Why don’t we own the virtual things we pay real money for?
Game developers’ profits stand in the way of true ownership of game items
In our previous posts, we reflected on how video games represent a recreation of the real world. We are faced with two major roadblocks to the adoption of virtual reality: 1) the development of VR and AR technology, and 2) the economic integration of virtual worlds to real worlds. As it stands, the economies of game worlds are heavily restricted by game developers, depriving us of ownership rights of our virtual possessions.
A Simple Analogy
Consider the following analogy. You walk into your neighborhood community center to play tennis. The tennis courts are free to use, and you can play with your friends or whoever else is present on the court. All you need is some equipment. At the reception, you see a sign that says “Tennis rackets and balls for sale!”. You are forced to first buy credits which are used to purchase items at the community center. You then use these credits to purchase a racket and a few balls and get playing.
After an exhausting session, you grab your stuff and make your way to leave the community center. At this point, the receptionist stops you, “Sir, you can’t leave with the equipment. They have to stay within the community center.” When you ask why, the receptionist shrugs. “It’s just the way it is.” Your only option is to transfer your rental equipment to another player in exchange for community center credit, which you can only spend on the “purchase” of other accessories. The community center represents this exchange as a sale, even though the credits you receive are worthless outside of the community center.
This is exactly what’s going on video games right now. When you “purchase” video game items, you don’t own those items — what you’re really doing is just renting it in the game world. When you want to sell your items, you receive the proceeds in terms of in-game currency which have little value outside of the game. And when the game shuts down, your “purchases” and in-game money go with it.
One EULA to Rule All Your Assets
Every video game comes with an End User License Agreement (or EULA). A EULA dictates the terms of service for players of the game — it’s the long document which no one ever reads but every user clicks the “Agree” button on. The EULA establishes the player’s right to play the game, a proprietary piece of software, but not to own it. Unfortunately, most, if not all, EULAs also dictate that the game developer retains all rights and title to the video game and in-game elements. In other words, the fine print states that the game developer actually owns all in-game items, including your digital possessions. Any money, virtual or real, spent purchasing these items simply represents a rental fee paid by the player for the ability to use these items in the game for the lifetime of the game.
In the real-world, we can buy, sell, and trade our possessions freely. In other words, we truly own the items that we possess. If I buy a tennis racket, I can bring this racket with me anywhere I want and use it anytime I want. I can even sell it and use the proceeds to buy a pair of football cleats. In other words, we have true ownership of the tennis racket.
Yet, we don’t actually own any of our virtual assets or currency in the video games we play, at least not in its current form. Despite the game representing these actions as “buying” or “selling” of items, players aren’t actually buying or selling items: they are buying/selling the rights to use these items in the game. And games aren’t alone in this: a study by researchers from the Case Western Reserve University School of Law and UC Berkeley found that a majority of customers who click the “buy now” button on digital content mistakenly believe they own it, the same way they would a physical book or a record. The study says that the customers “mistakenly believe they can keep those goods permanently, lend them to friends and family, give them as gifts, leave them in their wills, resell them and use them on their device of choice”.
This sort of misrepresentation is unfair, especially with the rise of F2P business models which emphasize the monetization of in-game content. There are legal precedents to back this view up. In a fascinating case study involving the online virtual sim Second Life, Evans vs. Linden Research, Linden Research, the developers behind Second Life, argued against the notion that virtual property was real ownership of tangible property but the presiding judge, U.S. Magistrate Judge Donna M. Ryu, ruled that “Second Life users own copyrights in the virtual land and items that they purchase or create.”
Players don’t Know
Game developers get away with this kind of behavior for several reasons: product misrepresentation, and low general awareness of virtual item ownership. As we’ve mentioned above, most players actually believe that they own the items they obtain in video games in the same way that they own items in real life. Game developers play a big part in this misunderstanding due to their efforts in misrepresenting buying, selling, and ownership of virtual items.
Furthermore, the technology which enables true ownership of digital assets, blockchain, is still in its infancy; the first cryptocurrency, Bitcoin, only appeared in 2009. There aren’t many games on the market which allow players to own their virtual assets, and the ones which exist aren’t exactly made by AAA game developers. This is a double whammy: not only are gamers misled into believing that they own their digital assets in the same way they own their real possessions, most of them aren’t aware of or familiar with the concept of digital asset ownership. Having spent years or even decades playing video games in their current format, they are used to the restrictions around virtual asset “ownership” and transfer.
