Whither PLEX?

Here is a graph of recent PLEX prices, courtesy of eve-marketdata.com.  Note the long and relatively smooth ride up, then the peak indicated by the red dot, which was Nov. 19.  Then there is a small correction, with two other near-peaks on Nov 21 and Nov 24.  Then a steep decline, to where we are now.  Not enough data to say yet where it will go.  But we can analyze, and we need to decide whether to buy.  Thus, this article.

PLEX prices, past three months.

Price, as we know from microeconomics, is set by supply and demand.  Let's look at the market for PLEX.

There are several factors that I think are affecting the PLEX supply.  They are, in order of timing, the influx of "This-is-EVE" newbs, the ISBoxer policy change, and the Thanksgiving weekend PLEX sale.

"This is EVE" effect on new accounts.

The first factor is a bunch of newbs coming into the game.  Ordinarily EVE gets ~2000 new accounts per day; these include people trying the game out for the first time as well as old players creating new alts.  After the smashing success of the "This is EVE" video, which was released Nov 21, newbies flooded into the game  New account creation hit something like 8000 per day, briefly.  This has dropped back a lot, but the rate is still about 50% above normal, something like 3000 new accounts per day as I write.  I would guess that a high percentage of these accounts are new players, not just new alts.

(The image is from eve-offline.net.)

Some of these newbies are going to find out about PLEX and want to use one or two to kickstart their career.  Others (and I have spoken to two, now, out of perhaps several hundred newbies in the rookie channel whose questions I have answered) are going to want to jump right past the whole low-skill part of being a newbie, and drop a bundle to buy a skilled character.  For that they need two PLEX, plus a boatload of ISK.  So there is at least some additional demand.

Demand for PLEX can be supplied in two ways.  One is by spending ISK in the in-game market; the other is spending IRL money.  Obviously, few of these newbies are going to be able to PLEX with ISK for some time now.  They have low skills, as a character and a player.  So, we expect them to buy PLEX with IRL money and drop them into the game.  This will tend to depress prices.

Probably the main factor is the recent change in ISBoxer policy.  For some time now, ISBoxer has been tolerated by CCP.  Last week (Nov 25), CCP Falcon announced a change: no input multiplexing to anything in-game.  So, you can still use ISBoxer to log in many accounts, or to organize your windows.  But you cannot send input of any kind (i.e. mouse moves, keypresses) which affects the game to multiple clients.  This change takes effect on January 1.

Immediately upon this announcement, PLEX prices took a steep hit.  (Possibly slightly preceding it?)  This is the sharp downward move after the last peak is hit.  Obviously, people believe that because multiboxers almost exclusive PLEX their accounts (nobody pays IRL money for 20 accounts just to mine more ice), their demise will free up so much PLEX that it will significantly lower demand.

There is debate over how much of an effect the multiplexing ban will have.  Some say not much at all.  But in any case, since the ban is not even in effect yet, the reduced demand for PLEX that will happen on January 1 should have minimal effect.  Yes, there will be some reduced buying, for people that happen to PLEX their multiboxed accounts for months in advance.  And starting Dec 1 (well after the price dropped), there should be some multiboxing accounts that are starting to expire and are not being renewed.  But this effect should be minimal.

The stronger effect must be speculation.  I think that the PLEX selling is less a direct effect of the ban than indirect: because people believe it will reduce multiboxed mining a lot, they believe it will reduce PLEX demand.  As such, people think PLEX will drop, and then sell because of that -- a classic example of efficient markets pricing in all information immediately.

The final supply factor is the PLEX sale that happened starting on Friday, Nov 26.  This sale went on through the weekend.  PLEX sales don't usually tend to affect the price that much, but they do often have a small downward effect on prices.

Meanwhile, what about the demand side?

Well, there are evidently a lot of people like me.  I prefer to safeguard value in PLEX, not ISK.  As I have written: PLEX is money because it retains value much better than ISK.  As such, everyone should try to preserve value in PLEX.  And this is, evidently, what a substantial number of players do.

