Game tokens — a “Titanic” investment?

So the first 24 hours of token sales in North America are over, and their gold value as of this writing has lost approximately 1/3 of its value. They started out at 30k gold and now hover right around the 20k mark. (It’s starting to look like the Facebook IPO.)

This is why I don't invest in the stock market

Graph courtesy of wowtoken.info

It’s early in this grand experiment, and clearly there will be some volatility in the market for the first few days. But I think I can claim a righteous I-told-you-so on this.

DISCLAIMERS: I bought a token from the Blizzard store almost as soon as they went on sale. Mainly I did it so that I would be motivated to follow the token market. I did not put it up for sale in the in-game exchange, held on to it. Part of this was intellectual curiosity and knowledge that you need a real stake in a game to care about the outcome, part of it was stupid wishful thinking, the kind you have when you buy a lottery ticket. Also, I admit that I am one of the players with a good day job and not a lot of time to play, so my interest in tokens is in how much gold $20 will buy me, not in how cheaply I can buy game time with easy gold.

As I predicted, the first day’s sales have shown that there are many more players who need gold than there are players willing to spend gold for game time. This is the fundamental flaw in Blizzard’s optimistic early assessments of the popularity of these tokens. Well, let me amend that last statement: this is the fundamental lie in Blizzard’s token sales pitch to its player base. No matter what happens, Blizz makes out like Bernie Madoff in the early years: they sell tens of thousands of month-long subscriptions for $20 a pop instead of $15. From their point of view, what’s not to like?

In any population of ten million, there will be widely divergent opinions on the concept of “value.” For many game time buyers yesterday, 1000 gold per day of game play seemed like a good deal, and similarly for gold buyers $1 for 1333 gold seemed like a good deal. Now it seems like subsequent waves of gold buyers are happy with $1 for 1000 gold, and of course the time buyers are getting an even better deal so they are still happy.

Personally, I thought 30k gold was a tad low for $20, so there is no way I would sell my one experimental token now for 20k, I am stubborn enough to hold onto it until hell freezes over at that low price. I don’t really need gold, I have plenty, but I place a certain arbitrary gold value on my hard-earned 20 bucks. Holding onto the token is pretty stupid, as doing so basically donates $20 to Blizz for nothing in return, but — irrationally — I feel like there is some principle at stake for me.

Not to mention that if I did need gold, the going rate for illicit gold for my server is now $13.50 for 20k gold, about a 30% discount from Blizz’s price. But the point is, my idea of value for my $20 is my own, and there are millions of other players out there who have a different value in mind. For each player, the success or failure of tokens in their estimation will depend on how close their concept of value is to that of the the majority of token-buying or token-selling participants.

Blizz claims that the token prices in-game are determined by “market forces”, which of course — surprise! — is not entirely true. Blizz has determined some arbitrary sales volume they must meet for these tokens, and they are adjusting the prices according to how well they are meeting that sales volume. Not selling enough tokens in the store? Raise the in-game gold price. Not moving them through the auction house fast enough? Lower the in-game gold price.

A professionally run company would disclose sales numbers for its new products, so if Blizz were actually playing with the grown-ups they would publish the number of tokens sold per day in their store, along with the number of tokens bought per day and the average price and sell time in the Auction House. That way potential “investors” could get an idea of their expected return, either in game time or gold.

HAHAHAHA! Isn’t make-believe fun?

One last point, and that is, no matter what the eventual economics settle into, it seems clear that tokens are here to stay. And that fact gives players a very handy measuring stick. People tend to have a better idea of the worth of real life money than they do of pretend money. So now, if for example the exchange rate is $1/1000g, it becomes easier to weigh the relative costs of other in-game items. If that fancy mount you want sells for 300,000 gold in the auction house, you can decide if it is really worth the equivalent of $300 to you. Or that piece of 685 gear that is selling for 40k gold, is it really worth $40 to you?

But I am still hanging on to my token. If nothing else, it will be a reminder to me of the folly of trying to guess the market.

About Fiannor
I have a day job but escape by playing WoW. I love playing a hunter, and my Lake Wobegonian goal is to become "above average" at it.

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