Tobold's Blog
Thursday, July 17, 2014
The economics of CREDD/PLEX

Recently neowolf2 commented here in a discussion about how much money Wildstar is making, saying "I'm wondering how the CREDD system is affecting this. I'm seeing reports that people can just farm and vendor stuff to get enough gold to buy all the CREDD they need. If Carbine screwed this up they'll effectively have a grindy B2P game.". So, what are CREDD in Wildstar or PLEX in EVE all about?

Different people enjoy different activities in a MMORPG. Furthermore different people also have different amounts of available time and different tolerances to grind. The result of that is that some people either enjoy very specific gold-making activities like trading, or don't mind farming gold, or if they hate both sometimes are willing to buy virtual gold for real money. Thus there are third parties selling gold, and that trade can cause a lot of trouble if the sellers hack accounts or use bots to farm their merchandise.

Now the easiest way to kill third party gold trade would be for the game company to sell gold at half the going rate. As they can create that gold out of thin air and don't need to hack or bot to get it, they could always be cheaper than any Chinese sweatshop and quickly take them out of business. But some players, especially the hardcore variety, object strongly against game companies selling gold. Miraculously the same hardcore players suddenly find gold selling not unfair any more if it is them who profit. Thus CREDD or PLEX are primarily a way to introduce a legal gold trade into the game without the hardcore players protesting.

If you ask the people who sell gold that way, they will pretend that this is all positive for the game company. The gold buyer basically pays for two subscriptions and the gold seller plays for free, so overall for the game company that works out as if they had two players buying subscriptions. What that calculation ignores is the alternative of the game company selling gold directly: In that case the gold buyer is still spending the same amount of real money and gets the same amount of subscription time plus virtual gold. But the other player who previously financed his subscription with gold would now either have to pay money to keep playing, or stop playing and stop using resources of the game company. So selling gold directly instead of via CREDD or PLEX is clearly more profitable for the game company. As the people who object to that are those who are basically freeloaders in the CREDD/PLEX system, them protesting against direct gold sales is not actually a financial impact on the game company.

Now some people will tell you that direct gold sales from the game company, of gold created out of nothing would lead to inflation. That is a strawman argument. It is obvious that ALL gold in a MMORPG is created out of nothing; various sources in the game either hand out gold directly, or hand out items or resources that can be sold to a vendor for gold. And all those mob drops or vendor sales create gold out of thin air. If you have a CREDD/PLEX system, more people are busy creating more gold that way, and that causes pretty much the same inflation as if the game companies sold the gold directly. In any case you have to balance the virtual economy with gold sinks, like the expensive housing decor in Wildstar or exploding spaceships in EVE.

So how much is a CREDD/PLEX worth in virtual gold? In Wildstar, where gold is easy to make if you know how, the price of CREDDs is going constantly up. On my server a CREDD used to go for under 4 plat, and now it is already 9 plat. Basically the price balances out at a dollar vs. hour rate at which the money-poor but time-rich player is willing to spend time to get his subscription, and the money-rich but time-poor player is willing to spend dollars to get his gold. Unfortunately that balance means that if somebody has a more effective way to make gold, for example a sweatshop, a bot program, or account hacks, he can sell gold cheaper than the player who farms gold to pay for his subscription. As a result for that neither Wildstar nor EVE managed to eliminate illicit gold trade.

Even a standard subscription game without a CREDD/PLEX system already has the casual players (who play less for the same money) subsidize the hardcore players (who play more, and thus pay less per hour). Adding a CREDD/PLEX system allows some people to play completely for free, freeloaders who live of the money of other players. Game companies would be better advised to just sell gold directly, and by that way get rid of the freeloaders and the gold traders at the same time.

It *is* good for the game company in one way nobody mentions, and that's players like me.

I have over 10 years subscription worth of CREDD currently which obviously I'm not going to use anytime soon. That represents $2,400 in Carbines pocket basically for "free". Since PLEX/CREDD is the most consistent inflation proof store of wealth I will continue to stockpile more and more CREDD over the entire time I play the game. That should reach some eye opening sums after a while.