(There is a very interesting comment I saw by "Baki Yuku" at TheMittani, on this article about the input replication policy change:

PLEX price is where it is because people are using it as an invetment tool on a massive scale. According to CCP (last fanfest) only 45% of all PLEX injected into the market every month is being consumed. That means 65% are being brought as an investment.

Obviously it is hearsay and the math does not exactly add up.  But it does confirm my suspicion that a lot of PLEX is being used as money.)

I've been sitting on a pile of ISK for some time now, both my personal savings and my corporate savings.  However, because PLEX have been so expensive, I've been waiting for a correction.  Now PLEX drops, and there is a golden opportunity to buy.  I bought.  I think a bunch of people have.  So, collectively the demand to preserve value is sucking up excess supply.

There is one more modest factor on the demand side.  In Rhea, CCP is going to abolish clone grades.  Upgrading clones is an ISK-sink; it is about 3% of sunk ISK according the only data I am aware of on the subject.  Clone costs are basically going to go away entirely.  (CCP will raise the amount required to re-home your clone, but it is still quite cheap, and how often do people do that?)   Other things being equal, this move will marginally decrease the ability of ISK to safeguard wealth.  So PLEX win a bit here.

Summary: I think PLEX is a good buy.  All the fundamentals are there, other than possibly some decline in multiboxer demand.  But I think there is plenty of demand in New Eden for secure savings, that will offset that decline.

As previously mentioned, I have been buying PLEX for my corp and myself throughout the recent decline.  I got some at 900m, a few as low as 812m, and most around 830m.  If the price drops further, I may buy a few more, but I am mostly content with my ISK/PLEX balance.  We'll see if my purchases were wise or not.

EVE and RMT

There's a new blog banter out, #58 - Money:

The SOMERBlink fiasco from last summer and then again this summer... resulting in the service's ultimate shutdown has opened the floor to the discussion or monetization of services once again. 

Do you think CCP was right in its reaction? Was SOMERBlink justified in trying to monetize its service via plex sales kickbacks? Was it true RMT or grey area RMT? 

More generally, where is the line to be drawn when a service attempts to monetize in order to offset costs and/or make a profit? Is asking for donations in Real Life cash too far (I realize CCP considers it unacceptable right now)? Selling non-EVE trademarked goods acceptable? Asking for money to pay for efforts in setting up EVE meetups? Should these all be scrutinized? 

And should you want to dig deeper, should players be allowed to reverse redeem plex for cash? Does this already not exist in programs like Plex for fanfest packages or video cards? Is it right?

About Somer

First off, I am not that interested in Somer.  What they did was RMT, but the RMT per se was not the heart of what they did wrong.  RMT is fine if done with CCP's blessing.  (I.e., PLEX, fanfest packages, video cards, etc.)  Somer did not have CCP's full and knowledgeable permission to do RMT.  They tricked CCP into a sort-of permission to do it, and that is a very different thing.  It's one thing to trick someone with inferior or equal power; you can sometimes get away with it.  It's another thing to trick the hand that feeds you.  It was a stupid ploy.  Then they compounded their error by breaking EULA in several ways.  CCP did the right thing.  Nobody wants a subordinate that tries to scam and refuses to accept the rules.

Why or Why Not RMT?

Now let's talk in more generality.  Why is RMT banned, anyway?  Presumably, because its downsides outweigh its upsides.  But what are the upsides?  You don't hear people talk about that very much.  Let's look at both sides.

Why RMT?

There's a very interesting scifi element in Neal Stephenson's recent scifi novel Reamde (sic).  In the book's near-future world there is a MMO called "T'rain", which features full RMT, by design.  Indeed, the RMT is said to be among the reasons why the game is such a fictional success.  Legions of third-world gold farmers make a living by playing T'rain.  They are the low-level farmers (literally) in the game; it's their real-life full time job.  Rich Westerners play the game as a game, paying subscriptions, and are in effect the aristocrats of the game.  Each one has a horde of farmers working beneath him.

