Real Money, Fake Property: Live Gamer’s Andy Schneider on Bringing Item Sales in from the Cold

For the uninitiated, “RMT” stands for “Real Money Trading,” the act of spending your hard-earned real-life cash on a virtual sword or a purse full of silver coins for your equally virtual character in an online game.

To read a very interesting discussion on the topic, hit the jump for Steve’s interview with Live Gamer’s Andy Schneider.

For years, RMT has existed on the margins of the MMO genre, run by a shadowy and much-maligned network, loosely bound together in the minds of players by the epithet of “Chinese gold farmers.”

But procuring digital items and currency to sell to players with more disposable income than time has now become a multi-billion dollar industry, and publishers are beginning to sit up and take notice, looking to tap-in on this revenue stream by moving the sales out of the cold and darkness, and into their own watchful gaze.

This is where Live Gamer hopes to come in.

The MMO Gamer: First of all, for those among our readers who may be unfamiliar, could you please introduce yourself to us, and tell us a little about what it is you do at Live Gamer.

Andy Schneider: I’m Andy Schneider, co-founder and president of Live Gamer. What we do is partner with publishers to offer legitimate real money trading of virtual items .

We’re currently working with about a dozen publishers. Among them are Acclaim Entertainment, Funcom, Sony Online Entertainment, GoPets, NHN USA, and several others, both in the subscription MMO space as well as the free-to-play MMO space, in addition to virtual worlds.

The MMO Gamer: When people hear that phrase, “real money trading,” their initial thoughts are probably of a dark basement in China somewhere, with men slaving over keyboards night and day, and some guy who whips them if they don’t meet their gold quotas.

I take it that’s not what you have in mind at Live Gamer. What exactly do you mean by legitimate?

Andy Schneider: Well, real money trading of virtual items has been around for more than a decade.

It started in the very earliest MMOs, if not back in the MUD days in a very grassroots sort of way, but then obviously got into a more opportunistic and nefarious industry.

When I talk about legitimate RMT, it’s about a publisher supporting the notion that people want to buy and sell virtual items for real money, and they have decided to proactively support that notion and give their player-base a way to do that.

This is within the terms of service of the games, within the end user license agreements, and moderated by a trusted party, Live Gamer, with everything totally transparent and authenticated.

That’s legitimate RMT, versus what most people think of as “gold farming,” which is obviously not supported by the game publisher.

The MMO Gamer: To be absolutely clear, what you do is sanctioned by the publishers, and you work with them? You are not a third party, working against the wishes of the people producing the games?

Andy Schneider: Never. We only create a marketplace with the publisher’s support, we enter into a contractual relationship with the publisher, and the publisher has affirmatively decided to support a sanctioned RMT marketplace.

It’s all player-to-player, our business model is a transaction fee. There is no concept of farming in our world, it’s one player selling a virtual item to another player, we facilitate the entire transaction, and make sure that we spot fraud, or farming, and shut it down immediately.

The publisher benefits, and more importantly the end user benefits; they don’t have to go to a black market outlet. They don’t have to risk having their credit cards stolen, or their identities stolen, or their game accounts stolen.

They don’t have to risk getting their account banned because they’re in violation of the publisher’s terms of services. In our world, because of the partnership, and because of the publisher support, we’re able to create a much better experience for all that consumer demand that’s otherwise been lost to the black market.

The MMO Gamer: How does this service work, exactly? Where does Live Gamer come into the picture of selling items?

Andy Schneider: It’s very simple. First you link your game account to your Live Gamer account. We don’t require you to give us your user name or password. We do it all through token identification.

Once we have that all set up, you can go and send an item or character to the Live Gamer server. We do that on a server-to-server basis, we pull all the metadata from the publisher.

So all these listings are completely legitimate and pulled right from the game server, there’s no misrepresentation. We pull the item in, and hold it in escrow while we facilitate the financial transaction.

