Nintendo Cryptically Points Out That Selling 'Animal Crossing' Assets For Real Money Violates ToS

from the sooooo? dept

Back in May, we wrote about something of an economy springing up around Nintendo's hit game Animal Crossing. With so many folks enduring the hardships of layoffs, or unable to find work, it turns out there are people making very real world money selling in-game assets and collecting payment outside of Nintendo's platform, which doesn't have a method for these types of transactions. This sort of thing fascinates me on many levels, perhaps mostly in how nearly perfectly this highlights the reality of income disparity in America. Some folks have to farm digital bells to make money by selling them to people with enough money to buy them.

But we also mentioned in that post that Nintendo is notoriously protective over how its games are played and used. On top of that, the only real way to be effective in this economy is to screw around with the clock and timer settings on the console itself to speed up the harvesting process. That, too, is the sort of thing that normally gets Nintendo's fur up. So, it's perhaps not surprising that Nintendo has pointed out recently that all of this violates its Terms of Service, though the company has remained cryptic as to exactly what it plans to do about it.

Nintendo has strictly defined rules about monetization. As clearly stated on the network services guidelines, Nintendo writes, “You may monetize your videos and channels using the monetization methods separately specified by Nintendo. Other forms of monetization of our intellectual property for commercial purposes are not permitted.”

J-Cast reached out Nintendo regarding the real-money trade of Animal Crossing: New Horizons characters. “We are aware of the violation of our terms of use,” Nintendo replied. Nintendo added that it is currently considering what steps should be taken regarding the sale of New Horizons characters.

One presumes the same would be true for in-game assets like Animal Crossing's bells. As stated, Nintendo has a reputation for this... but should the company drop the hammer on this sort of behavior? I've put some thought into this and I can't really come up with a systemic major problem that is or could be caused by this emergent economy springing up around a game like this. How much does this break the game's community, given that there is clearly a demand from players for buying these assets? And how much interest in the game is built on players knowing they have an outlet for progression through these purchases?

Interesting as those questions may be, Nintendo doesn't typically come off as though it engages in this type of self-interrogation. Instead, the company sees something happening outside of its control, has a visceral reaction to that something, and reacts with a heavy hand. Note that the quote from the Nintendo rep above says Nintendo is deciding what to do about all of this, not whether it should do anything at all. Which is too bad.

Filed Under: animal crossing, economies, in game sales, terms of service, virtual goods
Companies: nintendo

2 Teen Diablo Players Were Charged, Got Probation For 'Stealing' Virtual Items That Were Replaced

from the virtually-dastardly dept

With some of the recent news stories about how cheating, or other crimes, committed in virtual settings is resulting in real-world legal consequences, I'm sort of surprised the media hadn't picked up on this story before. Apparently back in the summer of 2012, two teenagers, Patrick Nepomuceno and Michael Stinger, ran a scheme in Blizzard's Diablo 3 in which Stinger would send out a link to another player that allowed Nepomuceno to take control of the player's computer, force the player's character to drop all of his/her valuable virtual game items, and then Stinger would scoop them up.

According to [Prosecutor] Wilkison, court documents, and an interview with Michael Stinger, Nepomuceno bought a RAT, a ‘remote access tool’ used to take over a computer remotely. Nepomuceno and Stinger got other Diablo III players to download the RAT by disguising it as a link to a photo, which they claimed was a screenshot of a rare item. After a player clicked on the link and downloaded the RAT, Nepomuceno gained access to their computer, and was able to take over their Diablo character. He would force the character to drop all of the valuable gear and gold the player had collected, and Stinger’s demon hunter character, who was hanging out nearby in the game, would swoop in to steal the goods. “Imagine you are a gamer and you have worked long and hard to get all these items,” said Wilkison. “The victim watches himself lose everything.”

Court documents insist that the pair then sold these virtual items for thousands of dollars, something which Stinger at least disputes. Blizzard banned the pair once the reports of the virtual "theft" began rolling in, but the company apparently wasn't satisfied with that as an end to the story. Instead, Blizzard brought in the FBI, who raided Stinger's house and made off with his computer equipment. Nepomuceno declined to be interviewed, but his equipment was likely confiscated as well. Blizzard, for their part, restored the virtual items to the victims, which is where the legal part of this story gets very interesting.

