Real money and the virtual economy

The world of Azeroth is a place where life is easy, but it can also be expensive. However, saving up for the epic mount you desire can take many months.

Real Money Trading is a vastly different industry from its early days, when gamers would use Ebay to convert virtual assets into real money. It is now a multi-billion-dollar industry. Industry insiders such as Steve Sayler from IGE estimate that $2.7 billion will be traded in this secondary market over the course of 2006. Companies like MMORPG SHOP and MOGS are now catering to this lucrative market. They have complete infrastructures that can be used to ‘farm for’ in-game gold or valuable items. These sites allow you to buy in-game spending power using real money. Many also offer service-driven services, such as power levelling that will help you speed up your avatar’s maturity, make you a skilled craftsman in days instead of months, and boost your reputation in the world you live in. Mogmine offers specialized services such as fruit picking and specific item farming. They can also help you get through the difficult situation that has been on your mind.

This is a new kind of economy, where the line between real and virtual is blurring. This phenomenon is being embraced by hundreds of companies. Some virtual goods are selling for hundreds to even thousands of dollars. People like John Dugger, a Wonder Bread deliveryman, who bought a virtual castle for $750 and paid more than a week’s salary, are making real money from virtual real estate. Edward Castronova, an Indiana University economics professor who has done extensive research on online economies, says that Norrath, where EverQuest is set, would be the 77th wealthiest nation if it existed in actual space. Players enjoy an annual income higher than the citizens of India or Bulgaria. GameUSD shows the current status of virtual currencies in relation to the US dollar. This is a good indicator that virtual world currencies perform better than real currencies such as the Iraqi Dinar.

Gaming world reacts with mixed emotions to real money trading and gold farming. Some gamers are critical of the fact that real wealth can impact in-game prestige, capabilities and reputation. Critics of the secondary markets believe that these activities in virtual economies interfere with fantasy and give the economically more powerful an unfair advantage in-game. This ignores the fact that some gamers have more time than they have to make money or advance their characters in a virtual world. Gaming’s average age is 27. Half of gamers work full-time. It is easy for a group of gamers to fall behind the time-rich in terms of gameplay. This is because they have to work the majority of their time at real jobs, while their friends spend their time levelling up their characters. These people are able to afford a few dollars to ensure their virtual survival next time they join an instance with high-ranking friends.

Companies that are set up to produce virtual commodities are also criticized as being nothing more than sweatshops. This attitude is encouraged by the low-wage economies in which many of these companies live, such as China. These companies have work conditions and pay that are comparable to those of their compatriots, who are paid to play stimulating, enjoyable games. The objection is moral in nature, as many Westerners are opposed to low-wage economies that allow for this type of leisure activity. Many workers receive a portion of their pay in kind. This includes food and lodging, which is a large part of the remuneration packages. The net result is a substantial surplus. Although pay is not comparable to Western standards, this type economic activity reminds us of the fact that we live in an ever-globalizing economic environment. Quality of life and spending power must be considered as much or more than a dollar for yen exchange rate. Mogmine offers its employees health benefits, holiday pay, share options, and the opportunity to advance within the company. Brian Lim, Mogmine’s CEO, says that many mid- and top-level managers started as gamers, and they now have the same or better pay than more traditional managers.

Another complaint is about the negative impact of farming activities on ingame economies. Brian Lim, Mogmine’s gaming team, plays the game exactly as it was intended. However, they also learn valuable techniques for gold generation, which keeps the work interesting for staff. Jonathan Driscoll notes that there has been competition for resources throughout the game’s history. He also points out that World of Warcraft farmers work within their assigned tasks and do not have an adverse effect on other players’ gaming experience. When compared to other factors, such as high-level characters being benefactors to their lower-level alts and thereby facilitating unrealistic in-game spending power for these low-level characters, complaints that farmers are responsible in-game inflation sound like a bunch of grapes. Although some developers don’t condone real-money trade on their servers as such, MindArk with their game Project Entropia has included the secondary market in their services. Sony Online Entertainment, which had previously been staunchly opposed to real money trade, has now joined the fray with their Station Exchange service. This allows for Real Money Trading in Everquest 2. Some games, such as the forthcoming Roma Victor, incorporate the secondary market into their financial model. Instead of relying solely on the subscription model, players purchase Sesterces to advance and play the game.

This is just one example of how virtual goods can be traded for real money. The Matrix Online sells advertising space to real-world companies to help them promote their products to gamers who are able to spend their leisure time anywhere in the world.

This is a new type of economic activity that brings together the real and virtual worlds within an economic sphere. It is still a young economy so it is hard to predict where this phenomenon will lead us. However, the sheer amount of currency that is being spent and earned within these economies, and the development services to monitor real-to-virtual exchange rates and market prices, indicate that they are here for the long haul.