Monday, September 27, 2010

The Deflated ISK

The ISK cost of PLEX is going up.

As most readers of Fiddler's Edge know, a player may purchase PLEX (30 day Pilot License EXtensions) with real world currency. A PLEX  can then be sold in-game by other players for EVE Interstellar Credits (ISK) and used by the buyer to pay for EVE subscription time.

In addition to allowing those players without thick real money wallets to pay for their subscriptions with in-game currency, the buying and selling of PLEX puts a ceiling on the real money value of ISK.

Previously, the ISK/PLEX trade had been fairly steady - running around 300 million ISK per PLEX. In fact as of my last check a month or two ago, a PLEX could be had for around 280 mil in and around the major trade hubs.

As of this weekend, that  price had ticked up to consistently above 350 million.

From an economics standpoint, this means something has gone agley in the world of supply and demand. Either the amount of ISK chasing PLEX has increased, or the number of PLEX available for sale has decreased.

Now, looking tracking backwards along the price history, there's one event that could explain the current (and apparently ongoing) price increase. And that's a change in PLEX mechanics.

Originally, PLEX could only be redeemed in NPC stations. Further, PLEX were effectively nailed to the floor in whatever station they were redeemed. On July 13, CCP put into place a change in PLEX mechanics that allows PLEX to be redeemed in any station, and once redeemed, they can be loaded onto a ship and transported like any other in-game item.

This means that nullsec residents no longer need to travel to empire in order to buy PLEX. PLEX can be redeemed in nullsec, or purchased in empire and flown down to nullsec for use or sale like any other commodity. As 300 million or so isk pile up easier in nullsec than empire, and most nullsec players willing to  pay a premium on key items in order to avoid trips to empire, nullsec is an attractive market for the PLEX trade.

With a sizable portion of the PLEX available for sale moving from empire to nullsec (and therefore largely taken out of the open market) empire buyers must now compete for a substantially smaller pool of PLEX, driving the price upwards. 

"But Mord," you ask, "With the price of PLEX on the rise, won't people who purchase them out of game for real money buy more of them to take advantage of the higher ISK return on their investment? Won't that increase the number of PLEX available and compensate for the nullsec shift of the current market?"

I'm glad you asked.

Normally, you might be right.  However, the initial purchase of a PLEX to sell in-game requires a real dollar investment. As ISK are of no use outside of EVE, and if we assume a purchaser's ISK needs are taken care of at their present rate of consumption, the number of PLEX injected in the game by the casual purchaser should be sticky, i.e. resistant to change. A person spending $36 per month for two PLEX that net 600 million ISK is unlikely to increase his PLEX purchases to net the additional 100 million ISK.

In fact, as is common in deflationary markets, the opposite is true. Said person will often hold off making the purchase - waiting for the price to rise further in order to optimize the return on his $36 investment - as a result driving down the value of the ISK relative to real world money even further. Which, of course, causes the person to hold off spending dollars for PLEX even longer. And so on.

Meanwhile, players who are unwilling or unable to pay for their EVE subscriptions for real dollars are price inelastic - if they wish to play EVE they must buy PLEX regardless of how high the ISK price goes.

Now, this would seem to be a bonanza for sellers of PLEX.

However, nobody wants to spend all their time in EVE grinding ISK to pay for play time, only to have no time (or decent ships) in which to play. If the price of PLEX continues to rise, a tipping point will be reached. Then the subscription base will suffer as the new PLEX underclass votes with its feet and finds another game.

As I often say, people don’t pay CCP every month for a bummer. They pay to have fun.  No one should lose sight of that.

Particularly CCP.


  1. I've been watching this trend and wondering what its cause might be. Great analysis, but I'd argue one point with you.

    While it's true that the rules changed and now a pilot can purchase a PLEX right in his or her own backyard, this was really not much of a barrier before as you can purchase a PLEX with any character on the account.

    So, while there may be a small percentage who didn't use this to their advantage and another small percentage who were making all of their alts useful in null-sec, it seems to me that this change alone shouldn't increase the price so drastically.

    Also, there are some in null-sec who are driving down the prices, such as the gentleman in Pure Blind who put his PLEX on auction for 300 million ISK with a 300 million buyout (I think somebody doesn't know what a buyout is, I give thanks to ignorance).

  2. Could the PLEX-for-neural-remap thing spotted on SiSi be responsible for any of this, or is the time frame wrong?

  3. Parity - It's not so much a function of the nullsec players' ability to access PLEX in empire as the inability of the empire players ability to access PLEX in nullsec. As PLEX migrate nullsecwards there's less available to empire-dwellers. Recall that a PLEX redeemed in a player-owned station are only available to members with access to that station.

    Minx - I don't think so. The remap doesn't fit the timeline of the price uptick - though it could be a contributing factor of late.

  4. Mord, you're mistaken. A PLEX available in a null-sec station is available to anybody who can enter the region that station is in. Both market and contract PLEXes can be bought from the safety of your ship in space, and redeemed immediately.

    In my case, I used a brand new alt, jumped into EC-P8R (which was camped by dozens of people with nothing better to do), bought the PLEX during my 30 seconds of cloaked time after the jump, lost my Ibis and pod to a horde of rabid "pvpers", woke in a new clone and finally redeemed the PLEX from the clone vat I woke up in.

    Also, maybe my logic is bad, but wouldn't your argument generally mean that PLEXes would be cheaper in null-sec? This doesn't appear to be the case (poorly configured contracts aside). I'll admit I am not a very knowledgeable marketeer in either the real world or EVE.

    So, like I said, I'll buy that this is part of the reason, but I don't think it's the whole thing.

  5. Point well taken viz station accessibility.

    However, the fact remains that, for many denizens of empire, a PLEX beyond a jump or two into nullsec might as well be a PLEX in a distant galaxy. Some of that number won't venture out of highsec for a PLEX, let alone nullsec.

    It's not that thay can't go to nullsec, it's that they have a strong aversion to going to nullsec. Rational or not, it's a big factor when it comes to shopping for PLEX.

    The jump-and-die purchase option works as long as you can get to a system with a known bargain PLEX before the locals kill you.

    Price is normally driven by supply and demand. I would expect the per-capita demand in nullsec to be as high or higher than in empire. Traditionally, supply is lower in nullsec due to restrictions in transport and travel.

    The reason I think this is the major driver of price uptick is that it fits from a causal standpoint as well as from a time-line standpoint.

    I can come up with a lot of convoluted reasons why it might be something else, but Occam's razor says to bet your money on the changes in PLEX mechanics.