socially acceptable way for kids to spend money (was not always so, though!).

In my view, this public debate is part of the process of legitimization. In Finland, it looks like that process is going forward: last week, the biggest daily had a full page in the consumer affairs section devoted to virtual consumption. One parent was quoted as saying that he somewhat prefers to have his kids buying virtual stuff as opposed to plastic toys, since the latter are shipped from a distant country and soon turn into trash. But then he was the CEO of Apaja Online Entertainment. In Korea, the process has gone furthest, while in North America some companies are currently putting all their might into driving it forward (one company to keep an eye on is Virtual Greats).

Is this a good thing or a bad thing? Are jazz music (replaced classical music) and microwave meals (replaced dinners cooked by housewives) a good thing or a bad thing? Depends on what you measure. In today's world, environmental impact might be a decent yardstick.

To finish off, here is a snippet of text from my paper: