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New Business:Real-life dollars buy in-game currency?

Copyright 2005 Steven Golden

Will people pay real dollars for virtual money to help their virtual characters buy in-game goods?

One gamer, who goes by the screen name Haylo, said he spent $10 to $20 real dollars a month on in-game platinum(all nonexistent, of course) to buy weapons and other goods in Dark Age of Camelot (DAOC), but would spend more if he could afford it.

Copyright 2005 Steven Golden

Will people pay real dollars for virtual money to help their virtual characters buy in-game goods?

One gamer, who goes by the screen name Haylo, said he spent $10 to $20 real dollars a month on in-game platinum(all nonexistent, of course) to buy weapons and other goods in Dark Age of Camelot (DAOC), but would spend more if he could afford it.

Most video games have some form of currency. In many ways, the in-game economy is similar to a real world economy - goods and services are traded to mutual advantage and are mediated in currency (platinum, gold, credit,etc.).

"With all the things you can buy in game," a gamer said, "it's hard not to want them, just like real-life stuff."

The average Massively Multiplayer Online Role Playing Game(MMORPG) player is 27-year-old -- a demographic drooled over by marketers. Plus, nearly half of all players have jobs, which often means they have more money than time and are the perfect consumers of virtual assets. On the Internet, many gamers now buy virtual money that only exist as data files stored in a server run by a game company with real-world dollars, and the buying and selling of virtual currencies may be off most people's radar, but it is truly big business.

An online broker, who goes by the screen name Rolala, was not a fan of online games until his 15-year-old son became interested in Final Fantasy XI. He then noticed that a large number of gils which are the currencies used in FFXI were for sale on eBay. "I started hearing about players leaving the game who were selling their assets at cheap prices," he said, "so I figured, buy low, sell high."

But Rolala found his moneymaking options in FFXI "very limited". He switched to World of Warcraft. There, he has leveraged his real-life experience into an online business. He converts his game profits into real money on sites like http://www.ebay.com and http://www.bankofwow.com (an exchange site for wow gold) ,etc. Earnings can be considerable. He said he was on track to earn about $120,000 in real money in his first year in this business.

Rolala's business is just one example of how increasingly popular online role-playing games have created a shadow economy in which the lines between the real world and the virtual world are getting blurred.

"World of Warcraft", the world's largest MMORPG, boasts more than 1 million paying users in North America.There are many sites like http://www.wowgoldwowgold.net and http://www.worldofwarcraft-gold.net ,etc., teaching gamers how to earn wow gold in game for free, however many players are still willing to buy gold and weapons to help their virtual characters get a higher virtual status more rapidly. Some virtual goods in World of Warcraft have been sold for thousands of dollars. It obviously creates a large real world market.

Edward Castronova, an economics professor at Indiana University who has written a book on the subject, calculated that if you took the real dollars spent within "EverQuest "as an index, its game world, called Norrath, would be the 77th richest nation on the planet, while annual player earnings surpass those of citizens of Bulgaria, India or China.

Go to http://www.gameusd.com , an exchange-rate calculator for the virtual worlds, and do a search for the latest rates of virtual currencies against the U.S. dollar, and let your jaw drop open. The rates of some virtual world currencies are even better than that of the Iraqi Dinar! For instance, here is the recent exchange rate of several popular virtual currencies: Everquest Plat ($0.54/1K), EQ2 Gold ($0.17/gold), WOW Gold ($0.098/gold), SWG Credit ($4.40/1M), Lineage 2 adena ($2.80/1M), Guild Wars Gold ($0.12/1K), FFXI Gil ($17.89/1M), etc.

Right now, this business is one of the most hotly debated issues on the internet. Many game companies such as Blizzard who run World of Warcraft discourage profit from in-game properties, though none have found a way to stop it.

Sony Online Entertainment, on the other hand, encourages the practice (albeit within the confines of their own "Station Exchange", their own forum for the sale of in-game properties). It recently announced the first month's figures from "Station Exchange". According to SOE, over 45,000 characters from "EverQuest 2" have been active on the exchange and have spent over $180,000 USD in one month, half of which have been spent on in-game gold and platinum.

Despite of different attitudes towards virtual currency trade, the number of people who are getting into such business is rising, and the size of market has been expanding very rapidly.The market also creates a competitive environment. We could refer to sites like http://www.gameshoplist.com , a world of warcraft gold price comparison site, to see the fierce price competition between different exchange sites.

For some ordinary gamers, however, such a capitalist approach spoils the experience. Nick Yee, a psychology researcher from Stanford University, believes many players dislike virtual currency traders because, by using real wealth to buy virtual power, "they're breaking the fantasy-reality bubble, getting an advantage in a way that other players can't".

But such attitudes are called into question by size estimates for the virtual asset trading market, which is seen having a value of $200 million to nearly $900 million in 2005.

This is a totally new market. Are you prepared for it?

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Steven Golden has conducted research into Virtual Game Economy for several years.You can read his recent articles at: http://groups.msn.com/virtualeconomy

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