Does a virtual economy affect player retention?

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Jul 012011

This Virtual World Economics blog asks the question “Does a virtual economy affect player retention?

The answer is unquestionably yes.

It is well-established that broken economies will chase away users. Two examples:

  • The economy in Ultima Online was severely broken because of limited resources being hoarded, resulting in items not spawning. Essentially, insufficient liquidity in the market results in player loss.
  • We have also seen that excess liquidity results in player loss; it’s well established that duping, which generally results in an excess of both cash and items in the game, shortens player lifespans as well.

It’s harder to see whether having a robust virtual economy extends player lifespan, since it’s proving a negative. But we have seen that the removal of economic features to simply the economy results in the loss of users; the removal of the merchanting professions in Star Wars Galaxies had a negative impact. We have also seen, via that same game and via Eve, that given the option, a substantial amount of players will choose economic gameplay as their primary means of interacting with the game system.

Economic play is not a tertiary feature in game worlds, unless you consider loot to be a tertiary feature. Loot is reward for labor, albeit in a crudely simulated fashion. You can’t not design economics into your virtual world.

The question the blog post is really asking is about the degree of player-driven economy. Typically, we see a few gradations:

  • A completely managed economy — you buy and sell only to the game
  • A centrally controlled economy where the NPC shops provide price floors and ceilings, but players can transact among themselves; all items are sourced from shops and loot.
  • As above, but items start to be sourced from other players as well via crafting. Typically this is also where you add item damage and decay as well.
  • A “player-driven economy” where items of variable quality are sourced primarily from players rather than from NPCs, and there is minimal price-setting performed by the game engine. This can reach the point of being a complete laissez faire environment.

Once you get to the top tier, there’s additional wrinkles you can add into the mix, the biggest of which is whether you have a perfect information economy or not (WoW’s auction house is global, and basically acts like eBay, flattening prices; original SWG merchants and UO vendors were local, and therefore you could hunt for the best prices). The degree of customizability not just in visuals but in statistics permits varying quality goods, etc. Price fluctuations over time can lead to more sophisticated play tactics such as shorting, arbitrage, and the like.

Economic play is a proven game mechanic of great appeal going back to the earliest games, because it provides varying challenges in a defined system model, susceptible to varying tactics and preparation. In other words, it hits all the items on the “fun checklist.”

  26 Responses to “Does a virtual economy affect player retention?”

  1. Hi Mr. Koster,

    I’m the author of the blog post you reference. Thank you so much for discussing it; I learned a lot from reading your post, as your experience in the virtual world space is far more significant than my own.

    I believe that the answer is “yes,” but given my limited experience I wasn’t comfortable stating such a concrete conclusion. It certainly gives me confidence to see that you feel the same way.

    I agree with you about economic gameplay as a key way that players engage with a game, and I think that it is also very useful from a design perspective. A robust economy provides a lot of gameplay, and it’s durable gameplay…far different from designing a new raid instance in WoW that is quickly completed. It’s well-known that players will plow through PvE content faster than any developer can hope to create it, so having durable content seems critical in player retention, especially during the downtimes between content additions.

    Thanks again for your input, I really appreciate it!

  2. While I agree there is an affect I don’t think you can really answer the question without including other aspects of the game. For instance, APB (now, APB:Reloaded) doesn’t really have a crafting system. It’s a customization system. You don’t need anything a player makes to play the game. However, there still is a player-driven market for customizations. Does it affect retention? I can’t say that it does. I rarely hear of anyone lamenting the price of an item on the AH.

    Now, I suppose you could argue that this represents a managed economy so it fits the model and all but I would counter that with the idea that other aspects of the game really determine the importance of the economic model to player retention. People harped on the game because of hacking, bugs, and poor implementations of other game systems (other than the economically related ones) and still do to some extent. But, the work around the issues because they want to play the game.

    A game like EVE (I played it very briefly long ago so take this with a grain of salt) is really all about the player economy. I think you see the increase in subs and the interest in the game because people who are interested in that sort of free market economy will gravitate there as they find out about it. Each push from CCP that brings in more trials and conversions introduces more people interested in the model.

