Filed under: Economy

One of the most talked-about features of EVE Online is its player-run economy. Due to over 330,000 players living on one server, the markets have reached a critical mass where the laws of economics play out in a very effective manner. When there's a demand for something, no matter how obscure the item or low the demand, you can be sure there are dozens or hundreds of pilots trying their best to supply it. The in-game economy mirrors real-life economic situations so closely that CCP even hired a dedicated economist to analyse the market and advise CCP of any problems that arise.

EVE's economy is often referred to as a pure free market, but that isn't technically true. At its heart, EVE is still a game designed and implemented by a team of developers. All MMO economies require some degree of control and intervention for the game to remain playable. In EVE, this comes in the form of careful balance of supply and demand via changes to game mechanics and drop rates. There are also a number of more direct passive influences on the market, such as NPC market orders and insurance.

In this economic article, I look at a few of the influences that constrain free-market economics in EVE.

Recently, a buddy and I were discussing the merits of MMORPG realism while waiting in the ironically named fast food drive-thru line. I'm all about the "realistic" social and economic possibilities inherent in old-school Ultima Online, while he digs the accessibility and pick-up-and-play nature of more recent titles such as World of Warcraft and, presumably, The Old Republic. About the only thing we could agree on is that there's room for both in the massive genre.

Realism is highly subjective. For example, a fantasy title full of wizard fire, dragons, and goblins (Ultima Online) is, in my mind, more realistic than a non-combat sandbox based on "real life" like A Tale in the Desert.

What say you, Massively readers? Would you like some realism with your MMORPGs, and if so, what exactly do you mean by that?

Are you one of the steadfast, stalwart gamers who absolutely refuses to shell out money on cash shops, microtransactions and virtual services apart from subscriptions? If so, you're in the minority -- a study by VGMarket showed that three out of every four online gamers purchased a virtual good in the past year. This shouldn't come as a surprise, however.

The survey isn't strictly indicative of MMORPG gamers; it was taken from over 2,200 players who were either part of PlaySpan Marketplace, Facebook, or purchasers of Ultimate Game Cards. Still, the results are fascinating, as a whopping 64% admitted to spending money on cash-shop items at least once a month, with 9% going so far as paying for virtual goods on a daily basis.

Other statistics from the survey are equally interesting. PC gamers spent an average of $37 a year on virtual goods, and PayPal is by far the most popular method of payment. Oh, and the most-purchased good? In-game currency. (There, that shouldn't be too controversial, right? Right?) You can read the full survey results over at VentureBeat!

I decided to write this article based on a nagging feeling. It's not something I would normally look into, being that the questions I have are not that easy to ask, or not that easy to clarify. But, as I sink deeper and deeper into the world of international websites, games and toys, I always find certain attitudes pop up during my conversations about my findings. Perhaps it is because I am used to the sights, sounds and styles of free-to-play titles, and have learned to look beyond some of the long titles and odd descriptions. I no longer see games divided into groups and sub-groups.

When hearing the complaints about "foreign" games, I rarely see the counterbalance to the comments. If "Asian" games are grindy, that would mean that North American games are not? If free-to-play games "force" you to spend money, then that means that North American subscription titles do not? The descriptor "free-to-play" is accurate, nine times out of 10, yet there seems to be an issue with using that term, because at some point the player might need to spend money to go at a pace she wants to.

In fact, I am confused by the constant use of the words free-to-play to describe, essentially, a class of game. Where is the counterbalance to that? Does that mean that all subscription games are from a different world of higher quality?

Virtual environments have a generally poor reputation in many quarters, particularly in the mass-media. Much of that reputation is ill-deserved, and some of it is entirely fabricated (eg: by the mass-media).

I have to ask, what's the big deal?

In the bullet-point list of most every MMO on the market, a "functioning in-game economy" comes as a standard feature, much like AM/FM radio and power steering, er, I mean like PvP and spacebar-as-jump-button. Being able to buy and sell goods and the occasional service between players adds a layer of depth and strategy to the game world that -- for once -- isn't solely about killing something. A few select players even eschew the rest of the game to focus on playing the auction house or crafting goods to sell.

Unfortunately, like the Force and the moon, in-game economies always come with a dark side. Economies are tricky to balance, and the longer a game runs, the higher the risk for it to spiral out of control due to mudflation. Late-comers to the game often find themselves at an economic disadvantage in comparison to extremely wealthy veterans. Economies also need the support of a lot of desirable things to sell and a useful interface through which to do it (such as an auction house), creating a lot of work for the dev team. And, of course, with any economy comes the headache of gold farming and selling.

Out of curiosity, would you play a game with no real economy? Some games such as Free Realms and Guild Wars de-emphasize their economies greatly in favor of other parts of the game. Do you find MMO economies to be more of a bother than a blessing? If a fun game came out that lacked this "essential" feature, would it be a deal-breaker?

This week, we cover the final installment of our summarized history of Second Life and Linden Lab (check out the first installment or the second, if you missed them). It's only possible to cover a tiny fraction of the events that took place in the space we have here, but the highlights paint an interesting picture.

We'll be working our way from 2008 to June 2010, and looking at what future directions we expect from there.

Although we're not yet finished with 2010, it seems to have developed a pattern of games going free-to-play. Add Monato Espirit to that list, as the game has recently moved from its own rather unique model for payments to a more traditional setup. Conversions of the sort usually come with mixed excitement and trepidation from the community, but it looks as if the response has been fairly uniform in its positivity, as the game's prior model was at once more open and more restrictive.

