Greedy Goblin

Wednesday, October 29, 2014

About PLEX prices

PLEX-prices - as usual - keep rising, the current price is a new record.
The interesting thing is the constantly decreasing volume. While there are always conspiracy theories about secret cabals controlling the PLEX price, the reason is less arcane. It's also proven that there is no significant PLEX hoarding: CCP is legally bound to list them as "deferred income" (coupons) on its balance sheet, so we know for sure that the amount of unused PLEX isn't growing.

You could see that average concurrent logins are weakly correlated to nullsec activities but strongly to highsec activities. This means that if less players log in, they are missing from highsec, not nullsec. Highsec is typical place for casual and new players while nullsec is usually filled with hardcore.

Being good in the game means that the price of the PLEX, even at its peak is pocket change to you. Someone who operate suicide dreads can surely afford to play for free. So the PLEX consumers are here to stay, creating a rigid demand.

The PLEX producers are the bad, new and casual players whose number is decreasing. Their main income source is PLEX creation. It's somewhat natural: unless you heavily multibox or trade, your EVE income is $1-2/hour with the current PLEX prices. So for these players creating PLEX is an obvious choice. This does not contradict my earlier claims that they are bad players: they should trade or multibox. And this statement also doesn't contradict with my even earlier statement that "multibox or fail" is a horrible design and will kill EVE.

So as the amount of casual players drop, the amount of PLEX production decreases, and decreased supply meeting with rigid demand means runaway prices. The prices will keep rising until:
  • They become unaffordable for the lighter farmers, like solo-L4 missioners and random ratters. As they quit or accept that they have to pay, they stop being PLEX consumers.
  • CCP focuses on casual and newbie content instead of iterating on hardcore content and attract more casuals and newbies. As they produce PLEX-es, the supply increases.

PS: I've found a wonderful feature: you can block whole alliances, so you can be safe from trolling and convobombing of hostiles.

PS2: Look! Another wonderful battle report!

25 comments:

Von Keigai said...

I think the dynamic you describe here is real. But it is not just highsec players that are PLEX whales. Indeed I expect they are disproportionately not. Rather I expect it is players who lose a lot of ships; PVPers with a taste for T2s in lowsec, and perhaps out in null too. They may live in highsec, but they spend in lowsec or nullsec.

Another aspect of the rise in PLEX prices is PLEX hoarding as a store of value. That is, PLEX is money. Unfortunately, there are no stats I am aware of on how many PLEX are used per month. But I expect that the number saved is considerable.

Anonymous said...

Nothing there has been "proven", not even that CCP have a legal obligation to separate out plex. All of that is guesswork. And why would a casual player be quitting more now, when his dollar is worth more isk, rather than before?

And no, if all players were plex consumers, nobody could consume plex as nobody would sell it. The game needs to have a healthy balance between people with a lot of isk and people with a lot of money. For myself, I do a a few minutes of real life work and I earn a plex, so there's precisely zero point in me working in game for what would be a terrible salary. It doesn't make me bad at EVE, it makes me good at life. Remember, we're not all in a country where the suggestion of a $3/month internet tax causes mass protests.

Why do Moa keep tagging along to all the BL fights by the way? Are they no longer able to fight battles themselves?

Rasmus Forlorn said...

Seconding Von Keigai: Any adult casual player in the developed world (read: no acute money pain) with a taste for PvP and a job is likely to create cash from PLEX, be it for T2 hulls, a new set of (Pirate) implants or just to keep the frigs and cruisers rolling in to explode them.

It's just too tempting to put down 17$ and have close to 1 billion in your wallet - which otherwise would take a considerable amount of preparation (be it skill training, raising multiple alts, figuring out how to multibox, ...).

With a job, a family and two young kids, I just cannot bother myself to do that. So I remain a bad casual player who likes to PvP when I have the odd hour or two to fly around spacepixels.

Gevlon said...

@Anonymous: why bothering scoring a goal in baseball when you can buy a dozen baseball medals with real money?

Also, if you earn $15 in 5 minutes, you make $350K/year after tax. You are indeed a winner in life.

Or a big fat liar.

@Rasmus: indeed. It's your right to be a bad casual who buys his victories with real money.

daniel said...

he doesn't "buy[] his victories with real money" but the possibility to be victorious.
isk isn't necessarily a meassure of success.

