Weighing The Pros and Cons

Posted by Daeity On Saturday, February 18, 2012

As promised, my thoughts on the recent RMAH changes.

There were 3 main changes in yesterday's announcement; the listing fee was removed, transaction and minimum listing price were increased, and users are now limited to 10 active auctions.

Even though these are just changes within the beta, it doesn't mean they're limited to the beta. Everything they're testing in the beta is intended for the retail, and Kaivax did say, after all, that the changes were being done to "remove risk" for the user (and there are no risks using Beta Bucks.) He's talking about real money risk.


"Beta Bucks" are the standard testing currency in the beta, but I will be using American Dollars. Since the testing is being done by the US-based Blizzard finance and development teams, you can assume that when the announcement is finally made, their choice of USD$ fees will be similar, if not the same, as the Beta Bucks. You can also assume a standard conversion rate into your own region.. for example, a $1.25 transaction fee in the US will be £0.80 fee in the UK.

Listing Fee Removal

As discussed previously, the Listing Fee was a major revenue generator for Blizzard. More so than successful sales and their transaction fees.

The only reason for it's removal would have had to have been something very risky or negative for the company. Because of the monetary risk involved with the Listing Fee, and the high probabilities of lost sales (which Blizzard would have confirmed over the past few months of RMAH testing), the RMAH became a form of illegal gambling. Rather than risking the chance of legal prosecution, they have simply removed the Listing Fee and are taking the financial loss.

It was a great idea in theory, and all of those non-refundable listing fees would have generated them a ton of profit. However, players are now at no risk of losing money and Blizzard can only profit from successful sales.

In order to make up for this loss of revenue, they increased their fees/charges and they brainstormed new approaches to guarantee Successful Sales; one being the 10 active item limit.

Transaction Fee & Minimum Listing Fee

Blizzard needs to bump up these numbers due to the major loss of revenue associated with removing the Listing Fee. This shows you just how critically important the Listing Fee was, and the very hard decision to remove it.

Also.. as you've noticed on the forums, these changes don't encourage players to use the RMAH more, in fact, it discourages them from using the RMAH. So, the changes were made not for the players, but rather the company.

The Minimum Listing price has been increased from $1.00 to $1.50. And, the Transaction Fee has been increased from $0.65 to $1.25. This is in lieu of $0.15 non-refundable Listing Fees.

Their choice of Transaction Fees might also be indicative of what they were expecting from the old Listing Fees. 4 x $0.15 (Listing Fee) = $1.25. They were expecting Listing Fees to generate at least four times the number of successful auctions (a total $0.60 vs $0.65 profit). In theory, it was probably even double that number or more. So, for every successful auction, there might have been at least 8 failed auctions (where Blizzard was hoping to make most of their revenue from.)

As for the Minimum Listing change, it was just a side effect of the Transaction Fee change. If players tried to sell an item for $1.00, they would be charged $1.25 for a successful sale, meaning that they would lose $0.25. :)

10 Active Auctions Only

This is indeed the most interesting of all of the changes.

They're also making the same change to the Gold Auction House. Blizzard explains that the reason for this change is:

Because gold can be sold on the currency-based auction house, we need to ensure there are limitations on the gold auction house as well; otherwise, a player might be tempted to sell everything for gold and then sell that gold on the currency-based auction house, which isn’t supportive of the kind of thriving item-driven market we’re trying to foster.
This explanation makes very little sense however. If there's a 10-item limit, how can they "sell everything for gold" so quickly? The only way to do this is if they significantly reduce their sales price. And even if they could sell all of their items (for a cheap price), they're still not going to have enough gold to sell on the RMAH. Players need to build up gold over time and set aside a large chunk to sell. Players will be able to sell items much faster than gold, and they won't be selling gold in tiny amounts at a time.

It's sort of strange that they had to explain their reasonings for the change in the first place, and even then, it was a poor explanation. So, there must be another reason that they don't want players to know about.

Consider the effect it's going to have:

  • The total number of items on the Auction House will be greatly reduced.
  • Having less items on both Auction Houses guarantees more success and less conflict.
  • By reducing the amount of active listings available, it means that each player will be far more careful about what they post. If a player is about to post an item for sale, they'll see if several are up already. If there's too much competition, they'll just post an item that has no competition.
  • When players are limited to the number of items they can sell, there's no overlap of the same items, therefore no competition, and therefore increased chance of success for each sale.
  • When items are NOT successfully sold, they will sit and idle. That time represents lost revenue for Blizzard. And, because there will be very little competition, Blizzard might not even have to make changes to auction duration (e.g. making them really short, like maximum 12 hour auctions, to rush players.) Of course, they might do some experimentations with this or in other areas.
  • For example, a D3 power seller might sell up to 100+ items per day. Under the old system, Blizzard would have profited greatly from all of the lost sales, cancellations, and undercuts. Under the new system, they don't benefit at all.. in fact, they lose even more money because hundreds of items will be sitting idle and no transactions will be taking place.
  • Therefore, it's in their best interest to ensure that every item sells. Before, they didn't care because they really only cared about the lost sales.
So, Blizzard now has a method to increase successful sales rates for their customers which in turn gives them more profit. It benefits them, but also gives them the excuse to claim how it benefits the players ("You have a better chance of selling your item now, and there's no risk!"). It's a win-win situation.

But, now they need to find a way to increase the overall QUANTITY of successful sales. This means more items. And, the fastest way to get more items are new attributes and affixes.

Because Blizzard wants players transacting as quickly as possible, and players will not be competing with each other, they need more potential items that can be sold on the auction house.

If you add a single new affix to items (and when I say items, I mean weapons, armor, potions, etc), it exponentially increases the total number of items. Blizzard doesn't even need to create new items or design new graphics, they just need to create a new affix, and it will generate 100,000 more potential items.

Variation of items is extremely important to Blizzard, especially if they're removing the Rune system, which was going to be another item that could be sold on the RMAH. With the removal of the "sellable skill item" and the Listing Fees, there will be a lot more emphasis of varying up items.. more modifiers, effects, affixes, attributes, whatever.

Most players will think it's very cool, but they won't know the reasons why. When the rune system is removed, the addition of a new item affix makes the most sense. Something that effects skills differently (changes the damage, charges, unique appearance, costs or duration of skills) would widely vary up potential item combinations and class builds, exponentially increasing the total number of items that could be sold on the Auction House. So, if (or should I say when) runes as an item are removed, expect a very wide variety of +skill item modifiers.

.. I am still just a rat in a cage

While all of this is happening (e.g. the different types of items, the 10 active item limitation, etc.), Blizzard will be hard at work analyzing all of these metrics and monitoring your behavior. They have a whole team of psychologists dedicated to this.

If they were to make a slight adjustment, say to the AH Active Item quantity, and change it from 10 to 11 active items, they'll immediately see the real time cascading effect that this has. Making that slight change will have a chain reaction causing different metrics in customer satisfaction, total successful sales, user play time, game cancellations, auction house utilization time, number of posts, and ultimately Blizzard profit. The number of metrics and connections that they will be monitoring will be terrifying, and even I can't comprehend the types of variables and statistics that will be available to them.

They need to do this to find the perfect balance that generates the best possible revenue for the company.

Even stacking of items (stacks that are sold on the AH) will be strategically designed and monitored. They might find better sales rates by lowering or increasing the total stack size, for example.

So, fully expect a lot of experiments to happen under the guise of a reward. They'll throw cheese at you, like "This weekend you get 20 active items because we love you so much!". This allows them to experiment, watch player reactions, and see if they can generate more revenue.