Pandaren Monk We finally have some reliable figures for the commercial value of “minipet” micro-transactions in the game, World of Warcraft. Specifically, the sales of just 1 item: In November and December 2009, at least $2.2 million worth of Pandaren Monk pets were sold. 220,000 at $10 each. We know this because “50% of the purchasing price” was donated to charity, and “more than $1.1 million” was donated (via WoW.com).

Over 220,000 sales to a market of about 4-5 million potential customers (only active WoW players can use the minipet, and the pet does not appear to have been sold in China or Taiwan). Roughly 5% of potential customers spent $10 on an ostensibly useless vanity item: A small pet that follows you around, looking cute.

Like most virtual goods, the cost of making and selling this pet is marginal: Primarily some additional art and marketing time, all built on the back of existing systems (store, staff, world). The first 2 months of Pandaren Monk sales will have made contributions to Blizzard’s profits of about $1 million. That’s only around 1% of the business’s turnover in that 2-month period. But that 1% is “free money”. Blizzard (-Activision) would be doing a dis-service to its investors if it did anything other than continue to milk this virtual cash cow.

Apply a healthy bit of European cynicism, and it is easy to conclude a scam. Tobold‘s:

“Send me $10, and I promise to send $5 of it to charity.”

Of course, Europeans fundamentally don’t understand US philanthropic culture: The idea that it’s fine to exploit your fellow human and make outrageous amounts of money, so long as you give some of it away in the end. Some philanthropy is able to take a somewhat rational, balanced view of what is good for the world. But there is a tendency to support visually appealing issues, such as charities servicing the needs of children.

The purpose of this article is not to argue that a European, government-centric re-distribution of wealth is preferable to an approach lead by personal responsibility. (I’m not sure it is.) The problem emerging here is more fundamental: That virtual goods are replacing trade-able value with non-trade-able value. Non-trade-able value that, by definition, can not offset inequality in (game) society. Donating part of the price of sales to charity is pure irony. In true Orwellian style, we’re sleep-walking into a potentially broken social structure with the best of intentions.

This article started as a box during my Adventures in the Invisible Tent, but has been expanded here in much greater detail. This article describes what a minipet is, highlights the role of money to balance inequality in society, and explains the problem with virtual goods. On this page:

Isn’t it Cute?

Minipets are small creatures that follow a player’s character around. Their (often) elaborate animations bring them to life, evoking many of the same emotions as a domestic pet or small child in the physical world. Unsurprisingly, since humans’ physical world desires tend to transfer directly into virtual environments, these creatures are especially popular with female players: WarCraftPets.com, Breanni’s community and database for minipet collectors is the only major WoW website where the majority of visitors are female (strong male biases are more typical).

The (programmed) game mechanics of minipets offer absolutely non advantage to a player. So while we can argue that “vanity” mounts have some utility (the benefit to the player of faster travel), minipets do nothing other than be seen. Yet they can hold significant monetary worth:

I suspect the most valuable single thing I own is Mini Tyrael. Mini Tyrael sells for between $500 and $1000, because only 8,000 (code cards) were originally printed: The pet is scarce, and therefore especially desirable for the minipet collector that “has (almost) everything”.

Sure, I have to discount the value (reduce the buy price to the likely resale price) of the computer I’m typing this on. And ignore future income from “inaccessible” assets like pension contributions. And even then, the revelation primarily reflects my hermit-like existence, which hasn’t deemed it necessary to own residential property, or, frankly, anything other than mundane items that are not practical to rent.

But it is important to show that there is real money involved here. And not just a few cents spent on throw-away items.

A wide range of pets are available, some sold for dollars, some available by completing activities. Sometimes the method by which people are able to gain a minipet is ethically questionable, as the box below describes.

Box: Lambs to the Slaughter
Blizzard occasionally holds Arena tournaments for World of Warcraft. The arena is a focused, player-vs-player combat environment in which small teams of players compete to “kill” each other. Tournaments are open to any player, for a modest (few dollars) entry fee. In practice the competition is global, and some of the most talented eSports stars are in the competition. Basic play skills aren’t going to be good enough to win many matches. But it would be a fairly boring, not to mention unprofitable for the organizers, if only a handful of elite veterans bothered to enter. There were certainly contestants that entered both because they enjoyed the tournament, and because they wanted the exclusive Murkimus the Gladiator given to serious competitors. But there were also teams that competed solely to obtain the minipet. Many could be seen in the WarcraftPets community comments at the time. The pet required contestants to complete 200 matches. Not win. Just enter the arena, and be slaughtered by the lions… 200 times.

Trading Equality

When William Pitt (the Younger) first introduced income tax in Britain, the levy scaled from roughly 1% to 10% of individual income. Now we consider a 10% to 50% range to be acceptable. Perhaps it is no accident that government continues to spend an ever-greater proportion of national income, in spite of apparent political pressure for “less government tax and spend”. For example, increasingly intangible, information-based economies are increasingly controlled by government because the (non-legislated) competitive market is increasingly dysfunctional as the knowledge sphere of the economy grows in importance.

