200,000 gamers earn a total of $300M a month playing video games. Part 1
Today, more than 200,000 players earn an average of $1500 monthly playing games. We expect the number of in-game jobs to grow from 200K to 1M, but in order to understand how, let’s take a look at the past and the present of WoW, EVE Online, Diablo III, Roblox, Axie Infinity, and Sandbox. We will also try to understand what the in-game professions of the future will be like.
Let’s start with the ancestors. The biggest virtual economy of the first decade of the 21st century is definitely World of Warcraft. Many believe that this MMORPG really falls under the term “metaverse” because of the open economy, valuable digital items, rich social and real-life mechanics, and a huge open world. That was the biggest online game in terms of Google searching from 2006 to 2010, and it still holds in the top 10. And probably still the biggest virtual economy in terms of the real in-game transactions made by its users.
WoW Economy overview
World of Warcraft 21B gold daily trading volume is ~$107M based on average gold exchange rates on a secondary market and the official Blizzard gold token exchange rate in 2021.
Faucets (how gold is being minted): People get gold from mobs, farming & selling resources, completing quests, or they can just simply buy it from Blizzard.
Sinks (how gold is being burned): Game time purchasing, Repairs, Character skills, Resources, Items and Mounts from Vendors, Auction House commissions, Cosmetics, and more.
Activision does not disclose revenue by title, but judging by their flat top-line revenue and information about 30%-40% drawdowns in Call of Duty, we can say that ARPPU in WoW has grown by at least tens of percentage points, and maybe more than a hundred percent over the past six years, since the audience of the title has fallen by more than two times, and the revenue has not.
Given that the subscription has not become more expensive, the audience is falling, and the game’s revenue remains at the same level or grows, while Blizzard began to earn a record-breaking 61% of the money on micro-transactions, it seems WoW has become a very strong Pay2Win title that has learned how to pump money out of whales by selling them gold.
Does the WoW economy create jobs?
Blizzard doesn’t really want people to make a living playing their games or multi-server scalable organizations to exist and scale because they compete with game publishers’ gold sales. At the moment, secondary market participants are reducing Blizzard’s share in the game resources and services trading market from 100% to 93% (based on revenues generated by the gold-selling marketplaces and service providers).
One example was a “boosting community” called Gallywix. They had a Discord that skyrocketed to 100,000 members in just two years, accumulated billions of gold in commissions from Coaching, Companionship, and Boosting services paid in gold by Customers to Pros, and were ultimately closed by Blizzard for selling gold for real money.
But it’s still safe to say that extraordinary players are finding ways to make a living playing WoW even now. Top PvP players and PvE Guilds sell pretty expensive coaching, companionship, and boosting services. Professional traders are engaged in profitable trading of gold, and resellers of game gold receive significant profit from commissions. Creators and Streamers monetize content.
By indirect evidence, it can be assumed that the number of jobs (people earning more than $500 a month playing WoW) is close to 10,000.
Considering that 2 million people play WoW every month, this is less than 0.5%, which suggests that only extraordinary players really earn in the game.
Moving to web3 could increase that figure from 0.5% to 5%, but I’m not sure we’ll ever see that.
The funny thing is that the outdoor research data agrees with my insider observations. From 2008 to 2012, I took the title of Rank-1 Gladiator in WoW 6 times (top 0.1% of players) and several times Gladiator (top 0.5% of players). At that time, I and other Gladiators were earning from $500 to $7,000 a month providing coaching and boosting services for clients.
At some point, one of my clients was the son of an oligarch, and I created for him the #1 guild in Europe, where 200+ people worked full-time with salaries. This man was spending $400,000 to $700,000 a month on the game.
I think that if Blizzard officially legalizes the ability to make a living playing WoW and take steps towards an open economy, this would greatly increase the number of jobs in the game, but then their share in the game’s economy could easily drop from 93% to 50%.
This “charitable act” will lead to a fall in the income of video game publisher and stock prices, a degradation of the unit economy, and, as a result, a decrease in the number of new users.
In this situation, a potential upside can only be obtained when the economy moves to the web3. In this case, the trading volume of gaming resources will increase significantly due to investor speculation.
The daily trading volume of WoW Gold is $107M, while the average daily trading volume of SLP (Axie Infinity token) for a bull market year was about $150M, and for a bear market year, apparently, there will be about $10–20M.
Considering how strong and rich WoW’s game economy is due to dozens of thousands of whales spending money in the game to increase their enjoyment, and how miserable and useless the economy and the whole game of Axie Infinity (compared to WoW), one can dare to assume that the daily trading volume of web3 WoW Gold could increase by hundreds of millions of dollars. In this case, if Blizzard charges the 4.25% commission typical for web3 games from the trading volume, this can compensate for the drawdown in revenue. Perhaps in a bull market, Activision Blizzard could make a significant profit from such an economy. But then again, this is a giant leap of faith and legal challenges, which such mastodons are unlikely to be ready for.
