Virtual economies and wealth creation

i'm just going to ramble a bit about stuff that's been occupying my mind, with the general topic being the intersection between virtual and real economies. virtual economies are, basically, game economies, like the auction house on World of Warcraft (or, if your serious, EVE Online). virtual economies currently intersect with real economies through third-party auctions performed on eBay, Craigslist, and privately.

i really expect that to change in the near future; it's already started, in some cases. in-game items have undeniable real-world value--undeniable through virtue of the fact that it's pretty goddamn big business. the free-to-play game model, in which you can play for free but must pay money to get better items, access to more areas, etcetera, is predicated on this concept. as time goes on, more and more games are going to get into the RMT market because there is just too much damn money to be made there not to. the basic model i envision will be eBayesque: transacting real money for virtual items will be handled right there in the game, and the game itself will collect a fee based on the real-money value of the transaction.

but here's the hangup: how much, in real terms, is a virtual item worth? this, it seems to me, is at the core of just about every debate over the ramifications of RMT. people are willing to pay for game items, but game items can be produced for free--money for nothing, instant bubble. and they can be removed from the game for nothing, too; WoW is perfectly within its rights to transfer or destroy any item in your inventory, even if you paid someone real money for it.

which aspect i actually don't think will change. game makers have a lot on their plates: they have to create and maintain content that can be enjoyed by as wide a range of people as possible. adding real-world fiscal responsibility to the process of content creation (game-world fiscal concerns are considered already, and are fairly complex on their own) is a recipe for disaster. as soon as a game maker admits that any virtual item in their game has a real-world value, they open themselves up to all kinds of litigation and legal problems. so most games will only admit that transactions contain value--specifically, the real-world money being transacted. that still imbues virtual items with real-world value in a sense, but because that value is deliberately divorced from the game itself, the game company is free from all item-related problems except those that occur in the context of the auction house. and really, for those, they can just do what eBay does.

the value of virtual items is predicated on the demand for them.

so as long as nerds (not using that term in a pejorative manner, i am one) have disposable income, the value will be there. but the wealth is based solely on non-tangible, recreation based systems. the value created will only be there as long as those systems remain viable in the real world.

yeah. that's one reason that i don't think game companies will ever decide to try to give their in-game items any real-world value. if they ever suffer any sort of data loss, they'd suddenly owe any affected players the monetary value of their gear.

no, they wouldn't. as soon as you start playing those games (even ones such as eve and ultima online that encourage trade both on and off line) they make you sign a TOS that basically gives them carte blanche. if they were to start offering real world value, then i think the TOS agreements as they stand would be very vulnerable to lawsuits, but even so, it's not a player's world right now. the game companies own your virtual ass.

indeed. i only mention it because some argue that it should be otherwise.

i agree completely, and i think in the future, it will be otherwise.

you think? even with all the liability that game companies would be opened up to? or, i dunno, is there a way to mitigate that liability? i mean, the only way i can think of to get around it would be for the EULA to say something along the lines of "by playing our game, you agree it's totally cool if our fuckups and whims cost you massive financial damage." and i'm not sure how well that'd hold up in court anyway.

the fuck-ups that happen in MMORPG's are almost never server side. most people (especially the players) don't understand that MMORPG's (especially Warcraft) represent some of the most complicated privately owned computer systems on the planet, with multiple redundant back up systems. it's usually the players that fuck shit up.

sure, but it's not just fuckups. if game items are acknowledged as possessing real monetary value, then game changes that affect those items--like the change to dodge chance derived from Agi in the upcoming 3.2 patch--affect their monetary value. if 3.2 reduces a tank's overall dodge chance, that would represent a financial loss for him in that the value of his items has been lessened.

Both Second Live and Entropia Universe seem to run on the "play our game and do shit, make money" model and succeed.

-TM

SL puts fairly strong limits on the liability they can incur in relation to the game's currency--they state in fairly clear terms that Linden Dollars are their property, and that anything that happens to "your" Linden Dollars are your problem. specifically:

likewise, from the Entropia Universe EULA:

same deal: the virtual items your character possesses are not yours, and therefore their loss or alteration creates no liability on the part of the game company.