By S. Gregory Boyd Virtual Property and Real Money Trade: A Business and Legal Survey Presented to Austin GDC 2008.

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Presentation transcript:

By S. Gregory Boyd Virtual Property and Real Money Trade: A Business and Legal Survey Presented to Austin GDC 2008

2 Goals and Outline Virtual Property Generally RMT Economic Reasoning Virtual Property Systems Compared Legal Issues

3 Take Home Points - Up Front RMT Growing in Importance and Revenue Willingness to Pay Is Key Careful with Cashing Out

4 Virtual Property Generally What is virtual property? Anything of value created in a game, virtual world or similar online community Most Commonly Traded Virtual Property Objects, avatars, currency, real estate, boons, status

5 Real Money Trade (RMT) What is RMT? The sale and exchange of virtual property with government-backed currency The Scope of RMT RMT market size is estimated at $2 billion (very rough) - Heeks

6 A Very Short History of RMT RMT - Mixed Player Reaction in US Until Approximately 2006 or Near Total US EULA Ban RMT - “Normal” Asia Gray Market RMT Blossoms in US US Publishers - Coming Around

7 Commerce in Virtual Worlds Users hand over real world funds to game publishers and get rights to use virtual currency or real estate in return Companies with console game systems dabble in virtual currency XBox Live Arcade, Wii Shop Channel, Sony PlayStation Store

8 Economic Reasoning Willingness to Pay Subscription - Singular Value RMT - Adjusts for Willingness to Pay

Subscription Model Price Users

Full RMT Model - Free To Play Price Users

Blended RMT Model - Price Floor Price Users

12 RMT Models Pay for Perks Velvet Rope Objects/Land/Boons Currency and Dual Currency

13 RMT Models - Big Choices Create the Goods Facilitate Exchange Cash Out Who “owns” it?

14 Virtual Property Markets Second Life by Linden Lab Players create roads, objects, housing Virtual currency: Linden Dollar (L$) Linden Dollars exchanged using a Linden Lab sponsored exchange – Linden Exchange or Lindex In 2007, $81 million US dollars exchanged on Lindex

15 Virtual Property Markets Entropia Universe by MindArk Virtual currency: Project Entropia dollars (PED) In 2005, $165 million US dollars passed through Entropia Universe and doubled to $360 million in 2006 Orbiting space station: most expensive piece of virtual property ever sold for $100,000 in 2008

16 Virtual Property Markets Station Exchange and Live Gamer XBox Live Points iTunes?

17 Pricing – Remember the Long Tail Usually a fraction of subscription price Characters and land traditionally higher iPhone – “I am Rich” – Sold 8 at $1000 each (2 returned).

18

19 Pricing – Veblen Goods As price goes up, demand goes up Price is often not linearly correlated with the quality of the good I am Rich application – secret mantra I am rich I deserv [sic] it I am good, healthy & successful

20 Legal Concerns Taxation Money Laundering Gambling Sweepstakes and Lottery

21 Legal Concerns Securities Regulation Banking Regulation Disputes Over Ownership

22 Alternatives to Cashing Out Subscription Time Status or other Intangibles – “I am Rich” Deep Money Sinks – Guild/World Events

23 Take Home Points - Redux RMT Growing in Importance and Revenue Willingness to Pay - Is Key Careful with Cashing Out

24 Contacts S. Gregory Boyd Davis & Gilbert (212)