    I guess the question is: how much should a game incorporate any of the above economic models as a method of attracting a retaining players? What if the end-game incorporated more complex economic models? For instance, what if lower level crafting produces raw materials and some goodies but is more about leveling and less about “premium items”? Sort of like Aion where you can just grind your way up with work orders. Once you get to the end-game levels you have something more tied to either raiding (for the hard-core types that guild up and grind dungeons) or simply managing mats and throwing in some luck?

    Though, for me, I’ve never been a “standard” hardcore MMO player. I don’t guild up (just can’t meet the time requirements) and am more of a solo player but I’m also more of an explorer and a crafter/merchant. For a lot of games (Aion, Rift), I often peter out before hitting the level cap because the games force you to group up and grind raids to get the best loot. I would much rather hang a shingle and harvest the resources I need to fill a store front. Something tells me I’m in the minority…

    (sorry for the long post…I can get carried away! )

  3. I think it was a very good question to ask, not least because the genre has been moving away from in-depth economies.

    UO and SWG had their heyday a long time ago; Eve is a niche and also quite an old game.

    Most modern games use economies as an adjunct to the main businesses of killing monsters and taking their loot and pvping. Games with deep economies require a number of hard choices that players tend not to like:

    – you sacrifice combat power to be a master crafter. This means it’s an alternative form of gameplay, not just an adjunct that every end game player has.

    – you limit alts on one account. SWG launched with one character per account. Eve has one skill queue per account. Games that fail to do this like EQ2 fail at crafter interdependence as players will tend to make alts for manufacturing subcomponents rather than trade for them if there is an easy option to do so.

    – local banking. Very inconvenient for a raiding game like WoW but adds a lot to a trading and transporting game like Eve.

    – slow travel.

    So the reason we have seen a shift away from economic depth in MMOs is not that economies aren’t fun, it’s that the feature list to make an interesting economic game gets bitterly protested by players and then watered down by Live teams wishing to placate them.

  4. […] Raph’s Website » Does a virtual economy affect player retention? This Virtual World Economics blog asks the question "Does a virtual economy affect player retention?" The answer is unquestionably yes. It is well-established that broken economies will chase away users. Two examples: It’s harder to see whether having a robust virtual economy extends player lifespan, since it’s proving a negative. […]

  5. Hi Matt. I agree with you, I’m just trying to draw you out a little more. But what makes content “durable”? I mean, obviously, it’s game play that keeps on going. But what allows that to happen?

  6. What I mean by durable is gameplay that is continuously engaging without requiring constant development.

    For example, a raid instance isn’t very durable. People will still run it over and over as long as it’s a good place to get gear, but for most players, once they’ve completed an instance a few times, a lot of the fun goes out of it (such as Icecrown Citadel in WoW). As a developer, even if you’re making amazing raid content, players will chew through it faster than you can make it.

    Durable content would be something like PvP (possibly), and as we’ve been talking about here, participating in a well-balanced, robust economy. This kind of content is durable because if you set it up well from the start, you don’t have to keep introducing major content patches in these fields (i.e. people still play the original battlegrounds in WoW). The content itself, as well as the way that it involves interaction with other players, keeps these activities fresh and interesting over a long period of time.

    I’m not sure if I defined that well, or just awkwardly. 🙂 What do you think, Amaranthar?

  7. It’s hard not to feel awkward talking about something like this. I think it’s because we aren’t sure exactly what the answer is to the question “why?”

    Lets look at the difference between raid content and what a player does in an economic simulation.

    At first, it seems the same. In a raid, the content is basically the same. You go, you win or lose, but the content doesn’t change.

    But does the content that a player experiences in the economic simulation change? Lets say the player makes weapons and sells them. They do the exact same thing over and over again. What’s different than doing the exact same raid over and over again?

    In both cases, there are variations. The group mix in the raid might change things a little. The prices for sold weapons might vary.
    But they are basically repeated content.

    To me, the differences are:
    -Other players on the grand scale
    -Player awareness of the spinning world around them.

    Diversity…Variation through diversity. It’s very hard to diversify raid content much. But it’s easy to think up wide variation in an expanded economic system. You no longer can only make weapons to sell to warriors, you can also make metal implements for a much wider clientele.

    Other players. You’re on the wide stage of the world and it’s masses. Being other players, as opposed to a wide range of NPC shops means something social. Since we’re social creatures, this is very big.