Britain no longer needs to raise money to fight the French. Occasional “crusades” aside, a key (especially European) objective of taxation is the redistribution of wealth.

This stems from basic egalitarian motives in humans. At least among “people like us”. There’s a tendency to equalise wealth within a group, even if that means an individual has less wealth for themselves: “Happy societies” are often also societies with low income inequalities. Scandinavia is the best example, where standards of living are considered to be very high, yet inequalities are relatively low: The richest 10% of people only earn about 5 times more that the poorest 10%. “Only”, because in the United States the difference is 15

The tax system works because money is exchangeable. It can be used both to trade goods and services, and to trade equalities within a society. Indeed, I argue that once government redistributes the majority of national income, the main reason for having money is to exchange of equality, not the purchase of goods and services.

Box: Robin Hood
In practice, most of the developed “first” world maintains moderately stable societies by “robbing from the rich and giving to the poor” – although bureaucrats replace folklore outlaws. In the United Kingdom, about half of all taxes are paid by the wealthiest 10%, and a half of that half (that is, a quarter of taxes) are paid by the top 1%. About a third of the money raised is then spent on social provision – a direct redistribution of income from the rich to the poor. Much of what remains benefits people equally, regardless of personal income – health, education, general affairs of state. (Equal in a very general sense – the rich tend to rent seek, while the dying poor tend clog up hospitals and social care services – the net winner is unclear.)

Wealth of Hypocrisy

In Paying for Points, I explored the role of altruism in virtual environments – specifically teen-orientated WeeWorld. Important is Raph Koster’s observation that, “a core philosophy of a world with transferable stuff is that you can help out anyone, anywhere.” Online games have their own currencies to allow players to offset inequalities between themselves and those they play with.

Secondary markets in “Real Money Trading” further allow players with wealth outside the game to transfer it into the game, gaining some form of in-game advantage or status in the process. And it was in response to that activity, that Blizzard, the designer of World of Warcraft, took to strong ethical position on player equality:

“Everyone starts off even [in WoW]. In the real world that’s not true, but in WoW everyone starts even, and the RMT stuff messes with that.”

The caveat that should have been added to that quote is “except for vanity items”. Vanity items can be sold for $10 or $1000 or… but that’s okay, because vanity items grant no in-game advantage to the player.

Except, I contend that WoW is a social game, where vanity is very important indeed. In Adventures in the Invisible Tent I presented evidence that the social, consumerist elements of the game had become as important as the original “kill 10 boars, raid dungeons in a group” MUD-style design. World of Warcraft increasingly resembles an exclusive gymnasium: There are lots of machines to help you keep fit. And you may even play on them from time to time. But the main reason you join a gym is to be seen by other people at the gym, not because that’s the only way to keep fit.

Consequently selling vanity for hard currency (both minipets and mounts) appears to be hypocrisy. Or perhaps ignorance. It allows players to bring their out-of-game wealth into the game environment, gaining (consumerist-style) status that does not necessarily reflect their accomplishments within the game itself. Yet hypocrisy isn’t the big problem.

Box: Vanity Inequality
This discussion raises the notion of vanity inequality. Which sounds like social security payments should include rations of fashionable clothing. Or something. But if we agree that vanity (consumerism, if you prefer) is important within modern social structures, and we wish to balance inequality, then seeking equality of vanity is perfectly logical. If a little paradoxical, because exclusive, valuable fashion is largely predicated on the fact that everyone else isn’t wearing the same thing. In practice, social security systems evolve: Victorian Britain was concern with the fairly basic human needs. Today sanitation, housing, and food tends to be assumed, while social isolation and related psychological issues are becoming more prevalent. Perhaps we already experience a form of vanity inequality?

Shared Value

Valuable virtual goods cannot generally be traded. Certainly not traded as easily as currency. WoW allows gifting of purchased minipets – either when buying the item in the store, or by transferring it prior to using it (many minipets are now bound to a character on use, partly to limit third-party scams, that claimed to offer players exclusive pets).

But the basic problem remains: These items cannot be split or redistributed between many people. My Mini Tyrael can only ever be attached to one player account. Its value and status can only ever be gained by one player. Consequently, it’s a lousy token with which to balance equality.

And hence we see the irony in selling a minipet and giving half the dollars to charity: Making the physical-world slightly more equal, while simultaneously fostering a less equal virtual world.

This is part of a wider trend for “worthwhile” things to not be purchased with in-game currency. For example, the most sought-after mounts (ridden creatures) tend to be those that most players don’t have. Most don’t have them because they are linked to activities that require a lot of player skill or time commitment or something unusual.

Reducing the need for in-game currency logically reduces demand for Real Money Trading, and hence reduces the volume of accounts hacked: Currency can be rapidly transferred away from a hacked character, and resold to another (unwitting) buyer. “Bound” items like mounts and minipets cannot. Fewer upset customers, less support staff time wasted, lower chance of money laundering and unwanted criminal involvement. You can see why less currency is attractive to a game operator.

