Origins

Let me start by saying this: I don’t care about gold selling in MMOs. I am well aware that the opinion of many of my colleagues is that gold selling ruins games; personally, I just don’t see it. In fact, I tend to think of it as leveling the playing field between college guys with lots of time on their hands, and those of us with jobs. But I digress. The point is that gold selling is, from my perspective, just a non-issue.

Thus this past week, when it was announced that Affinity Media (the parent company behind infamous gold-seller IGE) had acquired Wowhead, I didn’t have a very strong reaction. Sure, the sale was controversial. The issue among my fellow MMO journalists is whether Affinity is buying up big gaming sites, and using them to drive customers to their gold selling business. However, Affinity is claiming that it no longer has anything to do with gold selling, and is now simply an online media company servicing MMO gamers. There were a fair number of interviews with Affinity exec John Maffei, an announcement on Wowhead (of course), and some analysis of the whole situation. Most of that analysis didn’t seriously challenge Affinity’s claims that they were out of the whole gold selling business. Among the gaming press, there really wasn’t all that much outcry.

 

The Gaming Community’s Problem With All This

The same cannot be said of the MMO gamers themselves. Nearly every article on the subject is followed by comments that express displeasure about this deal.

The exact concern of the MMO gaming community is this: Affinity is just another alias for IGE. IGE has historically bought up prominent MMO fansites. IGE then used those fansites to push traffic to its gold selling/virtual goods selling business. They’ve learned to be subtle about this (no obvious ads), but the push remains. By using layers of companies within companies and vague, ambivalent relationships between various entities with various names, the relationship of IGE to these sites is concealed. On top of all that, the fansites, which were popular and full of solid content before the purchase, rather rapidly go downhill once IGE takes over. Remember how good Thottbot used to be?

In fact, this site documents that concern, along with past IGE’s behavior, very clearly. If you want a nice, detailed summary of who all the players are, and why this is a big deal to MMO gamers, take a gander at that article.

 

My Problem With All This

My exact concern is this: none of this is exactly comedy gold, folks. Hell, at first I found all this to be barely entertaining. It’s business, and it’s boring. WanderingGoblin.com is a site that focuses on the lighter, more humorous side of MMO games ? and there’s not all that much humor in this story. As such, we barely covered it on the site, and our coverage was was a small news blurb, done in our typically sarcastic, over-the-top way.

That was soon to change. Two events occurred that, quite suddenly, made me interested in this story.

The first was that I read a couple of interviews with John Maffei, president of the ZAM Network at Affinity Media. Initially, they seemed to be rather dull interviews with a suit from a gaming media conglomerate. But Maffei has this way of answering questions that raises the hair on the back of your neck. They key is his ?make many words? answering style. He doesn’t say this, but he doesn’t say exactly that, either. Hell, he’s the most vague company president in recent memory. He answers with a paragraph instead of a word. He seems to lack a lot of knowledge about his own company. Despite all the vagueness, there were moments in a couple of separate interviews in which he appears to be saying the opposite things to the same questions. The guy just makes you feel like he’s hiding something.

The second was that I received a tip from an anonymous source: a 24-page ?Restated Certificate of Incorporation of Affinity Media, Inc.? The document was filed with the State of Delaware on May 29, 2007, and contains some pretty interesting facts. It appeared that the incorporation document didn’t completely jibe with Maffei’s recent statements.

There were oh-so-many suspicious things going on.

Quite suddenly, I found myself in an interesting and ironic position. I write for an MMO comedy site; we do parody. I don’t care about gold selling; and this is basically a business story. This whole story really isn’t WanderingGoblin.com’s kind of thing. I mean, how the heck do you make fun of this mess? Nevertheless, this story had a certain intriguing quality to it. So I dug a little more, and then dug some more after that. Hell, I felt like I was digging to China. (Want to know who I met there? I’ll bet you can guess…) In the end, I stumbled upon a few facts and tidbits that you, the MMO gamer, may find interesting.

 

On John Maffei

This story really all starts with John Maffei, a prominent executive at Affinity Media, Inc. John’s served as the face of Affinity’s acquisition of Wowhead. He’s the company’s spokesperson. And yet even who he is, and what exactly he does, seems suspiciously confusing.

In an April posting to his forums, Allakhazam said:

Yes John Maffei is my boss at Affinity Media. It is his hiring last fall that has driven things in the right direction here and gotten us the resources we have needed to start expanding again.