But how do you prosecute a crime with no actual losses? “Blizzard gave the victims the goods back,” said Wilkison. “That made the loss calculation difficult because the victims were reimbursed. So instead we calculated the [perpetrators’] gain.”

It's an interesting question, I think, because if the victims are the players, they suffered no loss. Blizzard could be said to be the victim, but their restored virtual items carry a real-life worth that is nebulous and subjective at best, so I would think assessing any kind of value to the items for the purposes of declaring a felony would be quite difficult. The two virtual muggers apparently didn't want to fight this out in court, however. Both accepted probation and were forced to pay Blizzard back for the costs of investigating their actions. Notably, it does not appear they were forced to pay the company back for the worth of the virtual items, which seems strange since their worth was the basis for the felony prosecution to begin with. The real crime, it would seem to me, was the unlawful access of another person's computer in all of this, but the discussion around a felony for theft of virtual items took the main stage.

Theft of virtual items in which no loss actually occurrs to the victims, something that we've actually discussed before, almost a decade ago. Given that the question apparently hasn't gone away, the legal world is going to have to figure out how to navigate these virtual waters, and I don't think tossing around felonies strictly for the crime of stealing virtual items in a video game is a good route to take.

Filed Under: arrests, michael stinger, online games, patrick nepomuceno, stealing, video games, virtual goods

MPAA Wants Regulators To Force ISPs To Block Sites 'At The Border'

from the to-stop-pirates,-sometimes-you've-got-to-break-a-few-internets dept

When SOPA died its inglorious death, the MPAA's best shot at ISP-level site blocking died with it. But the MPAA is nothing if not stubborn and is still willing to wreak havoc on the internet in exchange for a slight dip in infringement.

According to a leaked document from the MPAA's law firm [pdf link] and two public filings in support of the International Trade Commission (sent over by Charles Duan of Public Knowledge), the movie industry is hoping to use the agency's new willingness to regulate digital transmissions like physical goods as a foundation for site blocking.

As we've discussed for years, the ITC has been an active player in helping US patent holders go after those they believe are infringing. Generally, this has taken the form of blocking imports of infringing physical goods -- that the ITC deems as infringing (using different rules than the US court system). This has often allowed patent holders two separate bites at the apple -- one in the courts, and one at the ITC. But a recent case saw the ITC shift its focus -- and its purview -- in response to some circuitous patent infringement. Russell Brandon at the Verge details the case that has led to the MPAA's next attempt at site blocking.

The heart of the case is a company called ClearCorrect, which 3D prints clear plastic braces custom-designed for each patient's teeth. Much of the technology involved in the process is already under patent, but ClearCorrect has gotten around those patents by farming out its intricate computer modeling to an office in Pakistan. That modeling violates a number of US patents — and if ClearCorrect were shipping back the resulting braces in a box, it would be a simple case: the goods would be contraband, to be stopped at the border. But instead, ClearCorrect is only transmitting digital models from Pakistan and printing out the braces in local offices in Texas. The only thing coming in from Pakistan is raw modeling data. So what's a trade commission to do?

In October of 2014, the trade commission -- blowing past legal precedent and established statutory limits -- granted itself the power to treat the incoming digital models as physical goods… and stop them at the border.

In the sweeping and unprecedented decision below, the International Trade Commission found that its authority to regulate trade extends to pure "electronic transmission of digital data" untied to any physical medium. Generally, by statute, the Commission's jurisdiction is limited to oversight of "importation . . . of articles." However, the Commission expansively construed the term "articles" to potentially include anything "bought and sold in commerce," thereby leading to its conclusion that digital data was an article of importation.

The MPAA, which has entered comments in favor of the ITC's self-granted power expansion, wants to use the agency's power over digital imports to block websites at the ISP level. The leaked Jenner & Block memo confirms this. The MPAA's lawyers don't consider it a slam dunk but they are cautiously hopeful that the ITC's land grab will pay off.

As discussed in the 2012 ITC Memo, seeking a site-blocking order in the ITC would appear to offer a number of advantages over federal court litigation, at least at first blush. This now seems even more so given the ITC’s recent decision (albeit now on appeal) holding that electronic transmissions are “articles” within the meaning of Section 337 of the Tariff Act of 1930, 19 U.S.C. § 1337. As also discussed in the 2012 ITC Memo, however, such an action would still involve several difficult questions of first impression, making the prospect of success in that forum uncertain.