I should balance this out by saying that in theory somebody may quit the game if they can't keep getting cheap CREDD due to people like me, so it's possible I'm detrimental to Carbine (although I think unlikely).
Assuming that a time-rich person would be doing his gold earning activity anyway (big assumption but I'd hope that someone who spends 75% of his in-game time earning the gold to pay for the other 25% does so because he gets some enjoyment from that 75%), then he is creating X amount of gold anyway. If that gold is transferred in a PLEX/CREDD exchange then the total gold created stays at X, but if gold-buying direct from the company happens then X+Y gold is created which leads to higher inflation or additional gold-sinks, making everyone's currency worth less.

Selling gold directly from the cash-shop still leaves a bad taste in most players mouths. At the moment they can get some extra money for enabling a CREDD/PLEX exchange (always sold for more than sub cost) without damaging their reputation as much.

I'd rather see game-time made available in-game for content creators and enablers. That would be harder to judge and calculate.
Selling CREDD requires ABSOLUTELY NO EFFORT from the company part. It's price is adjusted by the players themselves.

Selling gold on the other hand requires at least a WHOLE FREAKING company department if they are planning to implement it right so they keep adjusting the price and monitor the impact on the game economy and player retention etc.
Another thought: those "freeloaders" produce content for paying customers in the form of materials they produce to get the gold they sell for CREDD.
Now some people will tell you that direct gold sales from the game company, of gold created out of nothing would lead to inflation. That is a strawman argument. It is obvious that ALL gold in a MMORPG is created out of nothing; various sources in the game either hand out gold directly, or hand out items or resources that can be sold to a vendor for gold.

It's not a strawman argument. If you put gold or ISK that can simply bought outright rather than traded for in-game items, then it devalues the work that is placed in farming the in-game items.

I'll approach this a different way. If gold is going to be introduced that creates inflation, then logically the company needs to create sinks to reduce that inflation.

Would you rather that a dev takes steps to reduce inflation created by simply 'buying' gold or by reducing inflation from work product that 'someone' had to farm?

The crux of this concern is that no one is 'working' to create the gold. Under a PLEX system, someone has to do it and while you may be the recipient of that work, it doesn't change the fact that someone had to spend the game hours to do it.

Why is that important? Because if you don't have that, then it devalues the "time" and "work" that ALL people put into the farming.

It's also important because market forces are at work in the PLEX scenario. Specifically, if players produce more than other players can consume, then the price of PLEX goes down and those farming to earn PLEX no longer find it worth it.

If you think about it even more deeply, then consider this... People buying PLEX are having access to materials that they are using to buy things for themselves. If there were no PLEX, they would either farm themselves or not buy it at all. Either way, it would have either been 'created anyways' and thus, no additional inflation, or 'not created at all' and thus no increased inflation.
I have never understood how these systems work despite having read many explanations. Where does CREDD/PLEX come from? Do players buy it with dollars in the cash store then sell it in game for in-game currency? If it's that straightforward then how could it be anything else than a one-for-one transaction, with the game company getting the cost of one subscription each time? Why would any game company care two hoots about which account used the CREDD/PLEX for the 30 days gameplay? They've already been paid.

If that is how it works then why would anyone think it would be bad for the company running the game?

As for the idea that non-paying players in F2P games or in-game-coin-paying players in sub games with this kind of scheme being "Freeloaders", they are the exact opposite. They are effectively acting as volunteer, unpaid employees of the game company, providing content and background color for the real-money paying players. Their role is akin to those people who are willing to appear in crowd scenes in movies without payment just for the thrill of seeing a 0.05 second longshot of the back of their head in the cinema.
Bgahpuss, yep you got it. Items sold in unlimited quantity for RL$ by the dev and sold by the player in game for in game currency.

I like it, but it does add to the complexity for the dev. Since if you get it wrong it affect your bottom line.

But some people really don't like them. Some thread I read yesterday on Massively had one of those "all of the games that sell [things for] gold are crap" comments.
If you must have RMT in your game, then PLEX is the best alternative.

Think of it as a "1-month game card" that exists "within the game" rather than in your physical hands. Since the card exists in-game then it can be traded/transferred to others within the game.

The net impact to a gold (i.e. ISK) buyer is that he buys the PLEX and trades it for the in-game currency. He spends real money and gets the in-game items that he wants.

This really isn't any different than how illegal "gold farming" works when a 3rd party does it for profit. Someone farms the in-game currency and trades it for something that has real-life value (in this case, a game card).

The central difference is that the dev is working as the facilitator and is getting something out of it (additional subscriptions).