Under the old model, the game used purchasable MetaTix as its main currency -- it eschewed NPC vendors and gold drops in favor of tradable MetaTix to fuel the economy. The changed experience offers a far more traditional setup with in-game money and an in-game cash shop to facilitate microtransactions. While new business models are always interesting, it would appear this one wasn't tremendously beloved by Monato Espirit's players, meaning that the game's shift has been welcomed with open arms.

[Thanks to Alex for the tip! ]

This week, we cover the second installment of our summarized history of Second Life and Linden Lab (or check out part one, if you missed it). From 2005, there's an impossible amount of material to cover, but there are some interesting stories lurking among it all.

Join us as we work our way through some of the interesting highlights from 2005, 2006 and 2007.

The hype-machine for Working as Intended's incoming MMO, Dawntide, resumed at the end of May with the announcement of the start of open beta. Dawntide promises to be a skill-based, open-PvP sandbox a la Shadowbane or Darkfall, with territory to claim, castles to build, sieges to undertake, and boats to navigate waterways usually neglected in other games. And though the game isn't quite finished structurally, we have to agree that what's done is beautiful, and what's planned is ambitious. Might this be the ultra-realistic, survival-of-the-fittest sandbox you're looking for?

We were fortunate to score an interview with Working as Intended's CEO, Martin Anward, who gave us an inside look at Dawntide's development and his team's plans for the future. Join us past the break as we ask him about boats, crafting, boats, death penalties, boats, ganking, boats, FOTM builds, boats, and boats!

Second Life has just seen its seventh anniversary (called its seventh birthday, only it technically isn't -- the original birthday is in March, but the anniversary is in June. There's history there). It's also traditionally a time when Linden Lab and Second Life users most often treat each other as enemies and obstacles; and it is a time for retrospectives and for considering the future.

With the departure of Linden Lab CEO Mark Kingdon (the press release release says "stepping down," but the day prior to the release many Linden staffers were saying that Kingdon was fired) Linden Lab has hit a turning point -- or the end of another era.

Accordingly, over the next couple of weeks, we're going to look at the history of Second Life, starting back in 1999 and continuing to the present day. Or at least as much as we can cover the ten-year history of something so rich and diverse in the available space.

Second Life is quite legitimately a phenomenon (and even won an Emmy award). It was also something of an accident, since it wasn't what Linden Lab started out to make.

Hot topic of the week would be the Linden Lab layoffs. 30% of the staff (roughly 110 or so individuals) were laid off this week in a round of layoffs that we spotted ahead of the official announcements. Additional staff have been shed since the beginning of the year.

Staff have been dropped from market-development, business development, engineering, quality assurance, human resources, community and executive management. Hardest hit this week are community and customer-advocacy roles and quality-assurance/testing.

What isn't hard to see is why these cuts were made, and in fact, why they are vital to Linden Lab as a going concern. At least it isn't hard to see when you're looking in the right place.

Some men are born into greatness, the saying goes, and some have greatness thrust upon them. In MMOs, some are launched with item shops, and some thrust item shops upon us. In another sign that the MMO genre is irreversibly marching down the path of microtransactions, Fallen Earth quietly opened the doors to an item store, offering a pair of luxury goods in exchange for cold, hard cash.

The two items currently for sale are a Kaibab Cur pet and a pair of brass goggles. The Cur is one of the new pets in the game -- in this case, a four-slot-carrying dog -- while the goggles give lowbie characters a hand up with protective stats while making your avatar look like a mad scientist. Interestingly enough, Icarus is limiting players' purchases of each item to one per account.

You can scope out the goods at the Fallen Earth store on the official site. We'll certainly be keeping an eye on Icarus to see how the store develops and how players react. Although considering that Fallen Earth takes place in a post-paper currency economy, one wonders if Icarus Studios would accept poker chips instead.

[Update: The Fallen Earth team has responded to player concerns with this item store. Their statement can be found after the jump.]

Four times per year, CCP Lead Economist Dr. Eyjólfur Guðmundsson and his team of researchers publish the Quarterly Economic Newsletter (QEN). In addition to providing trackable statistics on EVE Online's in-game market, each issue focuses heavily on analysing one particular topic. This quarter's report focuses on wormhole systems and the state of the tech 3 market. Updated player demographics show more and more players entering wormhole space, with a drop in the number of characters in high-security space. Statistics for the number of jumps in wormhole space over the past year show a similar trend of growing activity.

This QEN provides some enlightening graphs on the popularity of various tech 3 offensive subsystems and how tech 3 material costs have changed in EVE over the past year. Perhaps most illuminating is the sharp rise in the use of tech 3 strategic cruisers in locations that put them at risk. While the majority are being flown in mission hubs and market systems, over 35% were found outside the safety of high-security space. In addition to this quarter's focus on wormholes, the report contains the usual graphs tracking in-game prices, trade volumes, ships in use and other useful metrics.

It has long been a matter of considerable debate among virtual-environment pundits about what constitutes an 'active user'. In some ways, subscription MMOGs have it a lot easier than many other kinds of virtual environment. You can always count paying subscribers, and that's all that matters.

In a general-purpose virtual environment, free-to-play or 'freemium' model, though, counting active users is important. Trends in active users measure the health of your user communities, as well as allowing you to credibly measure your virtual-world's e-peen compared to that of the competition.