Building drool

You know what sucks about Chicago? Building drool.

build·ing drool (bldng drl) n. - Unexplained drops of water falling as you're walking next to a building, when it's clearly not raining. Maybe it's some window washers. Maybe it's some asshole spitting out of a 9th story window. Who knows. The only thing I do know: it sucks!

Gaming markets (Part II)

Last time, I gave a brief overview of gaming markets and the issues surrounding them. I will now focus on their growth and their future prospects.

The growth of gaming markets can best be understood in relation to the growth of online gaming. The site MMOG Chart, a collection of MMO statistics, shows that total active MMO subscribers have grown exponentially, from half a million in the summer of 2000 to almost five million today.



Subscriber growth translates into growth of the gaming markets. Starting little over a year ago, the Gaming Open Market has traded almost $2 million in Second Life currency. This phenomenon is not an aberration - it is a response to real demand from real people. Why is buying virtual items so attractive? A few reasons:

1. The entertainment value.
2. People who play MMOs typically spend a significant amount of time in-game, leading to an emotional attachment.
3. The nature of MMO games imbues an investment mentality in the player. If I get this item, I can do X. If I level up, I can go to Y.
4. Virtual items are cheap, but they are used very often. This low-cost, high-volume system encourages impulse buying.

The game studios are starting to recognize the potential here. Sony announced the Sony Station Exchange, a real-money trading site for EverQuest players, will open in late June '05. Microsoft is also joining the party with its XBox Live marketplace for in-game items. How will increasing studio involvement affect the integrity of their games and the growth of the secondary markets serving them? The discussion will continue in Part III.

Gaming markets

The concept of gaming markets is relatively new. It grew out of the MMORPGs in the late 90s, such as Everquest and Asheron's Call. Players build up their characters by hunting monsters, earning experience points, and collecting artifacts. Although there are in-game markets for artifacts, denominated in artificial game currency, some players wish to further enhance (or accelerate the development of) their characters with real money. Naturally, secondary markets, denominated in real US dollars, arose to meet this demand.

The first of these markets were found on auction sites such as eBay. For sale: artifacts, in-game money, characters, even mentoring services. This is a vibrant multi-million dollar market. Some players make a (real) living from it. Another class of markets serving the online gaming community are forex-style in-game currency markets. The leaders in this field are IGE and Gaming Open Market.

Not everyone embraces real-money gaming markets. Some say the influx of real money corrupts the gaming environment by giving novices with a lot of money an unfair advantage. Market supporters respond that trade between willing participants, even with real money, does not significantly affect game dynamics. In fact, it often seems that bad design decisions made by game "central planners" have wreaked havoc on game economies.

Besides gamers, the game studios themselves are uneasy about gaming markets. These markets are technically against the Terms of Service of most MMO games. It must also irk the studios that they are missing out on revenue, which they cannot capture due to perceived conflict of interest. However, the studios have not made any concerted move against the markets. They know that they ultimately benefit from them via subscriber revenue, while maintaining plausible deniability.

Regardless of community opinion and studio skepticism, gaming markets are in demand and growing. Why is this happening? And why is this important? I will explore this in part II.

I'm back!

Haven't posted in a while. My hard disk broke down, so I was out of commission for three weeks. Then I was away to Boston and New York for a week. Then I decided blogging was stupid and a waste of time. Now I'm back, sort of. I won't necessarily try to keep up with the news. I will try to comment on things I think are not being paid enough attention. Posting will be fairly sparse. Enjoy the new format!