In addition to the degradation of the unit economy, pressure from shareholders, and legal challenges, what also scares me is that in traditional games, whales purchase items, characters, and assets that remain on their accounts after they leave the game. In blockchain games, all of these whale assets would theoretically be put up for sale by them when they decide to stop playing or switch to another game. This will create too much supply in the market, which will drive prices down and destroy the value created by the people who work in the game.
However, following the purchase of Activision by Microsoft, Activision Blizzard’s strategy may include experiments with web3. But I don’t think it will happen in the next 3 years.
Scalable in-game organizations and their tools
Like in the real world, there is a huge part of in-game revenues belong to organizations. They’re called “Guilds” or “Clans” or “Alliances”.
And I’m not talking about Web3 Guilds from 2021. In my opinion, they were engaged in absolutely illogical and useless activities due to the primitiveness of the games they played and the 100% speculative economy.
I’m talking about the real Guilds, for example, here’s the organizational structure of a typical commercial guild in WoW:
This allows the creation of a variety of in-game jobs: Dungeon runners & Raiders & Gladiators — coaches, companions, boosters; Farmers & Crafters; Treasury managers & Traders; Community Managers, Content Creators; Ops managers, Recruiters; Advertisers, and more. Each employee has their own role and can work full-time if the Guild has structured everything right.
I had an interesting conversation with Michael Seibel (CEO of Y Combinator; ex-CEO of Justin.tv — later Twitch; Reddit board member) while Legionfarm was going through the Y Combinator W20.
Mike asked me, “What’s your goal?”
And I told him, “We want to create one million new jobs inside of the virtual worlds.”
He told me that in Twitch they had a similar philosophy around creating jobs for gamers. “If you want gamers to be loyal and stay with you forever, you have to create jobs that will allow them to have a stable income that is enough for them to have a girlfriend or boyfriend (support a family of two), rent a flat, and have enough money for food and cinema.”
Basically, extraordinary 18–24 y.o. gamers just need enough money to start living an adult life. And that’s $700 to $2000 per month in emerging markets such as Latin America, the Middle East, and Eastern Europe.
Tools
There are a variety of products that appear inside virtual economies that are being used by organizations and individuals to earn.
Addons like Auctionator with 44M downloads that help players trade better and earn more gold. And WoW Econ that allow to track historical price changes and supply/demand of items.
At the same time, there is a problem — an open economy attracts scammers, abusers, and cheaters of all stripes.
We are sure that people who want to participate in an open economy and make money in the game must pass KYC, and be highly trained and verified professionals.
In-game services providers must use certain software that monitors their voice activity and game data, making sure that people make money doing useful actions to attract or retain whales and dolphins.
Conclusion
Social inequality continues to grow, so we’re optimizing for whales that will stimulate the virtual economy. If we want to provide people with a paid job for being entertainers inside the virtual world — then there must be enough people who pay 7/6/5-digits annually for some of the “7 deadly sins”.
And there must be games where people can spend that amount of money.
And why I’m rooting for MMOs is because those are exactly that type of games where whales can spend 7-digits amounts while creating thousands of interesting jobs divided into dozens of different in-game professions.
Economics of the “Eve Online”
The in-game economy in Eve Online is an open economy that is largely player-driven. Non-player character (NPC) merchants sell skill books used by players to learn new skills and blueprints to manufacture ships and modules. NPC merchants also buy and sell Trade Goods. Some Trade Goods are only for trade between NPC merchants while others have a functional use and are not good for trade with NPCs. The characters themselves gather the necessary raw materials to manufacture almost all of the ships and ship modules in the game. NPC ships can be looted and salvaged for items and materials. Non-player-created ships and equipment may be purchased from various NPC factions as a character gains status with them and can be resold in the in-game economy. The in-game currency is ISK (Interstellar Kredits), which is also the currency code of the Icelandic króna, the real-world currency of Iceland, where the Eve Online development studio is located.
The amount of money or materials in the universe is not fixed and, as such, the economy operates under supply and demand. Market manipulation is possible on a large scale, particular examples being ramping and bear raids. CCP does not issue refunds on in-game purchases. Hence, there is always the risk of certain types of confidence tricks or other scams. The economy is balanced by the automatic introduction of extra materials in underpopulated areas. This encourages a more even spread of players.
