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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?

----------------------------------------------------
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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