And it's also different than a "buy gold direct" model because it has the added benefit that every $ spent is spent on something tangible -- a monthly subscription -- rather than "gold" the dev simply created for the purchase.

That last is difficult for most to grasp the significance because if you just look at the first party's transaction, then they paid for gold/ISK. But if you include the gold supplier as well, then the transaction is still fundamentally one that is cash for a 1-month sub and not cash for 'gold'.

This is important because it a) mitigates the impact from inflation, and b) is governed naturally by market forces.

Imagine scenario 1- Dev provides 1000 gold for $10 cash. Consumer goes out and uses gold to buy things off the auction house. Since there is no increased supply of items available on the auction house, there is significant inflationary pressure.

Now imagine scenario 2- Dev provides 1-month sub for $10. Player trades sub in-game to another player for 1000 gold. In this scenario, "how" the second player farms his gold determines the economic impact. If we assume he farmed some material, then that material is now available to others in the marketplace and increased supply actually has a deflationary effect. If he sold loot to a vendor, completed quests or whatever, then his actions created new gold.

On the balance, the inflation from this second scenario has less impact than the first and can be balanced within the existing game gold sinks and faucets.

Now consider that the behavior of the real player in the second scenario is not unlike that of a 3rd party "gold farmer/seller" who exists if neither system is used.

With me so far? The PLEX scenario DOES have less inflation. It also supplants and effectively replaces the traditional "gold farmer". And by replacing the "gold farmer" we do not see any more/less inflation than we do if no official 'gold for cash or PLEX' system existed.
There is a fundamental difference between developer gold sells and PLEX. To see it, let's ignore real money and look only the game world.

In the first case, gold appeared for no reason in the players wallet. That's similar to duping cheat.

In the second case gold changes hands between players. That's similar to boosting.

The point is that the first makes competing in the game impossible. If someone has lot of real money, he can outpay you. In the second case he can only buy from more progressed players and they can't sell what they don't have. So if you are better than the seller, the buyer can't beat you either.
Dobablo - it is not at all clear if the person creating gold is "making" gold. If you make profits from trading, hauling or fraud, then the net gold in the economy is unchanged - when you buy for 100 and sell for 120, all you are doing ing is transferring 100 gold to the seller and 20 to you. In my experience, in most MMOs it is usually more efficient to make your gold this way than questing & farming with the muggles.

Sid67 is correct that with static scoring, selling gold direct introduces gold into the economy. With dynamic scoring, less inflation than indicated. For one thing, the person who mined for 25 hours to buy a plex would no longer be mining for 25 hours so fewer items created so less currency created when the minerals generate currency via vendors or insurance. Besides, why would a well run MMO have inflation. Friedman famously said that he thought the Federal Reserve should be replaced by a computer. i.e. use algorithms to adjust the money supply. CCP could measure inflation and algorithmically, without human intervention, change the number and size of minable ore and refinable items. Daily if it really wanted to.

IMO, Gevlon's argument holds up better in epeen raiding games like WoW than EVE.

Back before Apocrypha, a Russian oligarch's son spent $100,000 on buying stuff for his Alliance. Presumably, he bought from many people and at the end of the day had more stuff than almost every single one of the people who sold to him.
Eve has, bar none, the healthiest and most complex and rewarding economy in any MMO ever. Plex was introduced in the way it was specifically to not break this fully player-run economy.
Against this great achievement, it is hard to tell a game company "you are doing it wrong, just sell credits directly".
It seems a little arrogant to try and do that.
And it seems a little short-sighted to worship one game and declare that nothing it does could possibly ever be improved. EVE does have problems with bots and gold-sellers, don't pretend it is perfect.

Furthermore, even if the system might work for EVE, it doesn't follow that it would work for a different game with a very different economy.
Kind of off topic but Tobold what type of payment model do you think creates the best atmosphere for both gamers and devs?

Standard subs
F2P with micro transactions
F2P with initial buy in (Guild Wars, Destiny, Defiance)
The Guild Wars model: Initial fixed price, play for free, but pay again foe expansions.
Re EVE, Rewarding for whom?

Today Massively had an article where SuperData shows in 2013 EVE sold less than SWTOR and even LotRO. Their shareholder retained earnings of 18 million means about four thousand dollars a day over the dozen years they have been working on it.

EVE does so many things well and certainly has some extremely loyal fans. /salute. But I am not sure the non-employee shareholders are especially excited about their rewards.
To join your discussion with bigeye, a complication is that virtually everything come with a cash shop.