In this June 7, 2007 GamaSutra Article, John is described this way:

John Maffei was a ten year veteran of Microsoft, and is currently the senior vice president of business development at Affinity Media.

But in this WoWInsider article, dated June 28, 2007, John’s title is somewhat different:

WoW Insider got a chance to sit down for an exclusive chat with both John Maffei, president of the ZAM content network at Affinity Media, and Tim Sullivan, CEO of Wowhead, to talk about Affinity’s past, the sale of Wowhead, and what’s coming next.

Wowhead’s press release on their own acquisition says simply, ?John Maffei is the president of the ZAM Network.?

Well, which is it? Is he a senior vice president of business development at Affinity, or is he president of ZAM? Are the interviewers confused, or does John not know what his real job title is? It turns out this was just the tip of the iceberg. This kind of fuzzy logic ? say one thing one day, and another on another day ? just pervaded everything I discovered about Affinity. It was absolutely mind numbing.

 

On Affinity Media, Inc.

In this article, John Maffei described Affinity Media this way:

Affinity Media is basically a holding company for different gaming assets. Clearly, there were three parts to the company. There was an IGE division, which everyone knows about. And while we?re not releasing the details, it?s common knowledge now that IGE is no longer a part of Affinity Media, that we?re no longer in that business.

We?ve got a very strong auction presence in Korea. In Korea, it?s different, with gaming being part of the culture, people game all the time, and we own one of the larger c-to-c platforms in Korea. Very popular, and very different from some of the things that go on in the United States, in terms of the attitudes of gamers.

And we have the ZAM content network, both in the US and China. The three brands that people know the best are Thottbot, which is obviously our database for World of Warcraft, Allakhazam, also a database, but with forums and a more qualitative experience, covering a full range of games, and MMO Interface.

That?s our U.S. footprint. We also have a China footprint. We have a deal with Shanghai Media Group where we operate something called GamesTV which equates very similarly to G4. We show replays of the best gamers in the world playing each other. There are interviews. It?s a real 24/7 television station. It?s a joint partnership.

We also run ZAM.cn, which all in Chinese, but it?s similar to the things you?d see in the US, where you have game fan affiliated sites. We take a lot of that video from television and repurpose it for the web, you can go an watch those on the web.

If you got confused by John’s analysis of his own company, so did we. It seems that Affinity had three branches: IGE was one. Then there’s the ?U.S. Footprint? he talks about, which appears to be the ZAM Network. Then there’s the ?strong presence in Korea?. This includes consumer-to-consumer trading of in-game items via an eBay-like auction house. Then there’s Affinity’s ?China footprint.?

Let’s see, three branches: 1 – IGE. 2 – U.S. Footprint (including ZAM). 3 ? Presence in Korea. 4 – China footprint.

Hmmm. I’m no math major, but…aw, let’s give the guy a break. Maybe he’s not a math major either. In this WowInsider interview, John is asked if Affinity’s Korean branch sells gold. In his characteristic manner, John answers:

Yeah, I think you can buy– the Korean market is obviously a significantly different market than in the US. It’s very much more active than the US. The gamers are extraordinarily passionate and play a lot. But my understanding is, and I don’t operate that business– I don’t speak Korean, so it’s not easy for me to go to the website and check it out. But obviously there’s both object exchange and currency exchange.

So a senior executive, giving interviews about the nature and structure of his company and its recent acquisitions, answers a question by basically stammering out, ?Um, I think maybe, but I don’t operate that, and I don’t speak Korean, but I think so,?? I simply had a hard time swallowing that. And although John’s exact job title may be in flux, John is clearly one of the guys running the company. He’s either a senior V.P. at Affinity, or the President of one of its, ahem, ?three? branches. And yet he isn’t sure what one of the major components of his company does?

By the way, I checked. I don’t read Korean either (and the site is curiously hard to get to) but it seemed pretty obvious that many of the ads right on the front page of Itemmania.co.kr were selling in-game currency.

 

On The Recent Sale of IGE

In one interview, to which we referred above, John clearly stated:

And while we?re not releasing the details, it?s common knowledge now that IGE is no longer a part of Affinity Media, that we?re no longer in that business.

Later in that same interview, without offering any details, John elaborated on the sale of IGE and how it positively impacted the rest of Affinity:

Oh, just everyone has been so interested in the IGE thing, because IGE is a controversial business. Very controversial, and we?d always kept this incredible differences between the businesses.

