Global Trend

Massively Multi-Player On-Line Role-Playing Games

In 2001, an unknown 38-year-old academic named Edward Castronova was teaching at Cal State University in Fullerton, California, and feeling like a failure. His career had never gone anywhere, and he felt like he was at a dead end. He was so lonely at night he just sat around and played video games.

It was April when he joined an on-line role-playing game called EverQuest for $10 a month. EverQuest was a Medieval role-playing game owned by Sony. Members would go on-line, create an identity, and vie for wealth and power. As an economics professor, Castronova began to notice something interesting: The virtual world had a real, functioning economy, where people could go from rags to riches or build entire empires with fake goods and money. Soon Castronova found out that the players were selling their virtual goods and fake money on-line for real U.S. dollars as well.

After watching the auctions on places like eBay and calculating the value of what people were selling, he came to the startling conclusion that EverQuest’s fake currency, called a platinum piece, was worth one U.S. penny on the real currency market, which is more than the Japanese yen was worth.

In fact, each player was generating real-world wealth at a rate of $3.42 per hour, higher than the average wage that most people in the real world earn. Calculating the gross national product per capita of the on-line game at $2,000, he realized that it was larger than that of India or China, according to an article in The Economist.

Castronova began surveying the players and amassed data about them and their habits. The average player was a 24-year-old male and owned about $3,000 worth of goods on-line.

When he published his findings, expecting a few eccentric readers, he was shocked to find an enormous appetite for his work among both on-line users and academics alike. He had hit a nerve. He had also pointed out that for the first time, economists and social scientists had a real-world lab in which to study behavior in its purest form. All EverQuest players start equal ? poor and weak ? and must earn their wealth. It’s a true meritocracy.

And Castronova found that the game proves what Adam Smith theorized: that people don’t want the world to be equal. Even though everyone starts off the same, very few amass great wealth on EverQuest, just as in the real world. In fact, some companies have offered games with socialist rules, and people have rejected them. And this, understandably, has touched off a political and economic debate that continues today.

EverQuest is just one example of the enormously powerful trend of Massively Multi-Player On-Line Role-Playing Games (MMORPGs), which began in earnest in 1997. At that time, a game called Ultima Online burst onto the scene with 100,000 players. Smelling profits, Sony, Microsoft, and others rushed to establish their own presence.

Today there are more than 350 MMORPGs, many with 100,000 or more members. One site in Korea has four million players, according to an article in the Sunday Telegraph.

This global surge of virtual worlds has in turn spawned entire new industries. Media companies, such as Isomedia, have been founded solely to cater to gamers and those wishing to market to them.

In addition, gamers have formed clubs, known as guilds, to exchange information, conduct commerce among themselves, and to cooperate in an effort to defeat the most powerful players. The larger guilds are now beginning to receive corporate sponsorship.

Moreover, PlayerAuctions.com, just to name one, is a site that enterprising gamers set up as sort of an eBay for selling the characters they create to represent themselves on-line, known as avatars.

According to an article in DMEurope, Sony, which initially fought the practice of selling virtual goods, went on-line last April with its own auction site, called Station Exchange, for just that purpose.

The buying and selling of avatars is controversial. Since all players begin equally poor, they have to work hard to gain power and wealth. But when a player buys an avatar, he starts with the wealth already accumulated. Purists regard this as cheating. Even so, it’s popular enough that Ultima Online began selling its own proprietary characters last year. The demand was so great that it tied up their phone lines.

MMORPG sites are not so much games as virtual environments, and many make no pretense at having rules and goals. For example, one called There.com is devoted to chatting, socializing, and shopping, using avatars that are more attractive than most real people. The environment is so real that Nike and Levi Strauss have introduced lines of virtual clothing that are sold only on that site. Individual players also design clothes and products that they sell to others on-line.

But clothes are just the most trivial element in such a virtual environment. The U.S. military recently licensed a private tract of virtual land on There.com, where it created a virtual Baghdad to train soldiers.

Another business that on-line gaming has spawned is a merchant class that buys virtual goods from players and resells them. UOTreasures is a Web site that scavenges goods from 15 different games and lists them for sale. The site employs 500 gamers to find goods to buy and deliver. Some 35,000 people visit it each week.

A Hong Kong company called IGE, with 100 employees, claims to sell several million real dollars’ worth of virtual goods every day. The worldwide value of virtual goods and services traded is estimated at $500 million in actual money. Moreover, there is a futures market in virtual money. The Gaming Open Market in Toronto trades gaming currencies. If you are short of on-line cash, you can buy it for dollars. Or if you want to switch games, you can trade your fake platinum and gold for whatever the local currency is.

And it seems that these virtual economies are vulnerable to some of the same hazards of real economies. For instance, when Ultima Online first began, hackers figured out a way to counterfeit its currency, with the result that the value of its gold pieces took a nosedive. The owners of the company had to begin managing inflation just the way the Fed does.

In short, virtual worlds are now developing virtual governments, which face the same problems real governments face. Some game designers tried Soviet-style micromanagement of their economy, only to find that, as in real life, it didn’t work. Soon the systems turned to capitalism.

In the new capitalist system, some players became rich enough to make poor players even poorer. Virtual governments began giving out welfare to prevent all but a few extremely rich players from quitting.