    Awareness of the persistence of the spinning world around them. The player may have made weapons and sold them for the 1,000th time, but it’s different than running the same raid for the 1,000th time. It’s part of the big picture, the world, not just an instance defined in narrow unchanging scope. This is enhanced greatly by the socialness of other players. But it’s also something to do with knowing that this isn’t the 1,000th time you’ve done this, it’s the 1,000th time you’ve done this in the world. There’s a persistence thing here, I think. If you sold them to NPCs and they just disappeared, it wouldn’t feel the same as if the NPCs then sold them to other players.

    Tying this all together, I think it boils down to the player’s perspective of what’s going on. It’s world game play overshadowing coded systems.

  8. Second Life is all economy, no game, and that economy has been continuously growing.

    I’d love to see that degree of player creativity, player ownership, and player monetization in an MMO space. There are potential downsides… big, deep, dark, scary downsides… but there’s no player investment quite like turning a modest real-life profit from your work within a virtual world.

    I know UGC isn’t quite what we’re discussing, but I think it’s part of the same continuum that drives crafters and merchants… the desire to create, to make, to contribute to the greater whole.

    When I returned to UO recently, somebody showed me something they had kept as a relic — a basic, old-school katana I had crafted before I left the world many years ago. It’s not much, but it’s a tangible part of the legacy that I and my guildmates tried to establish. We left a mark.

  9. SL’s economy is part of the real world’s economy, it isn’t it’s own. And the game play isn’t there. It’s playing poker for money instead of chips.

    And as far as player created content, it’s a similar thing. In SL players actually create the content, instead of using game content creatively. Instead of playing the game, they are making their own game. It’s part of RL instead of a separate, “in itself” world.

    Different people are looking for different things here, but as a game, it’s more RL.

  10. Amaranthar,

    I think you’re right in that making a sword over and over is little different (and probably less interesting as a single activity) than fighting the same raid boss over and over.

    I think what’s interesting about economics is the way all of the little things tie together. Raid bosses, for the most part, are independent of other content (with a handful of exceptions, such as Kazzak in vanilla WoW tying in with the priest quest for Benediction). But, in a well-designed economy, every little extra bit of content is a piece that adds to the whole. Raw materials get turned into crafted items, many of which are further refined into other crafted items…it’s a system with plenty of network effects.

    And, as you said, it’s a social issue as well. I think your phrase of “world gameplay overshadowing coded systems” is quite apt. Activity within a virtual economy involves interaction with other players, with fills a social need, as well as being more interesting than interacting with coded content that will always respond in the same way. It can lead to negotiation, conflict, friendship, and more.

    It seems like we’re very much in the same boat on this. I don’t want to flood Mr. Koster’s board with our conversation on the subject, though. 🙂 If you’d ever like to reach me via email to keep talking about virtual economics, feel free, my email is xandamere AT gmail DOT com.

  11. No, feel free to flood away, that is why there are comments here.

  12. @ the question of “why”:

    At work, so can barely expand on this, but I think that in an MMO, Maslow’s Pyramid comes into play. And, given the socialization that defines the genre, the need to play a game at the level of socializing means first needing to overcome the resource deficit that keeps one, initially, at the level of basic safety needs.

    First (lowest, biological) tier can usually be presumed to be addressed, but I think for most MMOs “progression” means starting by satisfying second-tier needs (safety: my character needs to do X in order to survive/succeed at Y) in order to move to third and fourth tier needs (belonging, esteem: my character needs to do X to enhance my standing among my friends/peers, now that I’m able to participate at this level).

    Looked at in this light, the desire for alternate sets of activities providing the same extrinsic rewards (and thus the same ability to both progress out of second-tier needs and begin satisfying third and fourth tier needs) makes immediate sense.

    Some folks are more risk-averse, and may inherently dislike unpredictable combat; some may dislike the possible loss, be it of game resources or perceived shame, associated with overt or group-affecting failure; some may have issues with timing, pacing, any number of things associated with action gaming. Crafting, as generally implemented, is very controlled, very controllable, and very private, a stark contrast to combat-oriented gameplay.

    (The products allow for socialization and community, but in terms of game mechanics there aren’t group-crafts or raid-crafts that take place or are even possible. And to add, even the existence of grouping or raiding in crafting would affect the social dynamic, worth stating, as it would affect the ability of a given crafter to maintain social standing if/while declining these activities; including them is not only additive or only positive if this is a motivation for choosing to be a crafer.)