If you go to any of our sites, you?ll never see a gold-selling ad. The guys who founded our business, guys like Jeff Moyer and Bill Dyess, they?ve got absolutely nothing to do with that other side of the business.

So for us, it was a positive, in that we thought, for the people who cared, that?s no longer an issue. Since it?s a private company, a private transaction, we?re not releasing actual news on terms. But we?re no longer in that business.

Allakhazam (whose site is owned by Affinity) threw out several quotes about the sale of IGE on his site. Here’s one from April 27, 2007:

There are rumors going around about the sale of IGE, so I figured I ought to address them. It is my understanding that last week Affinity Media sold IGE. What does this mean for Allakhazam? Well basically nothing, since as I’ve said all along we never had any connection to IGE other than mutual ownership. However, for those of you who were bothered by what little connection there was between our companies, you can now rest easy. We are no longer even owned by the same company.

Allakhazam also says this about it (in the same thread) on April 30, 2007:

The sale of IGE means just that. A month ago, IGE was owned by Affinity Media who also owns us. Now, IGE is owned by Jon Yantis, who, I believe, was one of the original founders of IGE but had sold off his share years ago. Beyond the fact that Affinity sold IGE to Yantis, I have no knowledge of the terms of the sale. Personally, I don’t care. I like that we are no longer part of the same company just because that seems to make many of our members happy, and it may drive off the haters who post about us in other forums, but other than that it has no actual impact upon the running of our network. To me, all of this IGE stuff, including this part, is much ado about nothing.

Thus, as you can see, it appears that on many levels throughout the Affinity Media empire, the sale of IGE is being discussed. And that means that Affinity Media’s ownership of sites like Thottbot, Allakhazam, Ogaming and, most recently, Wowhead, won’t compromise those sites. And this is because, as everyone in the company keeps assuring us, Affinity Media is no longer in the gold selling business.

 

Or Are They?

In an interview that took place on June 22, 2007, Affinity Media’s CEO Brock Pierce doesn’t so much as mention the sale of IGE. Since the interview took place at a major industry conference, one would think that this would be a major topic of discussion, but Pierce doesn’t utter a word about it. Nor does Pierce even hint that Affinity is no longer in the virtual goods business.

In fact, he rather strongly indicates the opposite. In a separate write up about the same interview, the reporter gives details about Pierce’s comments. In the interview, which took place at The Virtual Goods Summit, Pierce indicated…

Wait a minute…what the hell was Affinity Media’s CEO doing at the definitive virtual goods conference? Affinity Media sold IGE, right? They’re out of the whole gold-selling, virtual goods business, right? Interestingly, and presumably based on the information he gleaned from the summit, the reporter stated flatly:

Earlier this year, Affinity sold IGE, but it still has a hand deep in the market for virtual weapons, currencies and the like.

Normally, we’d be likely to pass over that statement as simply the reporter’s impression. Intriguingly, it it appears that Pierce himself is the source of that impression. In fact, Pierce himself doesn’t even seem very sure that Affinity is out of the gold selling business. Consider:

…Pierce told CNET News.com at the Virtual Goods Summit here, Affinity is finding it harder and harder to make the big profits it used to. And that’s because, he said, virtual assets are increasingly a commodity and, therefore, the margins on sales of WoW gold and other virtual goods are rapidly shrinking.

And in the same interview, Pierce goes on to gripe about how his Chinese competitors are creeping in on his profits:

In fact, he said, as Chinese competitors get more and more sophisticated, they are also willing to accept less and less profit margin. And that means, “they’re perfectly happy to accept $20,000 in profit on $2 million of revenue.”

So, while forgetting to mention the sale of IGE (the biggest part of his empire), Pierce instead laments the state of the virtual goods industry and lambastes his Chinese competitors. Pierce actually gave an interview at the premier summit on the trading of virtual goods, implying strongly that Affinity is very much involved in the virtual goods industry.

Well, you’ve almost got to admire that. After having your lackeys repeatedly deny that your company is involved in gold selling, giving an interview like that takes balls.

 

The Email

On June 26, 2007, Brock Pierce retired as CEO of Affinity Media. Razorwire managed to get a hold of the email, sent to all Affinity employees, announcing his retirement. In that fascinating email, Pierce states the following:

I have decided after a fantastic six years to step down as CEO of Affinity Media. This was not an easy decision for me, because this is an extraordinary company with unlimited potential:

” The ZAM Network
Under John Maffei and his team’s direction ZAM has the opportunity to be the biggest online game network in the world. I am confident that the team will turn it into a great economic success.

