Fascinating accusations against Activision Blizzard, Inc.
I was looking at Activision Blizzard, Inc (NASDAQ: ATVI) this afternoon. After browsing a report, from curiosity I began looking at the games it makes, trying to evaluate whether this company has a market-beating product offering and process, or if it’s just a customer-led retailer. In the course of my research, I came across the darnedest accusations against the company on the depths of an internet forum.
Now I have no idea if these accusations are true. Forums are full of all sorts of characters, with all kinds of motivations. But whether Blizzard has done this thing or not, I was struck by the fact that it was something that some companies would do, and I lost a little piece of my innocence in coming to that realisation. But first you’ll need some background:
Blizzard makes all sorts of games. One I was looking at was an older title, Diablo 3. It is an action game where the goal seems to be destroying as many demons as possible to stop them from destroying the world. You destroy demons, find gold and magic items and these make you more powerful so that you can kill more powerful demons and…find more powerful magic items, which let you kill more powerful demons. From the Diablo 3 site:
Twenty years have passed since the Prime Evils were defeated and banished from the world of Sanctuary. Now, you must return to where it all began – the town of Tristram – and investigate rumors of a fallen star, for this is the first sign of evil’s rebirth, and an omen that the End Times have begun.
Lay waste to legions of evil throughout randomized, 3D environments.
Collect a dizzying array of treasures as you defeat the minions of Diablo. Equip, upgrade, and craft powerful weapons and armor as you grow into a legendary hero of Sanctuary.
You get the picture. There are ‘tiers’ of items that you can find, from sort-of powerful up to very powerful ‘legendary’ items. (I know this will be treacle to most readers but stick with me). These rare items were a big drawcard if you killed a monster and it ‘dropped’ one, since they had all sorts of special effects. If you look at it from a psychological perspective it is basically variable reinforcement schedule conditioning, and the occasional ‘jackpot’ (legendary item) kept the players hooked.
Now, in Diablo 3, Blizzard introduced a Real-Money Auction House (RMAH), which is the part of the game I was really interested in. This allowed players to buy or sell items that they found for real money. This sort of trading had been going on since Diablo 2 at least, but it was always kind of shady, since that era was before PayPal and secure methods of fund transfer, and there was no way for the buyer to not get ripped off.
Knowing human nature and that these types of shady sales would continue if not controlled somehow, Blizzard introduced a secure payment transfer and exchange facility for its RMAH in Diablo 3. Of course, Blizzard would clip the ticket and keep a percentage of all sales. This was smart business in my opinion, adding value for players, and the RMAH was immediately a very popular service on which the company would also earn extra revenue. Once designed and implemented, it was very low cost to maintain and highly scalable, usable across the player base.
Enter the Matrix
Now maybe the more cynical among you can already see where this is going. But many on the forums asserted that Blizzard was controlling the drop rates of these rare items in order to drive demand for the auction house. Because Diablo 3 is always-online, and all the data is stored server-side, Blizzard can make subtle changes to the game as it wills.
In a sense, Blizzard already controls the drop rates because it determined what they were initially when it wrote the game. But these people alleged that Blizzard dynamically controls the drop rates in order to adjust them lower depending on how many rare items had dropped recently.
I followed some threads with page after page of info and discussion about drop rates. It turns out that hardcore players do studies and have iterated on these things at length, and all sorts of people play computer games, including college maths students and statisticians. Frankly it was all Greek to me, but the main accusations seemed to be that:
- if one player found a legendary item, drop rates would be reduced for all other players across that local server
- That same person would also have their likelihood of finding another legendary substantially reduced for a certain period of time in game
- Blizzard had separate drop rates for actual ‘good’ legendary items and ‘poor’ ones, making the poor ones far more prevalent (and the good ones would thus receive more interest from bidders in the RMAH)
- Drop rates were far lower than the previous game in the series, Diablo 2 (requiring a greater time investment – more player engagement – in Diablo 3)
- Other actions were taken to psychologically manipulate players in order to maximise their hours of engagement (chasing the legendaries and using the auction house)
As I said, I have no idea if this is true. But it does not take a leap of faith to imagine a company taking actions to preserve an online marketplace. I imagine that if there is a fixed pool of items to find in the game, the more that players play, the more copies of these items they will find, and the more common these items will become (i.e. commodity supply increases). Lowering the drop rates would maintain the value of rare items – depending on player numbers and all sorts of other variables. I ran these forum ideas past a good friend of mine who used to play Diablo 3 and he said that, while they sound like wild conspiracy theories, they absolutely chimed with his experience when playing. He said he found just 2 legendary items in the course of 100+ hours of gaming, which I gather was not enough to keep a player feeling rewarded.
The whole thrust of these accusations is that by manipulating the player experience, Blizzard can control supply and demand (and thus prices, activity, and revenue) for the Auction house. Thus players are not getting a ‘real’ experience but are more like lab rats in an environment being artificially manipulated.
I found these accusations remarkable. The thought that a company could be manipulating its customers in such a manner, in order to bolster its own sales, suggests a degree of corporate fuckery that I would never have dreamed of.
Now I tried to pin these accusations down. I really have no idea if they are true. In Blizzard’s defence, it closed the RMAH after a few years, claiming that players spent more time in the auction house than they did actually playing the game.
On one hand, that supports the idea that they were not in it for the money. On the other hand, if you take the tinfoil-hat conspiracy-theory attitude I carried away from the forums I was reading, it suggests that Blizzard’s manipulation of players was highly successful, given their high level of engagement with the Real Money Auction House (i.e. spending more time in it than actually playing the game).
I would go so far as to say that, if true, Blizzard has broken its compact with customers by using them in this way. If you want to blow up demons and find powerful magic items in your spare time, good for you. If a company makes a good game and promotes it well, people will buy more of their games. A customer wouldn’t ordinarily expect to be signing up to be manipulated and have cash extracted from them.
Of course casinos use exactly the same tactics to keep customers hooked, as do tv serials that perpetually end in cliffhangers. Banks do it too – I’ve nearly paid off a personal loan I have (well ahead of schedule) and I’m getting all sorts of prompts to redraw it and grow the outstanding balance. When I was in university earning $270 a fortnight, I had a $5,000 credit card with a major bank and received repeat invitations via email, mail, and in-branch to upgrade the limit to $10,000.
The point is that all of these situations involve consenting adults who know what they’re in for (although the bank example is far more dangerous to the vulnerable end-user that gets sucked in). To my mind, a reasonable person would not think that were the case with video games.
In between Australian banks and seeing all sorts of shenanigans in stock markets, you would think that I would know better. Still, I found the idea of Blizzard engaging with its players in such a way to be..well, I’m not even sure I can find the right words. Devious. And fascinating. But mostly disturbingly devious.
It has been a busy afternoon for the 10foot investor. Here are links to my other articles about my first whisper stock, and the tyranny of quarterly reporting.
I have no financial interest in Activision Blizzard.