T'rain aristocrats are paying for three things that are affected by RMT: a living world, dominance, and status.  Let's look at each of these, and see how it is related to RMT.

First, T'rain is a living fantasy world that is full of actual people, not just simulated people.  (It also has a lot of computer-controlled baddies for PVE purposes.)  All the scutwork -- mining, farming, woodcutting, etc. -- is being done by characters in the game.  Everything is simulated down to the geology of the virtual world.  So, the world feels real.  Think about the difference in feel between an ice anomaly, and a level four mission.  In both, the grid is full of ships.

Second, just as in EVE, the T'rain aristocrats are the guys who get to run around and have adventures, many of which include fighting each other.  When you fight, someone wins, and gets the thrill of dominating another real human being.  Compare PVP in EVE to PVE.  The same thing applies: killing people is thrilling.  Losing is crushing, but for most people it does not depress you as much as a win elates you.  So, you ride the rollercoaster.  And note that in T'rain, there are "peasants" -- the gold farmers -- who presumably players can kill if they want a cheap win.

Similarly, presumably in T'rain if you want to hurt someone you can go and kill his peasants, Game of Thrones style.  Think of the difference in EVE between ganking and PVE.  In both you are shooting ships which in effect cannot win.  But ganking is typically fun; real tears are generated.  Compare the staid predictability of PVE.  Dominating a computer-played static fleet -- a fleet which is designed to allow you to beat it -- ceases to be fun after a while.

Third, the T'rain aristocrats get the thrill of being actually high-status in the game.  Human beings crave status perhaps as much anything else; they'll sacrifice a lot for it: money, sex, their very lives, even the lives of their children.  It's a very powerful motivator.  In most games the player is high status in the game's asserted fiction; for example, he's a "Jedi knight" and everyone knows that "Jedi knights" are high status supermen.  But the player in most games does not in fact have actual status in the sense of having actual human subordinates.  At best he has NPC subordinates; and after a point they do not tweak our status circuits.  By contrast, in T'rain, you could pay for actual status -- that is, having human subordinates -- and get it.

So, in summary, T'rain hits on a lot of the same buttons that EVE does.  But it does some things arguably better: a better simulated world, and higher status for its paying players.  Of course, we should keep in mind that T'rain is fictional.  I think the elements above would be successful in a real-world game.  Some of them are in EVE!  But it's trivial to assert in a story that your game is a worldwide smash hit because of X.  It's another thing to write an actual popular game, and yet another that a real game is popular because of X.

So, there are reasons why CCP should forget about monopolizing RMT and let people do it.

So why not allow RMT?

Why Not RMT?

Of course, CCP does allow very generous RMT: that's what PLEX is.  (Ref: my old post on EVE's Amazing AIs.)  But PLEX is uni-directional: money goes in; it never comes out.  What about opening up the other direction?  Of course, CCP should profit from it.  They might set up a online currency exchange: a modest "tax" on exchanges of say 10% seems like it should extract a lot of profit from the practice while still being low enough that black-market RMT is minimized.

One huge reason why full RMT might be a bad idea is real world laws.  If you hold someone's money for them, you are a bank, at least arguably.  And therefore arguably banking regulations should be applied to you.  I have certainly seen this mentioned in the RMT context.  I don't know how applicable it really is.  But if it is, I can certainly see that allowing any RMT might be prohibitive costly.  But let's ignore this reason for now and concentrate only on reasons related to game design.