The game provides support for the trading of in-game resources, including graphs of item price history, with Donchian Channel and daily average price. Some player characters operate primarily as traders, generating profits through buying, selling, and transporting goods. Others operate primarily as producers, obtaining components or raw materials and transforming them, sometimes on massive scales, into useful items such as weapons, ships, ammunition, items, or various technologies in demand by other players. Some less combat-oriented players operate as miners or salvagers, collecting and processing ores used in manufacturing or collecting salvage materials to make into items, respectively. Finally, some characters operate as mercenaries or pirates, being paid primarily to be battle-ready and either to attack or defend other profitable enterprises.
Unlike some games such as Second Life, in-game currency is not freely convertible with real-world currency. Players may only buy specific in-game items (such as the Pilot License Extension (PLEX), a token worth 30 days of game time) from CCP with real-world currency. The player can then sell the items on the in-game market for ISK (game currency). The reverse process, selling in-game currency or items for real-world money, is prohibited. The developers’ reasoning for this policy, as related by a CCP representative at Fanfest 2010, is that free interchange of currency causes in-game banking to fall under the same regulatory domain as real-world banking. CCP would rather not place this restriction on in-game behavior, due both to the difficulty of regulatory enforcement and the desire to allow players to create illegitimate in-game banks or Ponzi schemes if they wish to do so.
In Maslow’s famous hierarchy of needs, the value of an object in EVE is about as far from the base “survival” level as possible. Yet hundreds of thousands of players devote huge chunks of time to acquiring these objects, crafting memorable stories and a portion of their self-image around those investments. Those stories can be as epic as a galaxy-wide battle that destroys $300,000 in real-world value or as simple as the personal tales that get crowdsourced into a documentary.
This chart shows the relative cost of different EVE ships in terms of ISK (in-game currency), US dollars (in case you buy currency for real money from the publisher), and how many hours a mature gamer might have to farm resources to craft this ship.
The game economy is designed so that the average cost of an hour of farming for an experienced player is $2.17 (based on the dollar-ISK exchange rate of the game publisher). If you take into account the fact that it costs less to buy resources on the black market than from a game publisher, and also multiply this by the risk of your ship being destroyed by pirates when transporting a ship in order to sell it, the hourly cost of farming can drop to $1.5. Which is $200 to $300 per month.
It can be concluded that the economy is consciously designed by game publishers in such a way that it is unrealistic to engage in professional farming in order to make a living, even from the Philippines or Venezuela.
I don’t think it’s the greed of game publishers. Rather, the fact is that if a million Filipinos come to work in their game, then the price of game resources will fall several times, dragging the earnings of game publishers and the entire game economy as a whole to the bottom.
This situation is identical in World of Warcraft or any other open economy MMO game.
Corporations and alliances
Players can organize themselves into corporations (similar to guilds or clans in other MMOs). Corporations are run by one chief executive officer (CEO) who controls the corporation’s assets. The CEO assigns roles to corporation members such as director, accountant, and personnel manager. Corporations may also band together to form alliances. Corporations and alliances come in different shapes and sizes. Some player groups write press releases about new business openings and send out IPO information to potential in-game venture capital investors. Alliances can control enough star systems that their territory can be plotted on the Eve Online game map. Alliances based in lawless space often form unofficial political power blocs with other alliances. These power blocs are typically referred to as “coalitions”. Unlike formally established alliances, coalitions are similar in nature to Japanese keiretsu — an informal ‘business arrangement’ in which several corporations band together to provide mutual financial, military, and/or industrial support.
Corporations take up numerous business models such as mining, manufacturing, or “ratting” (hunting NPC pirates for their bounties and loot). Corporations can levy income taxes on their members, which skim off a percentage of every member’s earnings. Many corporations offer a variety of benefits to their members, such as free or discounted ships, equipment, formal training, and organized corporate group operations.
Is there any future for the Web3 guilds inside EVE Online?
CCP takes EVE economy balance seriously, and it tries to make sure that the creation and consumption of ISK happen in roughly equal measure. The Eve Economic Council offers detailed monthly graphs tracing the creation and destruction of aggregate in-game value across many variables, for instance.
Enlarge / One of the many monthly graphs the EVE Economic Council uses to monitor the balance of in-game assets in the game.
In a Monday blog post, CCP CEO Hilmar Pétursson wrote that the company is always “exploring new technologies and new possibilities” to help fulfill its mission to have “the EVE Universe outlive us all: EVE Forever.” But while he said that blockchain tech has “a lot of untapped potential,” he noted that there is “a lot of work needed before [blockchain is] ready for EVE-scale games.”
Final conclusion
All AAA MMOs combined currently create between 10,000 and 20,000 jobs for extraordinary full-time gamers. At the same time, they have the potential to create hundreds of thousands of jobs. This will definitely not happen in the next 3 years, but it will probably happen in this decade due to the development of web3.
In this article, we have touched on less than 10% of existing in-game jobs. And this means that soon I will write a few more articles :)
I hope you enjoyed it!