?”Consumer Auctions and Asset Exchange

Under Paul Kim and his team’s direction, I expect us to become serious players here in the U.S. The team has a mission to not only offer a great service but also to make game publishers into our trusted and valued partners. ?

“China Content

Under Rendey Xu and his team’s direction Zam China has become one of the biggest online game networks in China. Games TV our partnership with Shanghai Media Group has become a tremendous cable programming network. I anticipate under Rendey’s continued leadership that the best days of China content are ahead of us.

Under the leadership of Mr. J. H. Lee Itemmania has become the leading virtual asset exchange business in South Korea. With the closing of our transaction I look forward to even bigger success with J. H. and his team in the future. I am confident that Bryan Parker and the team will continue to put in place the financial tools, systems and controls that will enable us to effectively manage these global businesses.

 

Now an email can be faked. It’s possible that none of this is real. It’s possible that everything gamers have been told by Affinity’s execs is true, they are out of the gold selling / virtual goods business, and they’re devoted to bringing excellent content to gamers on their media websites. It’s possible that that someone is duping Razor, and this email is nothing but a sham.

 

But that is seeming increasingly unlikely. Just like everything else I was learning about Affinity, that email sure was suspicious.

The Smoking Gun?

I mentioned earlier receiving a document entitled ?Restated Certificate of Incorporation of Affinity Media, INC.? I also received a second document restating some of the basic data. (Be advised, the previous two links download the docs). They were filed in the state of Delaware on May 29, 2007. Let me tell you, this 24 page ditty isn’t exactly a page turner. It’s as dry as your Aunt Maggie’s pork chop dinner. It’s boring, it deals mostly with corporate rules and the issuance of stock and other whatnot. Dullsville.

That is, until you get to the middle of the document. On page 12, IGE’s stock issuances are addressed. It marks the beginning of the rather copious use of those three letters. On page 17, the document addresses an IGE loan agreement. On Page 20, IGE is simply defined as ?a Delaware limited liability company.?

Hmmm. IGE mentioned again and again in the Affinity Media document. That’s certainly curious.

Section 6(a)(iii), which begins on page 15, particularly held of my interest, in that the document begins to talk about Affinity Media’s subsidiaries, and the various interactions in which they have engaged. IGE’s relationship with Yantis Enterprises is mentioned, for example. This fascinating section continues on to page 16, where the financial relationships between IGE and various known Affinity subsidiaries is specifically laid out. Among the companies mentioned is ?Itemmania.com, Ltd.? (which is clearly mentioned in Pierce’s little bon voyage email) and companies like Allakhazam, along with several individuals.

In fact, section 6(a)(iii) mentions IGE no less than eight times.

The document details a number of the more substantial business deals in which Affinity has recently been engaged. In so doing, IGE is certainly featured prominently. What is most curious about the document is what it doesn’t say. It makes no mention of the supposed ?sale? of IGE. Not one word. If, in fact, IGE was sold in April as various company spokesmen have claimed, why is this not mentioned in a June corporate filing?

Even more telling: not a single indication of stock transferrs — divesting of IGE to someone else — is even hinted at. Those kinds of transactions are mentioned repeatedly in the document, but nothing seems to indicate that IGE was divested. Nothing. And it’s the exact kind of thing you’d expect to find if, in fact, IGE had been sold.

After reading the Affinity Media stock documents, I couldn’t help by feel that Affinity has been hiding quite a bit. In fact, I simply couldn’t help but form the opinion that they’ve been simply lying. They’re involved, via Itemmania, in gold-selling. It’s not just an auction house, as they claimed. It’s gold selling, and the company features prominently in Affinity’s legal filings. What’s worse, IGE is mentioned in virtually every business deal the document describes. They’re involved with Yantis Enterprises, presumably the same company that allegedly bought IGE a couple of months ago. I’m not claiming to be an expert, a stockbroker, or a corporate lawyer, but this document doesn’t make Affinity look good. It gives the impression that they’ve been flat-out deceiving everyone.

The Inside Man’s Take The Whole Affair

Ahmed Farooq is a former IGE employee. He engineered the purchases of several of the bigger fan sites that are now under the ZAM Network flag. He was also the owner of Ogaming, a site that was purchased by IGE. He indicated that IGE has historically used FUD (short for Fear, Uncertainty, and Doubt) as a disinformation tool when acquiring websites. Among the many interesting comments he made about this entire transaction, these were the most applicable:

…companies like IGE sell virtual currency and goods for real-world dollars. For all the (unwarranted) hype of Second Life, IGE et all are far bigger – they push hundreds of thousands of dollars worth of goods every day. A lot of players don?t like them – they believe virtual good sellers corrupt the ?pure? nature of the game.