When Shit Hits the Fan
But what if the community center shuts down, taking all its equipment with it? You can bet that the affected tennis players are gonna be extremely displeased — they paid real money for those equipment only for it to be taken from them.
When video games shut down, players’ items disappear as well. Video games don’t run for free — they require servers to stay online to record player activity and provide game data, as well as constant maintenance to fix bugs in the program. Game developers need to pay for these maintenance costs, and if a particular game is making a loss, they may opt to shut down the game. This is not so much a problem when interest in the game has died down and there are few active players. But it becomes more problematic when there is still a thriving community of gamers passionate about the game who can do nothing about the situation.
Sometimes, instead of shutting down the game, game developers might try to tweak the game in an attempt to improve profitability. Such changes might affect the experience of gamers negatively — for example, a previously rare item would lose much of its value if game developers release it in much greater quantities. In his about.me page, Ethereum founder Vitalik Buterin talks about how his experience playing World of Warcraft turned him against centralized services when Blizzard removed the damage component from his “beloved warlock’s Siphon Life spell” and inspired him to create Ethereum.
These situations don’t necessarily occur just in games. Recently, Microsoft announced that it was shutting down its ebook operations, which meant that customers would lose every book they had in their digital libraries.
Having true ownership over our digital assets and digital lives would not only insure us against the aforementioned scenarios by ___, it would also allow us to derive real-world value our virtual possessions, or make decisions about our virtual communities, among other possibilities. It’s about time that users get some return for the services they contribute to the ecosystems and profitability of major game developers.
So why don’t we own the virtual things we pay real money for?
We don’t own the virtual things we pay money for because that’s the way game developers have set games up. And the reason they have set things up in this way is because giving players ownership of their virtual items is harmful to the way game developers’ currently make money. At the moment, games exist as cordoned off from “real life”. The game environment and economy is self-contained: game developers have been resistant to attempts to link game economies to real economies as that erodes their profits. Let’s use Fortnite as an example.
- Games like Fortnite make money off selling in-game currencies like V-bucks.
- In-game items which players want can only be purchased using V-bucks.
- Assuming a competitive game market, game developers’ incentives are to drive the sale of V-bucks so that they can maximize their revenue and thus profits.
- From 2), the demand for V-bucks is thus equivalent to the demand of goods which V-bucks can buy
Therefore, the flow of money and assets in video game ecosystems is focused on:
- Converting fiat to in-game currency
- Converting in-game currency to in-game items
But not the other way around. This means there are two break points in this business model which game developers need to protect against. Giving users true ownership of their virtual possessions is a direct threat to game developers’ business models.
There are two aspects to ownership, subject to the constraints of each country’s respective legal systems:
- Legal recognition of possession of item
- Freedom to transfer item and store item
Game developers mostly restrict players’ freedom to transfer their virtual possessions. For example, they allow players to buy in-game currency with fiat but they do not allow players to sell their in-game currency with fiat. Since at any point in time there may be players who wish to sell their V-bucks, allowing in-game currency to be traded freely for fiat would erode the major source of game developers’ revenue as players purchase V-bucks from other players instead of from the developer. By preventing players from selling their V-bucks through official channels, players who want to buy game items will need to buy V-bucks from the game developers.
A similar argument applies for the second breakpoint on converting in-game currency to in-game items. By forcing players to buy game items with in-game currency or cash, but not allowing them to convert game items to cash, game developers are restricting players’ freedom to transfer their virtual possessions. Even if a game allows players to sell their items for in-game currency, their in-game currency is still practically worthless outside of the game.
Some games even restrict the swapping of items between players. For example, in Clash Royale, all trades and donations are limited to players belonging to the same clan. Even then, players are only allowed to donate a limited number of cards to another player. This forces players to purchase in-game currency to purchase loot boxes to get the game items and cards they want.
At the end of the day, we don’t own the virtual things we pay money for because it is harmful to the way game developers’ currently make money. And since gamers have little power to change the situation, developers have the ability to continue to implement this economic framework in their games.
