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Real Money Transactions: Coming Soon to a Game Near You
By Cameron Sorden | December 17, 2007
I thought I should take a break from feverishly studying for my Operations Management final exam, which is a mere 22 hours away, to comment on this interesting story that Gamasutra ran today. It looks like a number of major companies are getting involved with a new start-up that seeks to legitimize the RMT trade across a number of games in cooperation with the companies that make them. From the article:
Former Massive in-game-ad firm founder Mitch Davis, currently at Brash Entertainment, has teamed up with Sony Pictures Digital vet Andy Schneider to launch a new company, Live Gamer, whose technology is geared to create a publisher-supported, secure platform for real-money purchase and sale of virtual goods.
They kick off with a slate of MMO and virtual world operators including Funcom GMBH, Sony Online Entertainment, 10Tacle Studios, Acclaim, GoPets and Ping0 Interactive, all of whom will work with Live Gamer to provide the transaction platform to their users.
The fact that a number of companies, and major ones at that, have signed on to use a single provider as their RMT solution to help curb shady grey-market transactions is noteworthy (although as Razor points out these are all either companies that have already embraced RMT or companies which are virtually insignificant as market players), but it doesn’t fix the real issue that hurts players: the farming itself, which messes with their play experience.
I could go on and on about how as long as you tie time invested to achievement and allow even limited transfer of said achievement, you expose yourself to farming and thus, RMT-exploitative activities, but come on. That’s really a non-issue. We all accept, and even like, that time is tied to achievement in MMOs. You can’t get rid of farming without getting rid of valuable, transferable items, which would probably be a bigger blow to most MMOs than the necessary evil that is farming for said items. Some people have time, some people have money, and the RMT market levels the playing field. You can argue as a purist that only time should be rewarded, but you’d be forgetting that for most people time equals money, or even that spare time is worth more than money (if their salary is sufficiently plush and especially if they have families). Given that, RMT can be a positive thing for many of those people as long as we design games where you need to invest time to be competitive.
As always, I find the legal and practical considerations far more interesting in this kind of situation than whether buying currency or items is “cheating” (an argument that will continue until it’s so common that no one cares anymore). By officially legitimizing RMT and selecting an approved channel for all such activities, you’re also legitimizing farmers and acknowledging two things:
- The currency and items within your virtual world have tangible value and can be legally considered transferable goods (as opposed to services, which I argue for here — cliffs notes).
- That farming items and currency for the purposes of selling them is an accepted and legitimate use of game resources. There’s no getting around this– if you support RMT services than you can’t ban people for farming, period.
I always find it a little amusing when people get all up in arms about how if we allow real money transactions then the IRS is going to get involved in our games, but hey, guess what? RMT is happening. It’s been happening. It will continue to happen. Legitimizing it is not a bad thing. The only other option is a massive redesign of how MMO reward systems are structured (which isn’t going to happen any time soon). These companies are trying to address the problem at the source instead of plugging their fingers into their ears and saying “Nyah nyah nyah, I can’t hear you,” while devoting a ton of time, effort, and money to ban-hammering random accounts that get caught as a stopgap measure.
NEWS FLASH: If you receive income for selling anything it’s taxable. Frankly, the IRS should have gotten involved in online item sales a long time ago, but they’re too busy processing tax forms to play World of Warcraft. There’s no way to sweep all this under the rug and pretend nothing is happening. Sooner or later (and probably sooner), we’re going to have litigation that settles the matter. The games industry needs to get its act together and be proactive about this if they want to have a voice in the legal and political discussion, or else we’re just going to have a court case that settles the matter for us and have to lobby for ten years to avoid paying taxes on our epic drops from raid mobs.
Of course, doing this also opens all kinds of fun problems that are going to make game developers go prematurely grey and want to kill themselves and go do something else with their lives. I’ll leave you with some fun ideas that should serve as food for thought and which illustrate some potential pitfalls that we’re going to have to deal with in the near future:
Players are going to build businesses around providing virtual goods and currency, perhaps even specializing in certain types of goods, and they’re going to sue the game companies when patches go live that significantly impact their businesses, which is a valid complaint. If I’ve built a business around procuring items that were formerly extremely rare, and a patch makes them super-common, I probably have a case against the company for ruining my business.- Markets are going to form around the currency of particularly popular games. You know how people trade on the value of precious metals and foreign currencies? Expect to see people speculating on the future value of WoW gold when new patch notes are announced. Seriously. Expect the value of in-game currency to drop as companies near expansion release dates and announce new potential sources of revenue (like daily quests) in patch notes.