While the ITC's new aim -- stopping infringing digital files at the "border" -- would seem to be the ideal starting point, the memo points out that many technical limitations make this approach less than feasible. The "transit" ISPs -- those that "ship in" data from other countries -- can be handled more easily by other court orders than by ITC regulation. The ITC's purview only covers inbound traffic, and technical limitations make this a weaker approach. For one, the lack of information on incoming packets means the blocks would only affect IP addresses. If a "pirate site" shares an IP address with another site, the block won't work. And IP addresses could easily be shared to circumvent blocking at transit ISP level.

The memo also notes that the internet is designed to flow around obstructions. Applying blocks at the transit level would simply shift infringing loads to other pathways, nullifying the blocks altogether.

The law firm then addresses blocking outbound traffic to infringing sites at the ISP level. This would ignore the inbound traffic of "transit" ISPs and demand action be taken by US ISPs.

Even though site blocking by transit ISPs may be impractical in most (and likely all) cases, it may still be possible for the ITC to issue orders to the consumer-facing network access ISPs requiring them to cease and desist from providing their subscribers with access to the pirate site. To do so, however, the ITC would first have to find that the network access ISPs, by providing their subscribers with access to the pirate site, have themselves violated Section 337.

That's the sales pitch for ISP-level site blocking. It somewhat ignores the new powers of the ITC and instead relies on convincing the agency that access to "pirate sites" -- even as a "dumb pipe" -- is a violation of Section 337. Definitions will need to be stretched and ISPs that allow their customers to roam the web freely will need to be painted as contributors to infringing activity.

Because it is the transit ISPs and not the network access ISPs that actually carry the infringing data across the border, we would need to persuade the ITC that the network access ISPs’ conduct is also tantamount to “importation into the United States” of copyright-infringing articles... For this reason, we may be able to develop a case that the network access ISPs, by virtue of the integral role that they play in the process of accessing and delivering infringing content from the foreign site to the end user, should be treated as an importer for purposes of Section 337.

If that doesn't work, the next argument is to portray the ISPs as involved in the sale of counterfeit goods.

Even if we cannot persuade the ITC that network access ISPs are “importers” of the infringing articles, it can plausibly be argued that the network access ISPs are engaged in a post-importation “sale” of the infringing articles to their end-user subscribers, in violation of Section 337. See 19 U.S.C. §1337(a)(1)(B) (providing that “sale after importation into the United States” is an unlawful act). The difficult question presented here is whether an ISP, by providing network access in exchange for its subscribers’ payment, can be found to have engaged in the “sale” of the infringing articles as that term is used in Section 337.

The arguments don't get any less ridiculous. There's a pitch for ISPs to have participated in "unfair acts" by "forcing" (read: allowed customers to access sites the MPAA doesn't like) the motion picture industry to "compete" against infringing copies of its own works. There's even a small paragraph that pushes the notion of contributory infringement, although the law firm notes that this would be the longest shot of all. The likeliest approach appears to be the use of the ITC's power to obtain cease-and-desist orders against ISPs, forbidding them from allowing access to "pirate" sites.

Public Knowledge's brief [pdf link] in opposition to the ITC's pending power shift points out that even though the statute itself is old (Tariff Act of 1930), its authors directly contemplated the difference between physical and more ethereal goods -- and made it clear that the two shouldn't be treated identically.

Evidence from the early 1900s indicates that Congress and others would have cleanly distinguished importation and telecommunication, vesting authority over each in distinct agencies. Treating the Commission as having authority over telecommunications data, then, conflicts with this distinction. To the extent that the Commission’s interpretation of “digital data” as an imported article encompasses such telecommunications data, this Court should reject that erroneous interpretation of the Commission’s purview.

[...]

There is substantial evidence that, around 1930, data transmissions were generally understood to be distinct from articles of commerce and international trade. This understanding influenced Congress, as reflected in its creation of separate and distinct agencies to oversee trade and telecommunications.