So – with Thottbot/Allakhazam owned by IGE, they pretty much owned the WoW fansite market (and thus a huge audience to push their wares to). At least, if it wasn?t for Wowhead. A late-comer, the site was an instant hit, with its clean UI and fast loading speed (think of Thottbot as Altavista, and Wowhead as Google). You can see on Alexa how Wowhead has grown while the others have stagnated.

IGE has been ?supposedly? sold off by Affinity Media. They used FUD when they purchased OGaming. They used FUD when they purchased Allakhazam. Just some more FUD – rest assured IGE/Affinity Media are still very connected.

The FUD doesn?t end. Remember – I sold OGaming to IGE, while they claimed it was ?RPG Holdings? that purchased it. I?ve experienced it firsthand. I talked to another contact – it is a bit byzantine (how the site was ?sold?), but as it stands, IGE US LLC?s parent company is Affinity Media. Certain properties may have been sold, but not the company itself.

I leaked the sale before it was officially announced, so that shows I did have someone on the inside (my past with Thottbot etc just confirms it). All the same contacts are saying the same thing – Affinity is still very much involved with IGE.

These insights are certainly damning. Are they true? Or are they merely the angry outpourings of a disgruntled former employee?

One thing is certain: Farooq is certainly echoing the feelings of many in the community. Consider the comments by this poster in response to the sale of Wowhead:

ZAM is a corporate entity owned by RPG Holdings and that is/was subsequently the owner as well of IGE (at present the owners appear to be Affinity Media but these guys really really love their corporate shell games). Now apparently there are currently claims going on over at Alla (supposedly bolstered by a report on Gamasutra) that IGE has been sold to Yantis of EQ infamy.

Then again, Yantis was once part of IGE and there, to my knowledge, is a lot of murkiness about why he left, what his current status is etc etc. Remember that bit about corporate shell games..

In addition, that senior VP they talked to, was also defending gold selling practises, though he subsequently tries to turn it around and say he’s pro-consumer and not pro-gold selling. But, if it quacks like a duck, looks like a duck and smells like a duck, then it’s probably a duck.

If nothing else, the actions of IGE and its executives in the past have stoked the fires of suspicion in the present. Fans, like the one cited above, aren’t swallowing this wholesale. Quite frankly, Affinity isn’t doing much to assuage those suspicions.

 

Suspicions and Conclusions

The phrases ?plain dealings? and ?plain speech? come to mind as I write this. They refer to the simple truth of a matter.

And yet, as much as I hate to say it, everything I’ve read, researched, and discovered about Affinity Media’s deal with Wowhead is about as far away from plain dealings as you can get. It’s even conceivable that Affinity has used a pattern of disinformation to get the Wowhead execs to ink the deal.

But the misconduct seems to go quite a bit deeper. After all the research I’d done, Affinity’s recent claims ? they’ve sold IGE, they’re out of the gold-selling business, they’re simply a media company now ? should have been verifiable. They are not.

In fact, quite the opposite appears to be true. In the Affinity CEO’s final email, in the company’s recent announcements, according to the sources dug up by an old IGE employee whose experienced all this first hand, even in the interviews they themselves give (ones in which the senior executives of the company cannot seem to keep their story straight) Affinity appears to be vomiting up disinformation like a bunch of outrageously dissipate fraternity boys. The company is involved in gold-selling. They are involved in virtual goods transactions. Hell, their CEO had the juevos to give an interview at the Virtual Goods Summit, while his subordinates were claiming the company was out of the virtual goods business.

If anything, the Affinity stock filings of May 29, 2007 speak volumes about what Affinity is up to. And that, my friends, really appears to be the same old tricks.

If you are interested, you can dowload the Affinity stock document here (it’s a zip file). The secondary document can be viewed here.

I’ve been thorough in the extreme. I’ve quoted everyone involved directly. I’ve included every link. I’ve made the documents available for download. Feel free to read it all for yourself, verify everything, and form your own conclusions.

And, as always, I can be reached at www.WanderingGoblin.com.

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Copyright 2007 by WanderingGoblin.com. All rights reserved.