    Gah, gotta stop typing. And take it from me, Raph doesn’t mind his comment threads getting spammed. 😀

  13. First of all I think that a diverse game-play experience is important to player retention. The more things there are to do, the more things players will do, and that means more play time. That is assuming, of course, that the game allows a player to engage easily in those different game play types; otherwise you have multiple games, which doesn’t support more play time.

    I think that economy types can attract certain player types. SWG attracted a type of player because the economy allowed for a certain player type (thanks for that BTW). Other things being equal the same game with a different economy — say the completely game managed — wouldn’t have attracted some of the same players. I know many players whose first questions about a game are about the economy, not about PvP or player classes.

    Does the economy affect player retention? Again, I knew players in SWG for whom the economy turned out to be a playable feature in a way they didn’t expect, and for whom it became an important feature (especially after the NGE). In Asheron’s Call I used to enjoy the localization of the economy, and the game of buy/loot low and sell high. That certainly added to the time I spent playing, and thus you could say aided retention. That has been less true through LOTRO and WoW (I seem to recall AC had more item variety, but that was a long time ago).

    Of course, there are also the negative aspects of a game economy, which depend on your view of whether the economy works for you or not, largely. Any game economy which is perceived as broken — say from rampant inflation — is going to affect game play negatively (to the extent that the economy is an important part of game play).

    Like every other game functionality, though, the biggest issue for player retention seems to be changes after launch, at least from a more player-driven economy to a less-player driven economy. If players feel that the time they have spent to achieve a goal has been wasted, they will be turned off quickly, and leave.

    In summary I think that a virtual economy can affect player retention, but it has to actually be a feature that engages players in enjoyable activity.

  14. One thing that I think is done wrong in most game economies is the level grind effect. You know, where a player makes a sword for levels 1-5, then levels enough to make swords for levels 6-10, etc.

    As a game ages, the lower level swords become harder to sell, sometimes harder to even find because few are making them.

    What I think should be done, with a wider scope on economy, is to level up by making simple things and then more complex, but things that are required for the higher level, more complex items to be made.
    In other words, newbies should be making nails, which are in demand by highly skilled characters to make what they make. Nails for scaffolding, braces, etc.

    Every trade skill can be made this way, so that every level has constant demand to be met. Yet, if need be, even the highest levels could make nails themselves, even if they’d rather spend the time on their final product and simply buy nails from newbs.

    Properly done, you have a constant flow of goods and gold, up and down the ladders of success.

    But to do this, another aspect of level grind in the economy needs to be removed/adjusted. The idea of leveling coinage types. Where a MOB drops coppers, then higher level MOBs drop silver coin, ->gold, ->plats.
    It’s not so much having an increase, it’s the wide value increases. It’s like building in the inflation that kills economies.

  15. […] Raph Koster asks: Does a virtual economy affect player retention? […]

  16. CCP has their own house economist (or did last time I looked). It takes an expert (or experts) to keep an MMO economy from devolving into an escalating Monty Haul scenario.

  17. I agree with the point about not having newbies making lower-level swords, but instead making inputs for crafting recipes. Nails aren’t “sexy,” but I do think it’s preferable to have players making something that allows them to feel useful. There isn’t much satisfaction in making 20 obsolete items just to skill up and then vendoring them. It would be better for all crafters in a game to feel like they’re part of a value chain.

    There are a couple of games out there that do this. Look up Avalon and Achaea; they’re a couple of old text-based MUDs that are still lurking around. Their active player bases are much smaller than a server in a full-fledged MMO, of course, but I think the model is scalable.

    My experience with Eve Online is kind of limited, but I believe they use this type of model as well, don’t they? I don’t remember gathering any “useless” stuff when I was a new player there; I was able to sell everything I gathered to other players.

    But the broad point, though…you’re right, I believe. It’s about creating a value chain, and structuring it such a way that all players can participate, from the newbie who has just mined his first ore to the veteran who is making end-game quality armor. Allowing players to participate in the economy in a way that they can make money while feeling useful is a great way to make economic gameplay interesting.

    Yukon Sam, CCP does still have an in-house economist. His quarterly reports make a pretty interesting read.