The distinction was highlighted by the Supreme Court as early as 1887, in considering one specific type of telecommunications data, namely telegrams:

Other commerce deals only with persons, or with visible and tangible things. But the telegraph transports nothing visible and tangible; it carries only ideas, wishes, orders, and intelligence. Other commerce requires the constant attention and supervision of the carrier for the safety of the persons and property carried. The message of the telegraph passes at once beyond the control of the sender, and reaches the office to which it is sent instantaneously. It is plain, from these essentially different characteristics, that the regulations suitable for one of these kinds of commerce would be entirely inapplicable to the other.

The brief also points out that, while the ITC is correct in noting that internet transmissions couldn't possibly have been envisioned during the crafting of the 1930 Tariff Act, similar "articles" like telecommunications and radio signals had already been discussed by Congress, and each time, these were not allowed to fall under the same regulatory agency.

Putting the ITC in charge of digital transmissions will turn ISPs into ad hoc customs agents who need to inspect incoming packets and outgoing requests. Cloud services would also be negatively affected, as load balancing would need to be rebuilt from the ground up in order to accommodate the legal concerns now inherent in every transmission. The DMCA safe harbor would no longer exist, forcing ISPs to stay one step ahead of IP holders, building in anticipatory takedown response systems and choke points. The MPAA still wants site blocks and is still willing to break the internet to get them. Even the cautiousness displayed in the legal memo still glosses over the severe disruptions this use of the ITC's new powers will cause.

The good news? The ITC's "digital = physical" shift isn't in effect yet. The case prompting this shift is still under appeal and no decision is expected until late 2015. Chances are, this decision will be appealed as well, likely landing it in front of the Supreme Court sometime in the next few years. The MPAA can't move on its arguments until this is all decided. But it's ready to move as soon as it can, and this isn't its only plan of attack.

Filed Under: 3d printing, copyright, itc, patents, site blocking, sopa, virtual goods
Companies: clearconnect, mpaa

Blizzard Sells $2 Million In Virtual Livestock In Four Hours

from the celestial-bubbles dept

From Farmville to Second Life, there's no question that if you're able to create a virtual world in which people pay real money for virtual goods, then you've got a winner on your hands. For years now, virtual sweatshops have existed to farm World of Warcraft for gold and rare items, that can then be sold for real money. For example, a "Spectral Tiger" can fetch over $800 on eBay right now. That said, Blizzard has started to capitalize a bit on this trend, and now sells virtual pets through its online store. The latest is a "Celestial Steed," which, for $25, allows players to "travel in style astride wings of pure elemental stardust." In four hours, Blizzard sold approximately $2 million in virtual livestock -- apparently Blizzard understands how to give their community good reasons to buy (which is fortunate for Blizzard, since WoW's subscriber base is rumored to have plateaued).

This sale sparked off a bit of a debate amongst the WoW community, who argue that being able to "buy your way" through the game destroys the game in favor of profit. It will be interesting to see if this sentiment grows enough to warrant a Blizzard response -- like we saw in the case of Dungeons & Dragons Online, who removed some recent changes because of overwhelming negative feedback. That said, even if the complaints remain at a dull roar, a glut of Celestial Steeds roaming the plains of Azeroth would wreak havoc on its street value. After all, even though the world is virtual, many of the same laws of economics that affect the real world also apply. Blizzard likely understands these economic concepts will and will undoubtedly stop selling the Celestial Steed at some point to maintain an artificial scarcity.

That said, the only reason such artificial scarcity works in WoW is because Blizzard has absolute control over the economy. Those that think that Blizzard's success automatically means that people will pay for infinite goods in the real world will find that it is a bad comparison to make. So, if you want to sell imaginary, flying horses, then it's best to build a virtual world over which you have total control, in which those horses have some sort of value -- but that's not trivial.

Filed Under: virtual goods, world of warcraft
Companies: blizzard

Virtual Goods, Scams, Investigative Reporting And The Media

from the all-in-one-package dept

For many years, we've been quite skeptical of any business model in virtual worlds/social networks that rely on "buying virtual goods." That's because these are all based on artificial scarcities, and as we all know (hopefully, by now), relying on artificial scarcities for a business model is incredibly risky, especially once people realize the scarcities are artificial. And yet, over the past few years, a number of businesses have been built on this very premise. In fact, Silicon Valley is crawling these days with businesses built on selling virtual goods, and if you talk to many VCs about it, you'll quickly note that they're positively giddy over the fact that people are paying for this stuff. What they don't seem to realize is that it's unlikely to last.