Once there’s a buyer for the listing, we monitor the whole transaction from start to finish. We do a number of different screens and checks, and once we know that it’s an authenticated trade, we release the item out of escrow to the new player.

It takes the manual process out of the equation that most players are engaged in with the black market, and reduces the fraud considerably, which is good for players.

It also reduces customer support calls for developers and publishers, who used to be on the receiving end of a trade gone bad even though they had nothing to do with it. That is really how the system works. We provide the listing service, we provide the escrow, and we provide all the financial transaction.

The MMO Gamer: Isn’t there a concern that creating a legal outlet for selling things that were previously sold under the table is just going to encourage more farming, not less? That gold spam will just pick up and move from “Visit wowgold4u.com” to “Visit my Live Gamer account”?

Andy Schneider: The more legitimate transactions there are, the less need there is to go to the black market, hence the less demand there will be for gold farming.

We take things like fraud and gold farming very seriously. We’ve been very successful thus far in creating a legitimate marketplace and giving the consumers what they want, and redirecting them out of the black market, where they’re just feeding the gold farmer businesses, into something where the publisher, and the developer, and the designers have a say in what’s going on.

The MMO Gamer: To get down to the heart of the matter, RMT is one of the most divisive topics in the MMO genre. What abortion or Medicare would be to real-life politics, RMT is to MMOs.

What do you say to the players, or even the developers, who believe that this is not the way that the games were meant to be played, and that it offers players who make use of your service an unfair advantage?

Andy Schneider: You know it’s a great question, and before we started Live Gamer, we knew this would be the issue. So, we spent a lot of time trying to understand the motivation of game players. Why do they engage in RMT? What are the hot-button issues? Does it break the fourth wall or the magic circle? Does it create an unfair advantage for players who are buying items that are giving them a performance advantage?

We looked at what these motivations are, and certainly there are players who want to get a performance advantage. But, there are also overwhelmingly more players who play MMOs and engage in RMT for social reasons.

The social reasons might be one of they want to play with friends who are leveling up faster than they are and they want to keep up, they want to play the game again from a different character class or race perspective, or they want to customize their experience – so they want to go ahead and buy the items that make them feel better about their character.

There’s also the players who want to explore everything the game developer or designer has created, and they can’t possibly do it because they don’t have enough time.

In the end, all of these people engage in RMT because they don’t have enough time, but they might have more disposable income. And that’s the predominant reason why people that we see are engaging in RMT, and we certainly see all the arguments against RMT.

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The MMO Gamer: That covers the players, but there are developers out there, for instance Mark Jacobs from Mythic, who are vehemently opposed to any sort of RMT at all on a deep philosophical level.

Some believe that the real word and the game world should never come into contact, except via the players themselves.

What would you say to that argument?

Andy Schneider: RMT is there to fulfill a consumer need. The reason there are gold farmers out there, the reason why there is nearly a two billion dollar secondary market for virtual items, is because of consumer demand.

It’s not that gold farmers came and said, well we’re just going to create a market and hope they’re going to come and buy it, it grew organically in the eBays and Yahoo Auctions and Craigslists of the world. The demand grew from the consumers and players.

So, it’s philosophy. There’s never a wrong answer, and it’s a very volatile opinion on both sides of the spectrum.

The publisher who knows there is a demand and wants to do something about it offers their players a better experience by embracing legitimate RMT.

It’s not too dissimilar to other types of forms of media, when there’s no legitimate outlet players take action in their own hands. That is why it took a long time for the music industry to embrace digital downloads, it was disruptive to their core model.

And because there was no legitimate outlet, users, music fans, went and started engaging in black market trading. It is not too dissimilar to that in the game space. There is demand and there is no outlet, so players create their own outlet, or other people create an outlet around the publishers.

And that’s what happened. That’s why this is such a big business today.

The MMO Gamer: Just how big is it? Do you have any metrics? Some sort of a rough breakdown of what you believe is the percent of the players who are involved in RMT, versus those who are playing without it?