The virtual world resembles the real world in ways that can be disturbing at times. One player, a 37-year-old single mother, is married on-line to a character played by a real soldier in Iraq. The real soldier is really married, too, so he now has two wives ? along with a vast estate of property worth about $15,000 in real money. And this phenomenon of virtual polygamy is growing.

The Sims Online, another virtual world where players take on the identity of suburbanites, made the New York Times recently, when a University of Michigan philosophy professor who was studying the site reported an on-line brothel being run by a 17-year-old boy in Florida. The site also has an organized crime family led by a 26-year-old from Sacramento, who sells “character assassination” for hire. Maxis, which owns the game, expelled the professor and confiscated his goods, including a pet cheetah. But the professor had already put most of his money in the Gaming Open Market, so he was able to continue to trade and profit from it.

This type of occurrence, in turn, has led to a new area of law: virtual property. The big question is: Who owns it? There are already legal conferences devoted to discussing this looming subject. Gaming companies, of course, say that they own everything. Users don’t agree. But the fact that there is profit to be made ensures that there will be plenty of battles to fight.

According to Market Wire, one player on Project Entropia, the world’s fastest-growing virtual economy, bought a piece of land for $26,500 in 2004 and has not only recouped his investment but is making money on developing it. Inspired by that, Project Entropia developed a virtual Space Resort, which was then sold for $100,000 in only three days of bidding.

In light of this compelling trend, we offer the six following forecasts for your consideration:

First, this already super-heated field is going to grow and accelerate at an even faster pace. While it will continue to reflect its roots in adventure games for teens, it will spread and deepen into areas that make these sites far less like games and far more like life. Many sites have already moved away from the gaming concept and have developed elaborate societies with booming economies. Linden Lab, for example, is a San Francisco company that makes and leases virtual land. Developers pay $200 a month for each 16-acre plot, plus a one-time fee of $1,250. They then use Photoshop to put buildings, rivers, forests, streams ? whatever they can conceive of ? on the land, subdivide it, and lease it to members of the Web site, called Second Life. A whole industry of sub-contractors has sprung up to help develop neighborhoods, shopping districts, and attractions.

Second, within five years, the fastest-growing virtual economies will usher in waves of legal battles aimed at sorting out various rights. For example, as soon as one of the hosting sites goes bankrupt, which is bound to happen, users will file suit ? possibly in a class action ? to recover their lost investment. Even though the loss will be denominated in virtual money, that loss now clearly represents real money as well. The same goes for virtual property. Just as intellectual property was a blank slate for law once, so is virtual property today. Expect this to evolve into a whole new specialty in law. And, expect to see major law firms devoting entire departments to it, even while new firms spring up to handle it. Also, expect to see legislation passed to set out virtual property rights.

Third, in that same timeframe, marketing and advertising will migrate to the virtual world, buying space or product placements in those environments where they can speak directly to the players. This may help solve the difficulties marketers have encountered in trying to get the attention of people who are already distracted with too many messages. Hot new firms will emerge to manage marketing to the virtual world.

Fourth, just as the Internet forum and chat room have become an accepted, everyday way for people to interact socially, culturally, and in business and education, expect these “virtual worlds” to become the mainstream surrogate for face-to-face interaction. In the process, fantasy elements will be replaced by more and more realistic environments and avatars. By 2020, it will be commonplace to have business meetings, attend college classes, go on dates, go shopping, and do almost anything that doesn’t require physical contact with the world through virtual reality.

Fifth, virtual worlds will gradually evolve into virtual nations with laws, cultures, and elected officials ? or dictators, as the case may be. Like real nations, they will have conflicts, perhaps even wars. These, of course, will be virtual wars, but they could certainly do economic damage. Already one group of players formed a breakaway republic by stealing the code for the Web site and forming a clone of the virtual world for themselves.

Sixth, by 2050, these virtual worlds will become fully Matrix-like in their capabilities. This will be made possible as nanotechnology improves virtual reality to the point that all the senses can be translated into digitally coded messages. By mid-century, it should be possible to have a virtual experience of almost anything you can imagine with the full range of sensory responses. For example, you could go to a virtual five-star restaurant and have the best meal of your life without consuming a single calorie.

References List :
1. The Economist, December 14, 2005, “Online Gaming.” ⓒ Copyright 2005 by The Economist Newspaper, Limited. All rights reserved. 2. The Sunday Telegraph, January 5, 2005, “Real Profits from Virtual Worlds,” by Andrew Murray-Watson. ⓒ Copyright 2005 by Telegraph Group Limited. All rights reserved. 3. DMEurope, April 22, 2005, “Sony Online Entertainment Launches Official MMORPG Auction Site.” ⓒ Copyright 2005 by DMEurope. All rights reserved. 4. New York Times, June 26, 2005, “Upward Mobility,” by Mark Wallace. ⓒ Copyright 2005 by the New York Times Company. All rights reserved. 5. Market Wire, November 8, 2005, “Virtual Island Purchase of $26,500 Recoups Investment in First Year with Room for Ongoing Profit.” ⓒ Copyright 2005 by Market Wire, Inc. All rights reserved. 6. Business 2.0, December 2005, “The Virtual Rockefeller,” by Paul Sloan. ⓒ Copyright 2005 by Time Warner, Inc. All rights reserved.