Anonymous said...

I always love those comparisons between $/hours irl and isks/hours ingame, completely neglecting the "recreation" part.

Some people are making quite a lot of money irl, but are still doing lvl4 or even mining.

Anonymous said...

CCP focuses on casual and newbie content instead of iterating on hardcore content and attract more casuals and newbies. As they produce PLEX-es, the supply increases.

CCP since years is focusing on newbie stuff. When was the last time something was added that only veterans can use? that requires you a fair amount of training time till you get there? Years.

I'm so sick of everyone talking about new player experience, and about every new item/ship being introduced that you can either use it with existing skills, or train within 1 week.


As for the plex, you mention deferred income and that the balance shows there is no hoarding. However, you should consider that the moment a plex-code is converted to a plex, the sale is been done,
and not the moment the plex itself is converted into gametime.

maxim said...

@Gevlon
Why bother to collect every single card in Hearthstone manually if you can just buy them all and play with full decks?

Gevlon said...

@daniel: he buys his power to be victorious. Yes, theoretically he can still be beaten by a T1 cruiser, piloted by someone really good, but it's unlikely. See also: http://greedygoblin.blogspot.hu/2012/02/microtransactions-pay-to-cheat.html

@Anon: you mix new players with new alts. Sure, the changes allow a newly created alt to be more useful in the fleet. But did CCP did anything to make a new player care to participate? Any goal, reason or guidance?

And no. The sale is done when game time (or multi-training or Aur) is bought, since using a PLEX is directly competing with other forms of game time purchases (if I use a PLEX, my credit card will be billed 30 days later)

@Maxim: http://greedygoblin.blogspot.hu/2014/01/free-to-stone-heart.html

Anonymous said...

"why bothering scoring a goal in baseball when you can buy a dozen baseball medals with real money?"
That's a really bad analogy, since scoring goals in baseball is the metric by which success at playing baseball is measured, and it's the aim of the game. In EVE, owning plex or isk is not a goal, it's simply a means to an end. Gathering plex is less like scoring a goal in baseball and more like making your own uniform from your old clothes. Sure, you could do it, but if you make enough cash you can just buy a uniform and spend more time actually playing.

I don't play EVE so I can sit there all day trying to make my isk counter go up. I like to fly and shoot internet spaceships, for which I buy a couple of plex a month for less than I spend in a day on coffee. I'd be an idiot to pass up doing that so that I could spend all day collecting $2/hour doing something I don't like.

"Also, if you earn $15 in 5 minutes, you make $350K/year after tax. You are indeed a winner in life."
Thank you, but it's more like 8 minutes.

"Or a big fat liar."
Because it can't possibly be that some people are better off than others? I'm fortunate to have a well paid job, but I'm certainly not the only one.

Gevlon said...

Of course there are successful people who earn that money. But such people don't "like to fly and shoot internet spaceships". Or comment about their wealth as anonymous.

Anonymous said...

I don't think they have to list the hoarded plex under deferred income. They sell you an ingame item. All ingame items, as stated in their EULA, still belong to them and can be taken away from you at any time. So they don't really owe you gametime.

Yes they give you gametime for it when you use the plex but they don't owe that service to you and because of that the hoarded plex are no financial liability for them. At any point of their choosing they could delete all plex and be done with it. (obviously they would lose their customers because of it but they would not lose real money for not granting the service people paid for)

Gevlon said...

Bad argument: they can also ban your account, despite you pre-paid it for a year without refund. PLEX is a coupon that you can use for game time.

Rasmus Forlorn said...

Gevlon: you would be surprised what successful people who earn >100k USD a year do with their time.

Being one of them, I can say that flying and shooting internet spaceships is sure one thing on my list. As is killing aliens in X-COM Ironman style. Or attempting vanilla Diablo 1 Ironman runs.

Regarding buying victory: not that easy. My toon has about 12m SP and mostly flies T1 (yes, I am a baby to EVE PvP). Adding a set of Snakes or Slaves has levelled the field a bit, but still it's an uphill battle against the folks with PvP skills ALL V (and Snakes or Slaves) sitting in the same type of hull I sit in.

Sure - I kill the 5m SP pilot in the same hull but without implants hands down. But that's more often than not about making it a battle on my terms or surprising the enemy (like putting a neut Vexor against a non-injected gank Moa).

