State of Play 2009 - Economics and Economies
Jun 20, 08:50 AM
These are my notes for the Economics and Economies panel at State of Play 2009. The panelists are Julian Dibbell, Stephanie Rothenberg, Margaret Wallace, Andrew Schneider, and Ted Castronova. Any mistakes or misinterpretations are my own. Anything in [brackets] is a comment from me. I lost battery power to my laptop during Ted’s talk, so I only have partial notes for that!
——
Julian Dibbell:
Talking about IGE. Making millions of dollars selling EQ platinum. The founder of the company was 21 yrs old at the time, and the striking notion was that there was an amazing amount of money on the table. What’s interesting is the parallel between what IGE was doing and what it represented to us, and what Second Life was doing and what it represented to us, was that the virtual money was becoming real money and breaking out of the magic circle. Thinking through the economic implications of this was a way of thinking through what was going on in these worlds.
They both suggested a kind of emerging, true autonomy to virtual economies. Up until that moment there had been these virtual worlds where there was a traffic between virtual and “real” value, but it was tightly controlled and usually banned. They were trying to keep that magic circle closed, but here were two ways to break it. Linden saying, “These goods are part of the real world,” IGE saying, “No, you can’t stop us!” IGE showed up at the first State of Play to show the big players that they had a lot of money, a huge legal team, and were willing to fight for their autonomy.
So you had these struggles for virtual economies to break free and merge with real economies, and that was why VWs mattered in some way. It’s interesting to see what’s happened since then.
It’s been a long strange trip. What’s happened on the SL front is we’ve learned that opening up the IP wasn’t as momentous as we thought it was. The virtual items, which are separate from the copyright people have in them, is what people really cared about, and Linden did not expect people to want it and in fact wanted control over it. There’s been a settling of the SL economy into somehting other than what we thought was emerging.
For IGE, we thought they’d win their autonomy and RMT would become a 3rd party industry separate from the game business, but that didn’t happen. IGE has accepted their black market status entirely, and RMT in games like WoW is utterly a black market thing with some emerging exceptions, which is what people are talking about on this panel. I’ve brought you to a plateau where this autonomy that we thought was a signifier of how much VWs mattered, turns out to not have been inevitable, and maybe not as interesting as we thought. The game-oriented VW companies are starting to realize that there’s a place for this breaking of the magic circle, but they’re going to manage it tightly. Similarly, with SL, there’s a stepping back from that “you own everything” moment.
So we’re coming now to a less radically autonomous virtual economy, but as you’ll see from these presentations, it’s a rich, complex economy in which the magic circle has been held onto and mixed into the picture in ways that are pretty interesting. It’s not an anticlimactic plateau, it’s a rich one.
Stephanie Rothenberg:
I’m going to start by talking about a project I cocreated with Jeff Krauss [sp?]. We got interested in a mixed reality project, inspired by the work of Julian Dibbell and Ted Castronova, looking at the intersection of gold farming and virtual sweatshops with the spectacle that SL had become. We wanted to do a mixed reality piece that looked at the concept of virtualized labor. The project is called Invisible Threads, the creation of a “mixed reality virtual sweatshop” in Second Life. I got into this because I am an interactive artist, I do street performances, and am interested in audience participation. I researched the game industry, and was always interested in labor and the politics of labor, as well as the use of play in corporate culture, advertising, and education. Tried to create a project that would address these issues and not just affect the niche of the gaming world.
This piece we did at the Sundance Film Festival. What we did was created a business model to set up our virtual enterprise. Hired a builder to create a factory (Double Happiness Manufacturing) in Second Life. Our landlord became a slumlord, so we ended up getting our own island in SL. We didn’t have to worry about environmental concerns, because it’s not a problem in SL. So we manufactured designer jeans. The inside of the factory replicates a textile assembly line, and the jeans that we manufactured, called Double Happiness Jeans. We wanted to play with the idea of customization, so when you order the jeans your image and voice are projected into the factory so the workers can hear what you’re ordering. The in-SL workers would make your jeans, they’d get printed out on a large format printer.
In terms of the business model, we placed ads in SL to hire workers. We interviewed workers to ask about previous work experience, and it turns out that a lot of them used to work in real factories. We created an indentured servant model and gave our workers a 500 m plot of land for the duration of their employment to live with other workers.
We ran the factory for about 10 days at the festival, we’re going to do it again in October for a 4 month run. The sociological aspects were interesting — in SL, people usually have solo jobs. What appealed to the workers was the chance to work in a space with others and have camaraderie. A lot of them had previous factory experience, one woman had worked in a pie factory. It was interesting to look at the skills and values translated from her real life position into this virtual position.