One reason why people think that RMT is bad is that it makes it hard to earn ISK.  I discuss this with Gevlon in the comments of this post.  I make the point that ISK incomes would not collapse totally; they'd just drift down towards the global minimum wage.  (Really the minimum wage that obtains in places which have good internet access and sufficient population.  Today that is probably China.)  At the time, I computed 14m ISK/hour as that level; that was with PLEX around 500m.  The rate today would be somewhat higher, more like 20m ISK/hour.  This may not seem great to a wspace or null person.  But there are many people today earning less than that in highsec.  Highsec's safety counts for a lot, for many players.  So, there is definitely a viable game left even after all higher-profit work is professionalized.

Now, it should be apparent that in opening a competition between people all over the world to "play" EVE as a job, you open up competition and will drive wages down, at least somewhat.  A Chinese peasant may compare a job mining veldspar in EVE to, perhaps, working as a street-sweeper, and decide that he can survive on less than minimum wage.  The work is much more pleasant.  So wages would probably be a bit lower.  Still, the estimate is fine on that end.

Another thing that would happen with full RMT is that PLEX would go up quite a bit.  Consider a Chinese peasant playing EVE to make money.  He finds that they can rat in nullsec for 60m ISK/hour.  So he and a friend get an account and rat with it all day in shifts, perhaps 20 hours per day, six days per week.  Over a month, that's 33.6b ISK.  From that, they need to buy one PLEX to run the account; PLEX cashed out beyond that earn them minimum wage.  But their mininum wage is on the order of $112/month; if they can cash out a PLEX for $15 legally, then they'd need 15 of them to pay just over minimum.  16 total.  So we see a valuation of 2.1b ISK/PLEX.  (Perhaps not coincidentally, PLEX are just about 2b ISK on the Chinese server, although they pay about half as much for PLEX.)

So what's the problem here?  The problem is that everyone becomes risk averse.  That is because everyone has the possibility to extract real cash from the game.

Now, there's no problem in farmers becoming, or rather being, risk averse.  The Code to the contrary, pure farming is a viable play style.  And farmers already are famously risk averse.  They'd be perhaps bit more so with the ability to cash out, but really not that much.

It's the rest of the players that would have their incentives changed much for the worse.  Currently, it is relatively easy to earn more than PLEX.  So people pile up ISK with nothing to do with it.  For those whom ISK is not an end, but a means to more pixel violence, lots of ISK will eventually mean they fly more, or they end up up-shipping, flying more expensive ships.  They are more capable and also more fun to blow up.  Thus, everyone benefits.  And people stay in the game, because the spaceship violence is compelling.

Consider an EVE in which losing a "$1000" Titan really is losing $1000... and suddenly, you won't see many Titan pilots.

By making the accumulation of ISK easy, and having nothing to spend it on but spaceship violence, CCP induces lots of spaceship violence in their game of spaceship violence.  And that's a good thing, because lacking spaceship violence nobody would play EVE.

But What About PLEX-for-Vidcards?

So, the point of disallowing cash-out-RMT is to make sure EVE stays fun, which is what happens when there's nothing better to do with ISK.  But what about all those methods of trading PLEX for real stuff mentioned in the banter?  Video cards and fanfest packages, etc.?

Well, those do give players an outlet for ISK, and so they should have the effect of reducing the amount of pixel violence going on.  But on the other hand, at least arguably by handing out things related to EVE, you cement fan loyalty directly, and keep them playing because they like the game more.  So, I think it's a wash on the "fun" factor.  And also, it's a clear win to the extent that many of the people using these offers are not PVPers.  They're not going to do anything with the ISK in any case.

There is also the point about professionalization.  By allowing cashout in any form, CCP reduces the amount players can earn in game, because people will do extra farming to earn ISK for cashout.  But so long as CCP keeps the amount of cashout relatively small and unpredictable, this is not a real problem.  "Relatively small" here is relative to the global minimum wage.  Allowing cashout of a PLEX per month is insufficient for anyone to live on.  Unpredictable just means that you cannot come to rely on that income.  Also, cash per se should not available; rather, goods or services, ideally services that are not salable.  This makes it more difficult to live on cashout opportunities.