Anyone who's read my (now ancient) article on revitalizing the MMO genre knows that I'm a fan of the Diablo series.  Though behind the times in some ways even when it launched, it offered a streamlined MMO-style experience that didn't suffer from many of the issues that bogged down Everquest-style MMOs.  Like the first entry in the series, its woes were technical, the result of hacking and abuse from players, rather than significant flaws in its game design.

Diablo 3, though more technically advanced in many ways than its predecessor, makes one questionable design decision that inevitably led to more bad design: using the real-money auction house (RMAH) as a post-purchase revenue stream.  

And just as the old lady kept swallowing larger and larger animals to deal with the fly she initially ate, the RMAH forced Diablo 3 designers to implement game design that is giving its players a severe case of indigestion.

In order for the RMAH to be a viable, substantial source of revenue, the players had to have a need to use it. 

The problem was that Diablo 2's game balance didn't provide a sufficient level of compulsion in that regard.  Sure, there would be some demand from players who wanted ultra-rare items like D2's Zod rune and Windforce bow.  However, it was not necessary for players to acquire these rare items in order to conquer the top enemies at the highest difficulty levels in the game.  To use MMO lingo, there was no "gear check" that put a soft but unyielding barrier in front of insufficiently equipped players. 

Diablo 3 takes a different approach, forcing players to upgrade gear substantially for the Inferno difficulty mode with radically increased damage from enemies and "enrage timers" that basically kill off the player if certain enemies essential for acquisition of good loot aren't defeated quickly enough.  As a result, there is a "grind" for upgrades (or for the in-game currency of gold to buy the upgrades on a gold-based equivalent of the RMAH) that begins on Inferno difficulty and makes the RMAH more tempting.

This spider to the RMAH's fly does not make the game more enjoyable, is inconsistent with Diablo 2's approach, brings the game's well-paced progression (up to that point) to a screeching halt, and forces the old lady to swallow a larger animal to compensate: instant, nearly consequence-free re-specialization of character abilities.

Because of the gear upgrade requirements and the associated time/money investment needed to make the upgrades, it was necessary to allow players to "respec" without a penalty, lest they sink hundreds of hours or however many dollars into the character, only to discover that its skill configuration did not hold up well towards the end of the game.

Unfortunately, this allowance has its own set of drawbacks.  For one, it takes away one of the most enjoyable facets of Diablo 2 for "Johnny": dreaming up new character skill configurations.   Many pieces of gear you found in Diablo 2 were worthless to the character that found them, but they lent themselves well to a specific skill or combination of skills.  The disappointment of having no immediate use for a good item was tempered by the puzzle of figuring out exactly what type of character the item would be useful for - and then the enjoyment of creating that character, reaching levels where the gear in question could finally be equipped, experiencing the satisfaction of seeing your idea come to fruition, and testing it against a wide variety of content and difficulty levels as you progress through the game.

It also speeds up exploration of possible configurations to such a degree that players discover optimal builds too quickly.  In Diablo 2, experimentation and subsequent spread of discoveries to other players took weeks or months, since each new configuration idea had to be tested with a brand new character with equipment specially gathered to support it.  In Diablo 3, that iteration is condensed into days or even hours, and the auction houses make the acquisition of specialized gear a simple matter.  Imbalances in skill configuration manifest and propagate rapidly, forcing the old lady to eat the "nerf bat" (a metaphorical tool used by developers to weaken player characters) much more frequently than in Diablo 2 to compensate.  And I'm sure you know how that has gone over with the player base.

In short, game balance predicated on a need for auction house use to progress has caused a series of design decisions that, while making sense in and of themselves, aren't good for the overall game.

Blizzard's solution? It looks like they are tamping down the need for the auction house by allowing players to get more and stronger items earlier in the game.  Will they be able to strike a balance between keeping players happy and keeping the demand for the RMAH intact? We'll see, but so far the story has been the game's rapid loss of active players. 

I can understand why Diablo 3 swallowed the fly; nevertheless: perhaps she'll die.