If he is able to bring in 2 friends though and I am not, there goes any and all advantage I had over him (his ship might still go boom, but so will my ship).

For me, converting PLEX to ISK really is just a payoff to reduce the time that would be needed to grind/farm/scam the ISK I blow up each month.

It's not pay-for-victory but rather pay-for-service, where I give a PLEX to someone who likes to grind/farm/scam more than I do and CCP gets additional $$$ as a side benefit. Everybody happy - at least in my book.

Anonymous said...

Wow, you couldn't be more wrong about the deferred income. Per GAAP the sale of a virtual good (such as PLEX) is considered complete upon receipt of cash, not upon redemption by the purchaser. Listing those as deferred income would be at least frowned upon, and at worst outright accounting fraud.

Gevlon said...

@Rasmus: doing X-com Ironman is something I'd expect from someone of this salary. But buying EVE lolPvP victories?! Where is a challenge and accomplishment in that? Hint: if one farmed for lolPvP victories or just be very skilled in lolPvP, I wouldn't think of him higher.

Also, ANY kind of explanation of "I'm not buying wins, I'm just buying wins" is lame. If you pay money and your chance to win increases, you are buying wins, period. If you think that skillpoints are unfair advantage, just don't play EVE.

@Anonymous: PLEX isn't a virtual good any more than my bank account is virtual (stored on a bank server). PLEX allows you to use a real world service: playing EVE Online for a month, just like other forms of subscription.

Or you claim that if this year every player (300K) would buy 12 PLEX-es, CCP would have $54M pure profit, while in 2015 when these PLEX-es are used they are in massive loss due to zero income?

Jared said...

"PLEX isn't a virtual good any more than my bank account is virtual (stored on a bank server). PLEX allows you to use a real world service: playing EVE Online for a month, just like other forms of subscription."
Uhh, yes it is. A bank deals in currency. On the day that a PLEX is legally classified as currency, then CCP holding PLEX will be on the same level as a bank holding your money, along with all the legal requirements that come with such a responsibility.

A PLEX is a virtual product in a service, nothing more. This is why CCP can empty close your account with hundreds of PLEX on it, without reason if they want to, since it's not something you own. You don't pay income tax on the PLEX you grind in game (which you would if it was currency) and they do not count as held assets against your estate.

Anon is right, that the income from PLEX would be at the point of sale, not at some arbitrary point in time, potentially years later, when a plex is finally used in game.

Jared said...

"Or you claim that if this year every player (300K) would buy 12 PLEX-es, CCP would have $54M pure profit, while in 2015 when these PLEX-es are used they are in massive loss due to zero income?"
Oh, and yes, this would be the case. Luckily this doesn't happen, otherwise they'd need to revisit their business plan. Deferred income only covers where CCP would have a liability to pay back the funds if there was a change in circumstance. Fanfest tickets paid with currency for example would be deferred income, as they would be legally bound to refund them if they had to cancel the event. PLEX would not be refunded, even if CCP closed your account preventing you from being able to use them.

Gevlon said...

@Jared: if I buy a year subscription with credit card and they ban my account the next day for racist slurs, will they have to refund the money? If not, then how is losing my PLEX different.

PLEX is a textbook case of a coupon: you pay money, get a piece of useless junk, but the seller promises that they will accept this junk for later service. The fact that they might not legally bound to and could legally "scam" you out isn't making any difference.

Jared said...

@Gevlon
"if I buy a year subscription with credit card and they ban my account the next day for racist slurs, will they have to refund the money? If not, then how is losing my PLEX different."
No, because you breached the contract, meaning you forfeit your rights to a refund on your subscription. If they closed your account for no reason however, they would be liable for your unused service fees. With PLEX however it's an in game item. If you haven't used your PLEX and they close your account just because they feel like it, you cannot claim that PLEX back as it's not a legally recognised service contract (which subscriptions are). This is even more apparent if you consider that you may have sold the PLEX and instead hold the equivalent in isk or assets. If you've paid your subscription with PLEX, again, they would not be liable if they closed your account, as you didn't pay cash for your service. If you mixed up your future subs with cash and PLEX, they would be liable for the cash part only.

