Friday, August 4, 2017

The Pricing Practice of the WoW Token

The WoW Token is a feature that I think has been largely beneficial to the game to the point that I would defend certain aspects of it, such as the fact it may be considered "pay to win", pretty strongly. However, while I should be very biased considering I've paid for game time using the feature for over two years and converted more to hundreds of dollars of Battle.net balance, I'm not against the idea of criticizing it in some respects. For instance, I mentioned pretty early on that it might not end up reaching parts of the target audience since they literally would not be able to buy it with gold, at least not without wasting the time of a customer service rep. As of this writing, this issue has still not been addressed.

However, another issue I could've brought up even during the early stages of the WoW Token system but refrained from is the poor conversion rate considering that in the U.S., $20 of WoW Token buys $15 or less of game time. When Blizzard updated the WoW Token to be able to convert into Battle.net balance it served as great boon especially to players with little disposable income, but also showed how transparent the 33% markup was. The markup is even worse on certain other currencies. For example, based on info from this site, €20 converts into €13 of Battle.net balance and £15 converts into £10 of Battle.net balance. While I did briefly tweet about this issue, it doesn't particularly do justice when it comes to discussing the topic and why I find the markup to be problematic for Blizzard in at least a couple of ways. Therefore, this article will be a more extensive representation of my thoughts on the markup of the real life price of WoW Tokens.

Reasons for the Markup

To provide a framework for my thoughts, I think the best approach is to put forth a few counter-arguments I've heard when discussing this topic. This is by no means extensive but it serves as an effective springboard. If I missed any major counterpoints, feel free to provide feedback in the comments.
The subscription price hasn't increased with inflation.
This is one I often hear in general when criticizing Blizzard's pricing practices and it does hold a fair amount of water since based on this calculator, subscription prices should've increased by about 4-5 USD. However, since the subscription price hasn't changed from its $15 a month (or less when bulk purchases are accounted for) price tag, Blizzard may have had to make money elsewhere to ensure WoW can pay for itself in addition to being profitable. Marking up the WoW Token to more appropriately match inflation, in addition to microtransactions in the form of products and other services, can potentially make up the difference.
The WoW Token system has an upkeep cost to maintain, so the WoW Token itself has to be marked up to account for that.
This is almost certainly true in some sort of way especially with the addition of WoW Token to Battle.net fund conversion. Even if it's integrated into the Auction House, the gold price has to be calculated and synced across all of the servers, among other functionality that falls into the realm of guesswork on my part. My minimal estimate hypothesizes at a high possibility of power and bandwidth costs.

Addressing the Points

In this part, I'll address the two points made above, providing something of a counter-argument for what I hope was a balanced presentation.
The subscription price hasn't increased with inflation.
As I mentioned above, the subscription price would likely be a few more dollars than when World of Warcraft came out. However, Blizzard may have realized this in advance and priced their subscription to account for a long-term plan. This is supported by the fact that at the time, Everquest, the game WoW was competing against, was a little over 5 years old and doing reasonably well.

Even on the off chance Blizzard didn't account for this possibility, this doesn't change the fact that a markup on the WoW Token price itself could be much less and in favor of monetizing WoW in other ways, such as by focusing more on other microtransactions. There is also an argument that could be made about the potentially greater revenue that could be generated by slashing prices on microtransactions, which includes the WoW Token.

Finally, if the cost to maintain WoW can't be covered by the subscription itself, the price could be increased with an explanation as to why. While this could be controversial to the point the Euro and GBP subscription prices weren't increased but WoW microtransactions (including the Token) were, not doing so can hurt the development of the game because it's unlikely every player uses WoW Tokens. This seems like it would be a high priority issue and I would like to think players would be more understanding of the need to cover development costs for a game they enjoy.
The WoW Token system has an upkeep cost to maintain, so the WoW Token itself has to be marked up to account for that.
The part I intentionally left out of the argument when initially presenting it is my personal hypothesis on how great the upkeep cost is to maintain the WoW Token system. While my prediction isn't an informed one, it deduces based on the cost to maintain WoW. This line of thought led me to believe the WoW Token system itself probably doesn't cost roughly 33% of the cost it takes to maintain WoW itself. This then led me to consider the first point, but as I mentioned in the final paragraph addressing that point, it would be better to increase the subscription price instead of the markup price of the WoW Token to fund development of the game since it's very likely there are players who still pay for a normal subscription.

Another Point to Consider

A lot of what was said above is a little on the speculative side. While I could argue that it is derived from considering other information, it's hard to find many primary sources to definitively support either side of the argument. However, because the WoW Token provides the player buying it with real life money a benefit in the form of gold, the gold selling market has to be considered since its effectiveness can be affected by the price of the WoW Token itself. Before continuing, I have to note that buying gold from third party sources violates section 8 of the Terms of Use and can result in severe punishment in addition to potentially compromising account security.

While I had trouble gathering definitive data, mostly because I dislike the idea of going to a gold selling site to do research, I did find some that indicated that such sellers were selling about 200k gold for a little over $20 on at least a few US servers. The gold price of the WoW Token on US servers is currently about 140k gold and while that's steadily increasing over time, it's unlikely to reach a point that it competes with gold sellers any time soon.

This disparity in price, while it can be accounted for somewhat by emphasizing the legality of the WoW Token over third party gold sellers, could be enhanced further by reducing the price of the WoW Token by as much as possible to further put pressure on the market of such sellers. While this may not kill the industry, it would make definitely make operations a little less sustainable and probably have positive effects on the game such as a reduction in gold selling, hijacked accounts, and botters among other benefits. Ultimately, the lost profits are a small price to pay for the benefits of dealing with gold sellers plaguing the game less, with other benefits such as Blizzard gaining popularity due to their act of goodwill, serving as something of a bonus benefit.

Final Statements

While the article largely paints the WoW Token in a negative light, I have to repeat that it is overall pretty good for the game. It allows many players who might not be able to afford to play a premium game to continue to do so. In fact, with the ability to convert WoW Tokens to Battle.net balance, one can save a little by bulk purchasing game time with Battle.net balance which still results in savings if sales taxes are applied. The criticism I expressed in this article is a personal wish to address a pricing practice that, if taken to heart, could make the WoW Token a strongly positive example of how microtransactions should be handled.

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