- Given that in-game assets are going to settle at real-life prices, consider this: If I, as a game developer, tell my friend that the next in-game patch is going to make a currently semi-rare item exponentially more valuable (like what happened when WoW’s introduction of the tier 0.5 armor quests suddenly made thorium a hot commodity), and he stocks up on those items at their current market price so he can sell them and make a killing when the patch goes live (in real dollars), am I guilty of insider trading? Sounds a lot like it, huh?
Oh, whee. Remember– when all this happens, you heard it here first. I’m looking forward to watching the whole sordid affair unfold (although I’m really not looking forward to declaring virtual assets on my tax return).
Topics: Random |
December 18th, 2007 at 9:46 am
Maybe it’s because I just woke up and am still groggy but when I read “RMT is happening. It’s been happening. It will continue to happen. Legitimizing it is not a bad thing,” I couldn’t help but wonder if Bill Maher would stop by with his parallel theme replacing “RMT” in that quote with “marijuana.” I really need to stop watching HBO before bed…
I can absolutely see some of the farming gold-selling and item-selling businesses going forward with litigation if a patch weakens or eliminates one of their valuable markets. Developers and publishers are going to have to team with judiciaries and yes, probably the IRS, at some point to clarify, and create, new laws governing values of virtual property, protection for the game company and its users, and most likely the eventual taxation of real income gained from sales of virtual items.
My pixels are worth more than your pixels. Whodathunkit?
This also make me remember a video on Channel 10 a few months ago where Laura interviewed a guy who’s business is selling WoW items on eBay. She doesn’t appear to have any clue of the controversy, it sounded like a great idea to her! Quit Your Day Job and Play Games
December 18th, 2007 at 11:16 am
Great post. Depressing for the gaming community’s future, but great post.
Reminds me of what seems to be the usual progression of ‘things illegal, but profitable’:
“Hey, that’s morally, ethically, legally WRONG! That’s cheating! It’s a crime against the moral fiber of society and the Family!”
“But, they make really good money doing it…”
“But, it’s WRONG!”
“…but, the money…if we could tap into that..think of all the good we could do….”
“But…uhm, errr…like, what kind of good…?”"
“Well, we could use the money to pave roads, feed the homeless, house the Children! Oh yes, the CHILDREN!!”
“OK! Let’s legalize it!!”
And off they go, with greedy dollar signs in their eyes, not thinking of the all the consequences of their actions. I’m thinking of the government’s involvement in gambling, animal racing, alcohol…prostitution in Nevada…still waiting on the solution on how to profit from the illegal drug market…but I digress…
So, the government gets involved to tax the gaming income/assets, the little guy/gal (you and me) gets pissed off at the interference/taxes/hassle and goes back to single player and console games, the online community becomes businesses and commodity buyers, and the fun dies. Creativity dies. Innovation dies. Games are designed to fit the business model. Nothing like government involvement to kill the fun in things.
On the other hand, I find it hard to envision the government actually implementing this. Ever. Maybe it’s because I deal with (inaccurate, dirty) government data on a daily basis, and I see how hopelessly antiquated their systems are and how entrenched their employees are in the status quo. It’d take a miracle. The lawsuits should make entertaining blog fodder for decades though.
December 21st, 2007 at 1:28 am
The tax problem is not that if you sell gold for dollars you need to pay a tax on those dollars. As you said, that income is already taxable.
The problem is that if selling gold becomes legit and gold turns into something close to a foreign currency, the IRS can demand a tax from you *even if you don’t sell the gold*! So if you farmed 5000 gold in WoW yourself to buy yourself an epic flying mount, the IRS would still consider that as a taxable income which you then spent. If those 5000 gold are worth $250 on the RMT market, you’d need to pay taxes on $250 of income, although all you did was play a game.
December 21st, 2007 at 5:14 am
Exactly, Tobold. Which is the ridiculous situation that many people fear and which could easily come to pass if the industry isn’t actively involved in shaping the legislation surrounding RMT.
Also, this is a big reason why I think that virtual item sales should be viewed as a service, because it neatly sidesteps that issue. You can’t tax the potential to perform a service, but you can tax the income once the service is performed.
If you have some free time on some afternoon, go read my arguments about why RMT sales ARE a service. I think it’s a good solution to some of the RMT issues, and I think a lot of people skipped that post because it’s lengthy.
January 1st, 2008 at 2:04 pm
This is a great article - and raised an issue I hadn’t even thought about before. Since entire (somewhat shady) businesses have sprung up around gold farming, I suppose it’s only a matter of time. I suspect game developers will go to great lengths to prevent their players from having to pay tax on items in game. As Tobold says, having to pay tax just for playing a game strikes me as a bit much.