  18. I know that one reason I have stuck with Puzzle Pirates over the years is the player economy I’ve seen others who basically retired except to log in once a week or so to run their shops. (move goods, buy supplies, adjust prices).

    We’ve had interesting attempts to control the market commodities and price wars along with political wars to control islands.

    I like that if you want a ship or clothing you have to find shops run by players that offer what you want to buy instead of having to go out and run instances until the gear you want drops.

  19. Interestingly, Puzzle Pirates was built by one of the original developers of Avalon, the text-based MUD I mentioned in my previous post as an example of a strong player-driven economy. I’ve never played it, but it looks like Mr. James took some of the successful design concepts of Avalon and brought them with him to Puzzle Pirates.

    It’s definitely something I hope to see more of from games in the future.

  20. I’m surprised that A Tale in the Desert hasn’t gotten a single mention: an MMO with nothing BUT an economy? I have no idea what their retention rate is, but from this theory, wouldn’t you presume it to be disproportionately high? (That’s retention, not conversion, of course.)

  21. They cheat by resetting the whole thing every few months. 😛

  22. EVE cheats too. They quietly seed and skim the market to keep things running smoothly.

    Vanishingly few people want to make components for weeks or months. As soon as they skill high enough, they’re going to be building their own swords, armor, spacecraft or whatever. And to get to that point, they’re not going to be selling components to other players (too time-consuming when you’re full-out grinding to get past the boring part). They’ll dump them on a vendor if it’s convenient; otherwise, it’s going straight to the trash can or recycling.

    It gets us into the market distortion where raw materials are MUCH more valuable than finished goods, because the materials are essentially unrefined skill points.

    I think there’s potential in the Wurm Online system. You can make one finished item and then “improve” it to the limits of your skill, materials and patience. The grind is still there, but it’s focused on perfecting a few items rather than mass-producing hundreds or thousands… which suits a fantasy (or space opera) setting better.

    I also like the EQII crafting mini-game, where you have to pay attention and exercise some small amount of skill and knowledge to achieve best results. Free Realms has an engaging mini-game system for their Blacksmithing career that deserves mention, as it presents (in crude cartoonish form) the entire smelting and forging process.

    I think there’s a misconception that crafters are a fundamentally different breed than adventurers. We’re not, really. We want to be able to exhibit early mastery over our skills, with frequent upgrades and a variety of goals and milestones, some cool rewards that make us grin and do a chair dance, and a level of engagement and interaction beyond “press button, wait 7.5 seconds for result of random roll”.

  23. @Yukon, supposedly, Vanguard was going to solve the problem of having low engagement with their crafting system. I never experienced it first hand, though, and I’ve never heard comments about it so I have no idea what actually happened with it.

    Also, FYI, in ATiTD, you mine the ore, smelt it into a raw form, possibly mix it with something else for an alloy, and then hammer it with various tools until it looks roughly like what you want. OTOH, out of all the systems I played with, it’s my favorite.

  24. Vanguard’s crafting system had some interesting interdependencies, but was otherwise a fairly stock system in the EQ mould.

    The interesting comparison would have been between its crafters and diplomats, given the unique third option the game had. If it had only caught on enough for some solid metrics… alas.

  25. I was very much looking forward to the Diplomacy sphere, but it didn’t seem like an improvement on Lusternia’s ego battles, so… meh. Still, I never played it.

  26. Runescape is another example of a player-driven MMO economy. I would say 99% of items are looted from mobs, harvested from the virtual world (raw materials like ores, wood, herbs, etc) and made by player using the various skills.

    In the beta and first years of the commercial release, RS had a completely player-driven economy however the makers of Runescape, Jagex, found themselves in a bind when gold farming companies took advantage of this. They removed “free trade” between players several years ago and replaced it with a new feature called the Grand Exchange which is like an auction house but with no bidding. Items are listed at a set price by sellers. Trading between players was still allowed but prices were set by the Grand Exchange with a small +/- 5% leeway.

    This removal of free trade (and other updates done at the same time) apparently resulted in a large drop in subscriber and player numbers as many playing styles were ruined by the update. At that time RS was (arguably) at the height of its popularity with a constant influx of new players which helped offset the loss of the old players.

    Interestingly, the players did not like this at all so Jagex has recently brought back free trade, i.e. players can now trade what they want and set their own prices.

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