Real money and the virtual economy

In the world of Azeroth, life can be cheap but saving up for that much desired epic mount can take months of labour.

In the world of Azeroth, life can be cheap but saving up for that much desired epic mount can take months of labour. Welcome to the World of Warcraft, currently the world’s largest MMORPG (Massively Multiplayer Online Role Playing Game). In the World of Warcraft, the auction house presents the avid window shopper with a cornucopia of wonders, from fabulous swords to armour guaranteed to make you the hardest elf in your neck of the woods. To purchase such wonders, the player needs gold, something that requires quite literally hours, days or weeks of in-game labour. However visit Ebay or Eye on MOGs, a price comparison engine for virtual commodities, and you have the opportunity to convert real life earnings into virtual gold, platinum, ISK or Credits, depending on the virtual world that you alter ego(s) inhabits.

The world of Real Money Trading has come a long way since its fledgling days when gamers departing from a virtual world would use websites like Ebay to convert their in-game assets into real world money. Today it is a multi-billion dollar industry, with industry insiders like Steve Sayler of IGE estimating that as much as $2.7 billion will change hands within this secondary market during the course of 2006. This lucrative industry is now catered for by companies like MMORPG SHOP, Mogmine and MOGS, which have entire infrastructures set up to ‘farm’ for in-game gold and valuable items. Not only can you purchase in-game spending power with real world money from such sites, but many are service driven, for example offering power levelling to fast-track your avatar to new heights of maturity, turn you into a master craftsman in days rather than months, or boost your reputation within the world you inhabit. Sites like Mogmine offer specialised services like fruit picking, specified item farming, or will take your character through that instance that’s been weighing so heavily on your mind.

What we are experiencing here is a whole new type of economy where the border between the real and virtual world is blurring. There are currently hundreds of companies catering to this phenomenon, with some virtual items being sold for hundreds or even thousands of dollars. Virtual real estate is earning real world money, with people like 43-year-old Wonder Bread deliveryman John Dugger purchasing a virtual castle for $750, setting him back more than a week’s wages. According to Edward Castronova, an economics professor at Indiana University who has performed extensive research into online economies, Norrath, the world in which EverQuest takes place, would be the 77th richest nation on the planet if it existed in real space, with players enjoying an annual income better than that of the citizens of Bulgaria or India. A visit to GameUSD indicates the current state of virtual currencies against the US dollar, demonstrating that some virtual world currencies are currently performing better than real world currencies like the Iraqi Dinar.

Real Money Trading and gold farming are met with mixed feelings in the gaming world, with some gamers criticizing the fact that real world wealth can affect in-game prestige and capabilities. Critics of the secondary market believe that such activities within the virtual economies intrude on the fantasy and provide the more economically empowered with an unfair in-game advantage. However this ignores the real world fact that earning money and advancing one’s character within a virtual world takes a good deal of time, and some gamers have more money than time on their hands. The average age for gamers is 27, and approximately half of all gamers are in full time employment. For a group of friends playing together, it can thus be relatively easy for the cash rich to fall behind the time rich in terms of gameplay, as they are obliged to spend the lion’s share of their time working their real world jobs while friends are spending time levelling their characters. For such individuals, for whom time translates into money, a few dollars is a small price to pay to ensure virtual survival the next time they enter an instance with their high level friends.

Companies set up to farm virtual commodities are furthermore criticised as being little more than sweatshops, an attitude encouraged by the fact that many of these companies reside in low wage economies like China. However, pay and work conditions in such companies, where workers are paid to spend their days playing enjoyable, stimulating games, cannot compare to that of their compatriots who spend their days mindlessly producing the components that go into our computers, or the trainers that we wear while playing. Essentially the objection is a moral one, with many Westerners objecting to low wage economies catering to this type of leisure activity. Often workers are paid partly in kind, with food and accommodation included in remuneration packages, with the pay received thus presenting largely surplus. While pay may not equate to Western standards, this type of economic activity reminds us that we are living in a continually globalising economic environment where quality of life and spending power should be taken into account as much if not more so than say a straight dollar for yen exchange rate. Companies like Mogmine provide their staff with health benefits, holiday pay and share options, along with the chance for advancement within the organisation. Brian Lim, CEO of Mogmine, comments that ‘many mid- and high-level management started out as gamers and now they have equal or more pay than respectable managers in more conventional businesses.’ Within these lower wage economies, these thus represent desirable jobs.

Other complaints centre around the negative effect of such farming activities on in-game economies. At Mogmine, Brian Lim’s gamers play the game as it is meant to be played, but hone good techniques for gold generation along the way, thus ensuring that the work remains interesting to staff. Jonathan Driscoll comments that competition for resources has always been a feature of gameplay, and points out that his World of Warcraft farmers do their work within instances, and thus do not impact on others’ gaming experiences in the least. Complaints that farmers are responsible for in-game inflation smack of sour grapes when compared to common factors like players with high level characters acting as benefactors for their low-level alts, and thus facilitating the unrealistic in-game spending power of such low level characters. While some developers do not condone real money trade on their servers, others like MindArk, with their game Project Entropia, have included the secondary market as a part of their services. Even Sony Online Entertainment, who until recently stood staunchly against real money trade, have jumped on the band-wagon with the release of their Station Exchange service, actively facilitating Real Money Trading in Everquest 2. Other games, like the upcoming Roma Victor, embed the secondary market as part of their financial model rather than relying on the common subscription model, with players purchasing Sesterces to play and advance in the game.

Such trading of virtual goods for real world money is potentially just the tip of the iceberg for the development of virtual economies where people come together within virtual worlds to promote and trade real world products. Games like The Matrix Online already sell advertising space to real world companies to promote their products to gamers who spend their leisure time within the world.

We are thus embarking on an entirely new type of economic activity, where real and virtual worlds are meeting within an economic sphere. As a fledgling economy, it is difficult to chart where this phenomenon may take us, but the sheer weight of currency being spent and earned within these economies and the development of services to monitor real to virtual exchange rates and market prices indicates that they are here to stay.