"The fact that they might not legally bound to and could legally "scam" you out isn't making any difference."
Of course that makes a difference. This is exactly what makes it different. The fact that you pay for an in game item, you received that item and at that point the transaction is ended and the income is recorded. Whether or not you choose to use that to extend your account now, sell it on or hold onto it for 50 years is completely irrelevant.

Gevlon said...

@Jared: you can reverse-redeem PLEX to your account management page and make it disappear from the game. In this moment it would magically turn into real money again? Because I sure can buy account services with it, just like with real money.

Anonymous said...

CPA here. Firstly, CCP uses IFRS, not GAAP, though the differences are minor.

As of June 2014, CCP reports a deferred income of 6.7 million, of which 2.3 million are classified as "In-game purchases not yet consumed". That is almost certainly PLEX. (See note 16 here

PLEX is in no way a legal liability. However, financial liabilities are not the same as legal liabilities. A financial liability is any obligation from past events for which a future economic outflow is probable. The obligation has no need to be a legal one. (For example, my company is currently carrying a sizeable liability for expected back pay for a union contract that is being negotiated. As nothing is signed, there is no legal obligation, and if my company were to dissolve today, that back pay would never be paid, despite us still being solvent.)

I'm not completely versed on the details of CCP's accounting, however it would probably be acceptable to recognize PLEX as revenue when cash received, or as deferred revenue. (Though it's probably revenue from a tax point of view, but I have no idea how Iceland's tax laws work. Financial and Tax revenue are almost always different though, so this isn't really a point either way).

Nonetheless, if I were working in CCP's accounting department I would be strongly pushing to record it as deferred, on the principal of Substance over Form, PLEX is a substitute for a subscription, and recording it as revenue before the subscription is consumed does not accurately reflect the financial reality (essentially Gevlon's argument that if everyone bought PLEX for 2 years right now, it wouldn't be financially accurate to say that CCP has 0 revenue next year).

Jared said...

"you can reverse-redeem PLEX to your account management page and make it disappear from the game. In this moment it would magically turn into real money again? Because I sure can buy account services with it, just like with real money."
Whether or not it is in or out of the redemption system is irrelevant. They still have no liability to refund you that item. Just because they sell stuff for in game cash OR out of game cash, does not make plex equal to money. If I default on a utilities bill and they send debt collectors to take my assets, they won't take the plex and call it even.

Think about it. If plex were only income at the point of consumption, there would be nothing to stop CCP confiscating plex then using it to buy services on a dummy account and generating income at whichever point they wished, which I very much doubt would be legal.

Anonymous said...

> Think about it. If plex were only income at the point of consumption, there would be nothing to stop CCP confiscating plex then using it to buy services on a dummy account and generating income at whichever point they wished, which I very much doubt would be legal.

I'm not sure what you think would be illegal about this.

I am in no way qualified to talk on the legality of actually confiscating PLEX from players, however I can assure you there is a) Nothing wrong with the second part and further b) No reason to actually use a confiscated PLEX.

Firstly, it's not generating income, it's recognizing income already generated. If PLEX is destroyed or confiscated, both IFRS and tax law (though the latter doesn't seem to apply, see below) require that any deferred revenue arising from it be recognized during that period, as it no longer represents a liability. There is no need to make a dummy account to consume the PLEX.

Secondly, I'm not overly familiar with Icelandic tax law, but there does not seem to be any provisions to defer taxes, so PLEX sales are likely taxable during the period in which payment is received. In any case, financial reporting is not tax reporting, so any tax implications are largely separate (though, eg, in the US to defer taxation on revenue you must report it as deferred. The converse is not true, you may always opt to pay taxes on deferred revenue immediately)

Thirdly, the purpose of financial reporting is to provide investors with an accurate picture of the company's economic circumstance. While similar, this is not the same as describing legal or tax liabilities, and so there is little to do with legality involved. It would be illegal to mislead investors by reporting revenue they never actually received, but reporting revenue immediately or when the corresponding service is rendered is not a legal issue.

CCP's main revenue is through subscription sales (33 million of the 36 million total revenue YTD). From an real world economic point of view, PLEX is a subscription gift card (despite its legal form being somewhat different), and should be (and seems to be) reported as such.

Anonymous said...

@gevlon a plex is not a coupon. A plex code is a coupon, which is fulfilled with you getting the in-game item that it is worth - which happens to be the plex.