THE HANDSTAND
july 2005
Virtual trade gets real
Buying virtual goods on the internet is one thing; killing for it is quite another.
Aleks Krotoski
Thursday June 16 2005
The Guardian
http://www.guardian.co.uk
Last week in China, Qui Chengwei, 41, was given a suspended death sentence for fatally stabbing someone in an altercation that was over a piece of property that didn't even exist.
Qui, who was tried in Shanghai, and his victim, Zhu Caoyuan, were players in the Chinese game Legend of Mir II - one of the world's 1,600 active massively multiplayer online games (MMOGs). They played with millions of paying subscribers in a virtual space set in a 24-hour real-time fantasy.
Like traditional console-based computer games, these feature goals to be achieved, bad guys to thwart and rewards to be reaped - but, unlike titles for the PlayStation 2, Xbox or GameCube, every on-screen character is played by a person logged in via the internet. In these virtual worlds, players team up to take on challenges, working off each others' strengths to solve the in-game conundrums.
Qui and a friend had jointly won a valuable Dragon Sabre by battling through a tough quest. The pair lent it to Zhu who, instead of returning it, sold it via an online auction, kept the money (about £480) and ran. Chinese police don't recognise virtual property as real goods, so the question of theft was a moot point. The result was that Qui resorted to a brutal real-life crime.
That someone would pay £480 for something that doesn't exist in "meat space" is of increasing interest to economists, legal scholars, social scientists and philosophers. That someone would value it enough to kill another person interests just about everyone.
Until earlier this year, virtual trading was a curiosity. The buying and selling of magical weaponry, non-existent currency and imaginary castle between players of online games was a strange quirk of the system. But money talks, and the fact that players of these games were spending their hard-earned real cash on synthetic stuff in a digital environment - things they could not touch, taste or smell - soon got the attention of business minds.
The market exploded, as did stories of people who had cashed in on the phenomenon. A Jedi character from the game Star Wars Galaxies sold for $2,000 (£1,106) on the auction site eBay. One journalist earned more in one year of virtual trading than an American secondary school teacher would make.
Black Snow Interactive, a "sweatshop" that employed low-paid Mexican labour to develop highly skilled characters for sale, was shut down by the creators of the game Anarchy Online. In-game "mafias" controlled sections of The Sims Online.
It all had a circus sideshow freakish quality, but it was still believable. Pouring real money into intangible products didn't have the same jaw-dropping effect it may have had before the dotcom bubble.
Since 2001, Dr Edward Castronova has been following the progress of virtual market trade and oversees the subject's leading forum, the weblog Terra Nova. "I expect this activity will show strong growth over the next 30 to 50 years, as new generations grow up with video games as a normal part of life," he says.
Some believe that government, policy and law workers will begin to use these worlds as training grounds for real-world decisions, and such discussions are already part of the New York Law School's annual State of Play conferences. Castronova estimates that the overall market in MMOG goods within the game worlds is worth an annual $2bn. This, according to his research, is "comparable to economic activity in many small regions, provinces, and even a few countries". Outside the game, with real dollars traded for virtual things, Castronova predicts that the market occupies between $100m and $1bn in trade. That is comparable to the market for tennis shoes.
These figures present questions about the nature of value, ownership and property, forcing a pop-reassessment of the assumptions of Western capitalist, political and economic structures. Ren Reynolds, resident philosopher at Terra Nova, suggests that virtual property alarms most people "because they have rather cosy ideas about what property is. These ideas tend to be reinforced when property has physicality. For example, I can say this is my brick because I can touch it and take it from you and run away. A lot of these virtual property discussions challenge these notions."
Yet virtual property has existed for centuries. Copyright and its modern spin-off, intellectual property, are examples of constructions of ownership of non-physical entities understood and accepted by the general public. "People do embrace virtual property," Reynolds says, suggesting that the contexts in which things develop are responsible for their value.
"The pound coin doesn't mean anything except what you think it means. Your money is just a bunch of ones and zeroes in a database in a bank. It actually has no value. It's the same with EverQuest money; it's a bunch of ones and zeroes in a database. Intangible goods are not actually new; it's just these specific types of virtual goods that people don't embrace."
The stakes in virtual property have been steadily increasing since 1999. Last December, the price hit record heights when David Storey, known as Deathifier in the game Project Entropia, paid $26,500 for a piece of digital land.
He received the title to "Treasure Island", while the seller, MindArk, laughed his way to the bank. Storey considers his purchase an investment: "The Island has two forms of income: one is estate sales, which is where the big money is in terms of one-off income. I have 20 out of 60 that I intend to sell. When you look at the price for each estate ($450 to $550) and multiply it by 60, you can see that it easily meets the initial purchase price of the island. Even if they don't all sell at such a price, taxation will make up the difference, and is also the source of ongoing income beyond the estates."
Storey has received a $9,000 return since December, and both he and his investors are pleased with the progress. He says: "I do believe the purchase has challenged people's perceptions and blurred the border between the real and virtual worlds, and I also believe that this will be reinforced once we have demonstrated that it actually works."
Reynolds says that the idea of gameplay also challenges wealth: "The Protestant work ethic says work isn't something you're supposed to enjoy. If you look at the gameplay in some of these products, it seems too superficially enjoyable to be work. In fact, 99% of the game is clicking repeatedly in order to advance your character to the next level."
Matt Mihály, chief executive and creative director of Iron Realms Entertainment, believes that offering real-money transactions to participants will open up the genre to a broader audience. "If I have a family and a job, how the heck am I supposed to get anywhere in a game designed to appeal to people with far more free time than me?" he says. "I want to feel a sense of progress, of unlocking new experiences in the game world, and I don't want that pace to be molasses-in-winter slow."
By offering such transactions, Mihály is a minority in an industry that generally outlaws the sale of virtual goods based upon intellectual property clauses in end-user licence agreements. Regardless of legality, the mostly black-market third-party trade in games has made millionaires out of some company owners.
Partially in response to this, Sony Online Entertainment has done a u-turn in its hardline position on virtual trade. The company was adamant about pursuing professional virtual traders, and even made a deal with eBay to prosecute sellers of EverQuest goods. Yet last month, it announced Sony Online Station Exchange, a service that acts as an in-game marketplace for players who wish to trade real money for virtual properties. Gamers benefit from the security of the transactions, a process that in the past was riddled with scams. Sony gains capital through commission and saves man hours usually spent answering complaints about illegal deals gone wrong.
Reynolds argues that this is a step towards normalising the process of virtual trade. "Five years ago, the practice of virtual trade was clearly cheating, but in five years time it won't be. Station Exchange is helping to norm the practice of virtual trade. It is reinforcing to the outside world a practice that goes on anyway."
The public may not embrace the phenomenon, however, particularly if stories such as Qui's continue to emerge. Others maintain that replacing the real world for the virtual may create a population of social isolates. But Reynolds says: "People into social software would say that virtual worlds are socially enabling." Regardless of viewpoint, virtual worlds are encroaching upon the real one.
"It's generational," Reynolds says. "If you look at teenagers, they are entirely comfortable having a name on email, SMS and instant messaging services - all different pseudonyms for different aspects of themselves ... All of the debates about virtual property are about the dividing line between what's me and what isn't me."
With real-world house prices stagnating, property barons might be advised to start looking into online games. Beware, however, of people wielding virtual swords.
Copyright Guardian Newspapers Limited