Senior Staff Writer Christopher "Pwyff" Tom sat down with Advisory Board member Gordon Walton to talk about GDC Online's Virtual Items Summit and how the market has changed for online gaming.

ZAM: Everyone's talking about Blizzard's announcement that Diablo III would have an auction house directly tied to PayPal so that players can sell items, gold and characters on the auction house for real money. So far, more than a few people have been enraged at the thought that Blizzard is encouraging real money trades. Do you have any thoughts on that?

Gordon: No, I think it's a religious war. In fact, a long time ago, I ran this model and allowed this eBay stuff while a lot of other game companies chose not to allow it. I think, in the end, the consumers are going to do what they want to do. There are always going to be people out there trading money for time. Really, time is the coin of the realm for a lot of our players, more than money. If it takes a certain amount of time invested to hit the really entertaining levels of a game, there are a lot of players willing to spend money to shorten that time. I think whenever you try to thwart what the consumers want, then you're playing the "legislate morality" game, which is something you'll never win. You should never be fighting with your consumers, you should be figuring out how to satisfy their needs.

ZAM: Do you think there are any drawbacks to tying real money trades to in-game items?

Gordon: Sure! I mean, there are always tradeoffs. Everything that's out there can, and will, be abused. Some bad things will happen, but if you just look at statistics, you might see the advantages. It's really about the overall utility. Are more people being satisfied rather than not? In the end, the market will talk to us and will tell us what's working better. Getting back to Blizzard, well, they're run by a bunch of very smart guys, and I'm sure they were very dissatisfied with leaving so much money on the table through previous business models. They produced a superior product, and they probably felt they should reap superior rewards for it. I don't blame them.

ZAM: There's a been a lot of talk about offline DLC falling into the realms of virtual goods, and there's been a lot of argument that developers are half developing things, cutting a lot of final product, and then putting it on DLC. If that's true, is this simply an indication of a struggling industry, or is it just straight greed?

Gordon: I think both of those are right. Is the industry trying to make more money? Yes. Are they struggling? Yes! So if you struggle, you try to make more profit. I think we're in a transition time where the traditional console market has been shrinking or has become stagnant, at best. Different companies may be doing better or worse but, overall, there's been a downward trend. The economy is bad, and there are so many free alternatives sucking away the time, energy, attention and money from your traditional game developers. So now people are experimenting with different ways to make money. 

Do some companies chop stuff out and then release it later for money? Absolutely! They make the calculations and, if they see they can make more money doing that, they're going to do it. In the end, companies are driven by that life value proposition to keep gamers playing their stuff. The game creators may be driven by slightly different ideas, and they are trying to get the best value out of their product, but they might not be as clued into the entire economics of this.

ZAM: There's an MMORPG out there called Planet Calypso, where the in-game currency is tied with the U.S. dollar so players can actually take out their in-game money and convert it at a whim. Sometimes transactions can go into the hundreds of thousands, or even millions of dollars! Do you think that this might be a future we'll run into as we go further into the realms of virtual goods?

Gordon: I think it's an interesting experiment. It's not something I would personally jump up and down to get into - I see nothing but pain in it - but I do know we're going to see more of it. People are casting about for ways to be successful, and there will always be those who take higher risks in the hopes of higher rewards. Literally, that's where the original itemization sales came from. 400 developers in Korea all had subscription MMORPGs and they couldn't win that way, so they covertly changed business models to survive and stay in business. So this business model came from a competitive problem that they were trying to solve, which I think is fabulous. 

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