[Julian interrupts to explain the mechanics of it: you go to a real kiosk, talk to people in SL, the workers in SL do stuff at their stations along the assembly line. If they mess up alarms go off and they have to start over as a team. Then the printer prints out patterns on cloth that real life workers at the kiosk sew together for you into jeans.]
Margaret Wallace:
I’m the CEO of RebelMonkey, which has been around for a little over two years. Couple of years ago we raised money to build some great stuff. The two primary properties that we’re responsible for. One is the Monkey Wrench Game Services Platform for making virtual worlds, and our premiere VW, CampFu. It’s a labor of love, a casual gaming world focused on the teen demographic, offering realtime cooperative games for casual players. In CampFu, instead of people playing head-to-head competitive, everyone plays a certain role and work together to achieve a common gold. We were able to get funded to build the experience, and an essential part of the game is our microtransaction (uT) economy. We approached our economy, which we invented from scratch, on the premise that people play in realtime and form teams, and the teams often carry over into the social aspects of the world (the campground). That drives engagement and excitement and community.
If you look at this path, it translates into: in-game items (co-op games), gifting and shared spaces (team play), and status items and collectibles (social). Once you create your avatar, you are dropped into making two choices: play a game or go shopping. The kinds of goods we offer include in-game items that give you special powers in a game, shared spaces that you can decorate and invited friends to hang out at, and status and peacocking items to show off in front of friends. In the campground is where most of the action takes place. Every time I’ve gone into the campground to try on a new item, immediately the players say “What are you wearing? I love it!”
Lots of VWs operate along a dual currency system. Why two currencies? Fu Cash is the hard, real money currency; and tickets which you get by playing games on the site. Tickets are an engagement booster, every time you play a game with friends or by yourself, the tickets encourage players to spend more time doing activities you want them to do on your site. Tickets are mostly for consumable items. We’d rather link expiring items to stuff that time-rich players can afford, rather than charging money for something that goes away. Tickets introduce players to virtual goods and spending, and hopefully moves them to real money transactions.
We’ve only been out since February, we look at the tickets and FuCash to get metrics on engagement. Once we launched the world, we had engagement go up from just 21 minutes to over an hour avg time in game.
Andrew Schneider:
I’m the cofounder of Live Gamer. I spent a long time in digital entertainment, and this is my first startup. We saw what was going on in the secondary black market for gold farming, and saw that it was not a new phenomenon, but one that dates back to prior to the first MMOs. Virtual items for real money have been around for quite some time now, but gained popularity in 1998 with EQ and UO. People were selling characters for thousands of dollars on eBay. Same thing happened in Korea with Lineage. All sort of a cottage industry until IGE got into the mix, and in Korea there’s ItemBay and ItemMania. Lots of players got ripped off, credit cards got stolen, game accounts got hacked, and IP owners had no control over this at all, and lost money via customer support costs! It was a bad experience for the ecosystem and the developers/publishers.
That’s why we created Live Gamer, we thought that it could be more inclusive of the publisher, better experience for players, reduce fraud and handle compliancy issues to deal with money IN as well as money OUT. But the thing that was constnat through growth of RMT was consumer demand, so we wanted to make a legitimate outlet for that demand. We’ve been very fortunate, approached the market much differently than IGE. We have licenses from game publishers, and develop strategies to let players in SOE, FunCom, and others’ games to trade items with one another for real money. For example, characters go to mailbox, drag an item into it, the item gets escrowed into Live Gamer Exchange. Then the player logs on and lists the item on the exchange. One of the big problems in black market trading was misrepresentation of what was being sold, but in our system the buyer can rely on the fact that the item they’re buying is the item they’re going to get. We allow players to sell characters, coins, and items. What we sell the most of are characters, which can range in price greatly, up to $1000 for a very high level character. Sellers can pay extra for highlighted listings. Most of our sales are on Fridays, people go in and buy a character then play with it for a weekend. Commonplace items aren’t sold a whole bunch.
We power a secondary market for GoPets, as well, not just relegated to hardcore games. The game publisher gets a cut of the revenue, we get a fee, but the player takes home the lions’ share of the revenue. We enable a virtual economy with in the EULA and ToS of the game publisher, and often we’ll engage at the design level to create a secondary market that makes sense for the games. We handle customer support, item validation, delivery validation, fraud, etc.
Ted Castronova:
[The gist of it is, he spoke about how dictatorships in virtual worlds are not the way to go, you need to let the players form “covenants” to come up with their own local governances. Really interesting idea, I wish I had been able to transcribe it.]