Superdata said WoW's 2013 cash shop was over two hundred million about triple CCP's 2013.

IMO, there is a non-trivial difference between a B2P game where most medium core spend little to no cash shop prior to the expansion versus one where the cash shop is the norm (e.g. storage, travel, progression, profession.) Yet both would be considered "b2p" in the forum flamewars.

Now that subscription games have crossed the Rubicon and your sub (or b2p) no longer gets you everything, it is a more complicated world. You may need to talk about X's implementation of the monetization model rather than the model itself.

I liked SWTOR better after it went f2p. I still subbed but now there were all these QoL things that they sold (more storage, more char slots, quick travel) that I could buy with in game currency or RL$. I like QoL conveniences, in game and IRL.

I would tend to go with b2P+expansions as well. Although sub with lifetime has some irrational appeal; I don't mind the money, I just don't want the guilt of "did I get $15 of value from this MMO this month?"

I am with Bhagpuss and Hagu, the CREDD/PLEX system functions so well from a developer's point of view. If the price of CREDD/PLEX in in-game currency is low enough that a typical player can afford it without real money, your game essentially becomes "Free2Play" for a large portion of players. Presumably, that means more will play or keep playing longer.

At the same time, it doesn't matter if that player is the one paying the bill, you know for every last player in your game each month, someone somewhere paid for a CREDD/PLEX. So, hypothetically, you have the higher population of a "free" game, with the guaranteed income per player of the subscription model.
@omni: just curious how you got around the 12 c.r.e.d.d. per account limit? Multiple accounts?
@Blagpuss - You got it correct, except that the game company tends to get more RL cash for the CREDD/PLEX/Bonds/Kronos, etc. CCP did that originally in order not to undermine the game time code sellers. People who can pay in U.S. dollars (especially if they live in the EU) should always try to purchase their PLEX in USD from a licensed PLEX reseller. With sales, you can usually find it cheaper than buying direct from CCP. But CCP still gets more money from those people than the $11.99/month I pay on the 6-month subscription plan.

@Tobold - You're correct about wondering if a system like PLEX that works in a pay-to-lose, spaceship shopping simulator like EVE will translate into a themepark, raid-centric game like Wildstar. What makes Wildstar so fascinating is that it is the first MMORPG that I am aware of to launch with this feature.

@Everyone - If someone tries to tell you that PLEX/CREDD/Bonds/Kronos by themselves will eliminate the secondary RMT market, the recommended response is to laugh out loud. Pointing at the person and giggling is also an acceptable response. PLEX/CREDD is a powerful tool in the fight on ISK/plat sellers, but it has to be part of a larger anti-RMT strategy. If a company just relies on PLEX (which CCP doesn't) or CREDD (Carbine I think is learning a painful lesson right now), that company will fail.
I agree Tobold. The problem is that f2p generates so much cash for most MMOs. (Not counting WoW which to me is the exception to the norm. It came out recently that star wars the old republic made $165 million after switching to F2P. Hardly what I'd call a failure. Its easy to see why devs are either launching as f2p or quickly turning their games into f2p.

Swotor for me was ruined once it shifted to f2p. I felt nickel and dimer at every turn. Bag space? Pay. Want to play all your toons? Pay. Want to do anything besides level alts? Pay. That style of f2p I hate.
Rift for me is the best F2P setup I have experienced.
I never said Eve was perfect or did not have problems, merely that it is currently top of the bunch for ingame ecomomies.

They do have problems with gold sellers of course. Plex is a single tool of many that they use to fight it.

I disagree with you that selling gold will impact gold sellers in any significant way. There will always be people trying to undercut the official price.

The only effect it could have is leading to inflation. At least right now Plex is subject to laws of demand of supply.
@Tobold - "Furthermore, even if the system might work for EVE, it doesn't follow that it would work for a different game with a very different economy."

This is where I am still unconvinced. A game like EVE, where you simply have to become part of the economy, even if you only purchase goods, is a far cry from more traditional, and somewhat optional, MMO economies.

It is unclear to me how CREDD in WildStar or Kronos in EverQuest/EverQuest II will behave in the longer term.
CREDD and PLEX are very different animals in fundamentally different games. Each needs to be compared separately as conflating them fails to answer the most important questions regarding inflation and, to a lesser extent, benefit to the company vs selling actual gold.
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