Diablo 3 Auction House Causing Problems In Korea?

By Frank Lewis,
On August 1, 2011, Gamasutra broke the news that shocked the gaming world: Diablo 3, Blizzard's long-awaited action RPG sequel, will be supporting a real-money trading (RMT) auction house.

This stunned industry observers and players alike. Blizzard up to that point had been one of the most vocal opponents of third-party RMT, but was seemingly doing a 180 to get their share of the profits.

Third-party RMT sellers have been leaching off Blizzard games for the past decade. Diablo 2 generated a cash-flush underground economy, where websites like lewt.com offer rare items and runewords for up to $500 a pop.

While in the popular MMO World of Warcraft, so-called gold farmers mostly from China earn a living by playing the game for hours to earn virtual currency and items. These are then re-sold to players who want to skip the grind. In 2008, the Chinese government pegged the value of virtual currency trade to "several billion yuan" with an alleged annual growth rate of 20%.

In both cases, none of the revenues go to Blizzard. That's why defenders say the company has every right to try and capture these huge RMT revenues, since Diablo 3 is their game to begin with. Blizzard plans to monetize the RMT activity by taking a cut on all item sales, and imposing an additional tax on sellers who decide to "cash out" their earnings.

Even though the profit motive is a glaring one, Blizzard's official reason for allowing a company-run RMT operation is that it wants to make item purchases easier and safer for Diablo 3 players.

"Many of these methods were inconvenient and either tedious (for example, repeatedly advertising for a desired trade in Battle.net chat channels and waiting for responses) or unsafe (e.g., giving credit card information to third-party trading sites). With Diablo III, we're introducing a powerful auction house system that will provide a safe, fun, and easy-to-use way for players to buy and sell the loot they find in the game, such as weapons and armor," said Blizzard in its Diablo 3 Auction House FAQs.

But other parties are seeing it otherwise. For example, South Korea's Games Ratings Board has fought hard to remove the RMT auction feature, which it classified as a form of gambling. It won the battle last month, when the regulatory commission approved a Diablo 3 release version without any item RMT. The board also warned Blizzard that the game will be re-rated, and possibly banned, if the RMT feature is ever added in future patches.

This has likely dashed Blizzard's hopes for RMT revenues. Blizzard games are massively popular in South Korea. According to industry estimates, the country alone accounted for 40% of sales for the sci-fi, real-time strategy title StarCraft II, and 30% of sales for Diablo 2. Combine that with a propensity for spending on virtual goods -- the Korean social network Cyworld generated $250 million in virtual goods revenues in 2008 - and it's clear that the South Korean market could have racked up major RMT-related revenues on top of box sales.

While there's little indication that other countries will follow suit, the months-long South Korean scuffle has been speculated as one of the main reasons why Diablo 3 was pushed back to the second quarter of 2012.

The confirmation of an RMT auction house has also disgusted some Diablo 3 fans, but if this MMO-Champion poll is any indication, the consensus is that it is more annoying that game-breaking.

"I don't think the AH will actually kill the game at all. If anything it gives another niche of gamers," said forum poster Sanguinesun. "I'm skeptical at the moment that your average player will be able to make any significant money from the RMT AH, though."

The item RMT feature has sparked a frenzy of money-making ideas among gamers, who believe that they can play and earn money at the same time. The potential is there -- across all games and social networks, sales of virtual goods amounted to $2.2 billion in 2009 and are expected to reach $6 billion by 2013, according to Piper Jaffray & Co - but it's too early to tell whether players and Blizzard can take a slice of the pie, or whether third-party RMT vendors will devise even cleverer ways to dominate the new cash stream.

Resource articles:
Diablo 3 RMT Auction Early Reveal by Rob Pardo: http://www.gamasutra.com/view/news/36266/Blizzard_Reveals_Real_MoneyPowered_Diablo_III_Auction_House.php
Diablo 3 Auction House FAQs: http://us.battle.net/d3/en/services/auction-house/info#q1
Diablo 3 Approval with Conditional Removal of RMT in South Korea: http://www.koreatimes.co.kr/www/news/biz/2012/01/123_102801.html
Blizzard Game Sales in South Korea: http://www.igigroup.com/st/pages/koreangames.html

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