Andy Schneider: There was a survey that came out-I’ll have to get you the link-but it was about 33% of all users, all players of MMOs, that participated at one time or another in RMT.

If you read the SOE white paper that they wrote after the initial launch of The Exchange, they saw that 22% of their audience used RMT services, which is a pretty big amount.

The Exchange is only on two servers, but if you go onto any of the black market sites there is quite a following there for all servers.

The survey also said up to 60% wouldn’t mind participating in RMT, and a third were vehemently opposed.

I think the market is shifting, especially as games are designed with real world player-to-player trading and game design.

It’s only a natural outcropping of a well-developed market. If you’re selling items that have any sort of collectability, rarity, redeemable social value, there will always be a secondary market. So, we’re seeing the dynamics moving towards secondary markets rather than away from them.

The MMO Gamer: Despite those numbers, and despite IGE’s massive success, I think you said earlier they had sales of what, a billion dollars one year?

Andy Schneider: I think they stated a billion in gross transactions in 2005.

The MMO Gamer: RMT for many players is still a niche concept. But, this is more or less only the case in the West.

In the East, a somewhat different concept, micro transactions for item purchases, has been embraced whole-heartedly, and companies there seem to be making a tidy profit off of it.

Why do you think there’s this divergence between almost 100% acceptance in the East versus, to use your numbers, 30% acceptance in the West?

Andy Schneider: In Korea and China, item based business models have been around for almost a decade, and that’s just starting to happen here in the West in any meaningful way.

There’ve been fits and starts, but the indicator in what we see in people we talk to is that item purchases, and RMT, are becoming the new core model, here.

I think the item based model in Asia has been successful for a few different reasons. First, you had broadband penetration. Secondly, you had a really wide audience that was gaming as a form of mass entertainment and it’s been that way for awhile.

The item based model allowed people to buy into the game or pay for the game at their own discretion. So, you had very casual players who maybe didn’t want to make the big upfront commitment, but wanted to play once in a while with their friends. And that is happening here now, but in general we’ve got a packaged goods model that’s been well established in the West, and certainly there’s subscription MMOs that have done extraordinarily well.

But, we see that model changing to an item based model, and increasingly garnering a broader demographic who can participate at their own pace. That has been the norm in Asia for quite some time.

The MMO Gamer: I’m sure you’re slightly biased on this subject, but in your opinion will there come a day when the majority of the titles released in North America and Europe include legitimate RMT as an option for their players?

Andy Schneider: Yes, absolutely. I do believe that. I think as people place more emphasis and more value on the digital persona, and the achievement and the items that they acquire through their digital persona, there will naturally be a more robust secondary market, as well as a more robust primary market, for those items, and not to dissimilar to the real world today with EBay. So I think it will be part of MMO’s going forward. I think you need to design it for it. And there’s a lot of opportunities around for creative and community design for social engagement that legitimate RMT provides.

The MMO Gamer: To wrap things up, the real-world economy isn’t doing so hot at the moment. If there was ever such a thing as discretionary spending, I would think that imaginary items for virtual characters would fit the bill nicely.

Has the RMT business been hit by the recession?

Andy Schneider: Well, business fortunately is going along pretty nicely. I think, with the player-base that is in the MMO world, there is a deep attachment and affinity to the games that they play, to the social aspects of the game, to the communities that are formed, and that people are getting good value for money in the game space in general.

So fortunately again, while the macro economy is certainly hurting, we haven’t seen a downturn in the game market in general and particularly around the games we’re supporting. In fact, I think a lot of folks are happy to be distracting themselves with their virtual personas, and continuing to have those very real relationships in virtual worlds.

The MMO Gamer: Thank you very much for joining us, we appreciate it, and we hope we can do it again sometime.

Andy Schneider: Thank you.

Well? Would you buy a rusty dagger from this man? If so, head over to http://www.livegamer.com to see if legitimate, publisher-sponsored RMT is coming to your neck of the woods.

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