Storms on Cloud 9 #40:

Fortune Telling

by Scott Holliday
2005-04-22

We live in interesting times. I was already writing this article when I found out about EQ2's decision to start their own market for handling real to virtual exchanges between players. Yes, it's only going to be on certain servers, so as not to alienate players that want to avoid this environment. And, yes, it's been done before, but this is the first time one of the established names has gotten their toes wet. Much has already been written on this event elsewhere by bigger names than me, and it seems everyone has an opinion. I've read everything from prophecies of doom for all of online gaming, to cheers of adulation. I don't play EQ2, nor do I plan to start, so I'm mostly unaffected. Instead, I'm just curious about what this means for the future - if anything.

It has been obvious for some time that virtual property holds real world value to certain people. Living in our value-driven society, it was no real surprise when secondary markets and virtual exchange rates sprung up. If something has value to someone else, it is human nature to find a way to make a profit. It doesn't matter whether the exchange is an object, an idea, or something even more ephemeral. Real value is directly related to perceived value. One person's trash is another's treasure. An intriguing comment on Slashdot noted that, as gamers, we each invest more value in our online characters than is needed to save real human lives. I'm sure many of you have read the analysis that compares EQ's trade rate as similar to that of a first-world nation.

In recent history, there have been many different approaches to this issue. Just looking at the big names reveals a complete disagreement on the legitimacy of such trade. Early on, UO gave tacit approval to the use of Ebay to exchange items. Many later games wrote strong language into their EULAs to discourage this activity. Still later, games such as Project Entropia chose to directly link their currency with real-world money. In contrast, FFXI and WoW have been in the news recently for tenaciously rooting out and banning players that market virtual wealth for cash. Despite this, well-known secondary markets like IGE still have lively currency exchanges available for both of these games. In fact, I suspect that this prohibition, if anything, has only enhanced a trader's profit margin.

Naturally, there are more than two sides of the argument. Part of SOE's reasoning behind opening an official exchange market for EQ2 was that it would save them money and headaches spent on scammers and related difficulties caused by the secondary markets. On the other hand, many gamers would argue that this action breaks the fairness or immersion of the game. Obviously, if I was the GM of a tabletop game, I would take offense if I learned that one of my players was bribing another to give them in-game benefits. Strangely, this has happened to me before as a GM. Naturally, the players outside this little "deal" were just as offended as me. But two of the players obviously thought this was acceptable behavior… they had even devised an in-game reason why this transaction would make sense for their characters.

So what next? Some analysts suggest that the legal issues that are bound to arise will drive currency exchanges back underground. Certainly, it seems like running the exchange for your own game would have a host of possible legal and ethical problems. Regardless, I'm pleased that online game companies are experimenting. Since so many projects all look the same in game-play, perhaps economics is where the newest innovation is going to be. It will certainly be interesting to see what will evolve out of this. But will I like the result?

In the spirit of these odd times we live in, I'll make my own predictions.

1. More games will start handling their own virtual-to-real currency exchanges. Cutting out the middle man is a clear advantage to any business. A little profit skimmed off the top would be perfectly acceptable to many players who would enjoy a trustworthy method for such exchanges. Also, this allows a fascinating method to sink excess wealth out of the game world (into the developer's pockets).
   
   
2. There will be several small legal challenges when virtual wealth is lost due to game error. Larger legal issues will come when employees exploit the system for personal gain. Sooner or later, virtual property will be legally recognized as having a real value. The biggest legal challenge will come when one of the smaller games, unable to meet expenses, is forced to shut down - effectively destroying huge amounts of virtual property. However, the end result, since stock often becomes worthless when companies close, by similar argument, maintaining this virtual property will not be the responsibility of the company.
   
   
3. The games that create virtual currency to be sold directly (rather than exchanges between players) will continue, but they will always be considered to have a lesser status. I don't believe the majority of players will accept a model where the game design allows the company to just "print" money. The exception to this is games in which the cost to play is directly related to the bandwidth or memory storage required for your actions or creations. An example of this would be Second Life.
   
   
4. A new type of business model will arise in which the company's income consists of skimming off the top of the player's virtual-to-real currency exchanges. No monthly fees. No cost to download or box to purchase. Really tight game economies. Perhaps combined with in-game advertising, I can see this as a viable business model - assuming the investors are patient enough for exchange market to mature. I'm guessing the best examples will have a posted "tax rate" that is guaranteed to remain static.
   
   
5. A new type of game design will arise in which player skill and character social status has more value than a character's attributes, abilities, or wealth. In other words, anybody can create a new character with the same (approximate) abilities as a long-standing character. However, the benefits of real-skill, knowledge, social ties, and community respect are intrinsic to the player (not the character). As such, if the character changed hands, these benefits would likely be lost. An example of this can already be seen today in MMORPG guild structures. If a guild leader's character is sold, the followers generally figure it out soon enough and either get a new leader, or leave the guild. As result, even in today's games, if you look at the characters for sell on ebay, their social position is not typically a selling point.
   
   

Personally, I look forward to all of these developments. Players can then pick and choose which type of game world they prefer. I'm willing to bet that games will start to be classified by what type of real-to-virtual currency linkage they have. Naturally, we'll invent quick terminology or abbreviations to describe these different game environments. In the end, I'll probably be playing (or coding) the type of game described in #5 above. I imagine that many of you will be too.

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