Many of the old “gold farming” organisations that used to earn in-game currency (by playing continually and selling their earnings to other players), can now be paid (in dollars) to play your character and accumulate rare mounts, status symbols and other achievements with that character. So the secondary market by which players can transfer physical world status into the virtual still exists, with or without in-game currency.

What’s changed is that there are now fewer methods available to players to equalise wealth within the game itself. Evidence from wider (physical world) society suggests that a more unequal game environment will become a less happy place. Not a good attribute for a game that claims to be “fun”.

Postscript: Small-Scale Altruism

While humans have a need for altruism, that need can be focused on a relatively small number of people. A single (sharded) game realm may contain tens of thousands of players. But some players primarily play within much small groups of players – commonly a “guild”, with typically under 100 people. So equality within a guild structure could become far more important to players than equality of all players across a realm.

This would be a more robust argument if most players spent most of their time playing together. But players tend to play as individuals, with very loose interaction with others. And consequently the most important signs and symbols are those that are clearly apparent to people you don’t know. Focused, small-scale altruism genuinely does require a much more fragmented society than humans seem to enjoy.

Which is probably a good thing for the rest of us.

It would be easy for groups within national societies to become highly fragmented. And for those fragments to start using non-trade-able tokens as a form of motivation and status. If (for example) bankers started being primarily motivated by how many brightly colored virtual widgets appeared on their trading screens, rather than relative (million-dollar) differences in bonus payments, tax revenues would collapse, taking state social provision with them. Redistribution of wealth would fail because brightly colored virtual widgets are neither trade-able (and hence not readily taxable), nor particularly useful for those struggling with the basics of life.

The ideal is laughable for any established commercial industry. Yet the motivational logic is clear from social online games. Games which involve satisfying much the same humans that go out to work. The differences are not so different.

Unfortunately, our systems of taxation and income redistribution are built around money. Capital gains can be taxed, but the gain needs to be liquidated – converted into money. How exactly does one tax a single Mini Tyrael that I choose not to sell? Or, worse, am unable to sell by design? Remember, the only tangible asset is a numeric code. It’s utterly worthless out of context, and cannot be meaningfully divided.

The risk is that our structures for limiting inequality in society continue to be based on money, even when value-earning silently evolves to use non-monetary, non-trade-able forms.

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6 Comments

  • I believe Blizzard used the vanity pet/charity scheme as a way to deflect potential outrage that they have essentially introduced a RMT (real money transaction)into WoW. Now that the public outcry has been effectively been neutered, Activision/Blizzard can go on their merry way and start introducing more virtual items for sale. This is exactly what Blizzard President Mike Morhaime plans on doing according to the recent investor conference call.

    By the way, Americans give more money to charities than any other country in the world by a factor of at least 10. I think France is number 2. Just because some charities spend more on administration than one would find acceptable doesn’t make it a bad thing. I daresay giving money to a charity to feed the hungry is a wiser investment than giving it to a government that has a significantly higher overhead costs such as institutionalized bureaucracies, unions, waste, inefficiency and corruption.

    Don’t knock American charities. Every time there is there is a natural disaster the Americans are always there to help before anyone else. How much money did filthy oil-rich Saudi Arabia donate to the Haiti earthquake? Zero.

    Not to mention that when a person gives their money to charity it is by their choice and not by some faceless government official. In the end it’s their money. Giving to charity is just more honest and direct.

  • Wolfshead – I agree, Blizzard have been experimenting, by offering different packages. Overall, I term it, “doing the Starwars thing” – making money from the franchise.

    Although I don’t have solid evidence, I suspect that Blizzard’s stance on RMT is increasingly dominated by a war against hackers, rather than ethics. Logically, gold will gradually be nerfed into oblivion, replaced by “Soulbound economy”. I’ll be watching Cataclysm’s reported guild focus with interest, because if done correctly that could allow all transferable value to be internalized within a guild. Small-scale altruism. Which as my final section highlighted, raises some new challenges.

    I didn’t intend to knock American charity, so apologies, since I evidently did. It’s none-the-less a curious juxtaposition, that a very generous people have created one of the least equal societies in the “first” world (OECD source cited). As an alien, I found the results frightening. Thus far I explain it by cultural differences: In both the strength of illusion and the relationship of self to everything else. Clearly it goes very deep indeed.

    And perhaps all this starts to hint at why I’m really writing about these “games”…

  • As a postscript, today sees the announcement of the first flying mount to be sold for via the official store (source).

    Based on IRC, the US store queue was over 20,000 people long at the point when it crashed. People are mostly interested in the mount, which would be around $0.5 million revenue just in the line at the checkout, an hour-or-so after the mount became available. This really is a license to print money.

    And now people are starting to worry that it isn’t “unique” – after seeing a dozen of them in Dalaran. Te he.

    And then cognitive dissonance sets in: “I bought it because it is useful to alts.” Meaning it saves a handful of (in-game) gold and a key binding (one ground-and-flight mount instead of 2). Not the best justification for $25.

    The US queue reached 35,000 at one stage, which possibly makes this the fastest selling virtual good in history? Fairly confident it added at least $1 million to Blizzard’s wallet in under 2 hours.

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