In the last couple weeks, Mike Arrington, over at TechCrunch, did an amazing job calling attention to the widely known, but rarely discussed in polite company, dark underbelly to most of those business models: quite a large part of their revenue is based on scammy offers that effectively trick unsophisticated purchasers (often kids) into signing up for expensive subscriptions to things they don't want. I was at an investor "roundtable" a couple months ago, which was mostly bankers in suits, and they were laughing about just how gullible people are on these things, and it's great to see TechCrunch exposing them, and pushing the worst abusers to clean up their act. Of course, even when some, like Zynga, claim to be cleaning up their act, Arrington was able to dig up a video where Zynga's CEO proudly talked about the scammy tactics he used -- and then noted that these same scammy tactics showed right back up on Zynga, after the company promised they were gone. Those who use these kinds of tactics may find that while they "bring revenue now," it may be short-lived. Companies that focus on such abusive tactics live to regret it (just ask RealNetworks).

But, the really amazing thing, as pointed out by Dan Lyons/Fake Steve Jobs, in an amazingly un-Fake-Steve-Jobs-like rant, is to compare the series of writeups by Arrington with the love letter to Zynga and other "virtual goods" companies in the NY Times, which came out after most of Arrington's posts, and makes no mention of them at all. As Lyons/FSJ notes:

So: they walked into this shit-storm and somehow, by some miracle, managed not to notice the fecal matter flying all around them. It's like covering a football game that took place in the middle of the blizzard and neglecting to mention the weather.

Now, maybe they did all the reporting before Arrington's stuff broke. In which case they should have gone back and updated their info. Or maybe, just maybe, Zynga's PR people teed up a Times story as a kind of rebuttal to what Arrington was reporting. Either way, that's what ended up happening: Zynga used the Times to deflect the bad shit flying at them from Arrington. They need good press because they're hoping to cash out by going public next year. That story in the Times will be worth millions. Many millions.

Meanwhile, Arrington, still digging, blasted again on Saturday night, reporting that sleazy ads had popped up again on Zynga, despite promises that they would be taken down.

Um, New York Times? If you guys are still wondering why people are dropping their subscriptions and getting their news from blogs instead of you -- this is why.

After which, Lyons/FSJ notes:

And to all those people who go around wringing their hands and saying what are we going to do when the "real newspapers" all die and we have to get our news from Gawker and HuffPo and TechCrunch? Friends, I think we're going to be just fine.... What really cracks me up is how often I still hear people say that bloggers are mere "aggregators" and the "real journalism" gets done at places like the Times. Because time after time, blogs are simply beating the shit out of the newspapers. They're the ones who still dare to go for the throat, while their counterparts at big newspapers just keep reaching for the shrimp cocktail.

Of course, there's just a bit of irony in noting that Dan Lyons wrote one of the quintessential blog bashing articles four years ago, when he was writing for Forbes, at one point suggesting that blogger "journalists" were no different than notorious (NY Times) maker-up-of-stories, Jayson Blair. Nice to see he's coming around to recognizing things perhaps aren't so bad in the blog world.

Filed Under: bloggers, dan lyons, media, michael arrington, offers, reporting, scams, virtual goods
Companies: offerpal, techcrunch, zynga

Linden Lab Sued Over Copied Virtual Goods

from the dmca,-anyone? dept

Way back in 2003, when Linden Lab announced that individuals owned the real world copyright on virtual trinkets they made in the game, we noted that this was a bad idea that would lead to problems. It was, in effect, taking bad real world laws and bringing them into a virtual world. It was even worse, because it was taking real world laws that were designed for a world of scarcity, and bringing them into a world of abundance -- and effectively allowing the laws to reach from the real world into the virtual world. That's a recipe for trouble.

And, indeed, a few years back there were lawsuits over "copied" products, though the main one we know of ended with both sides dropping the case. However, a new lawsuit has been filed, but this time, Linden Lab itself is a target, and the guy suing is claiming both copyright and trademark infringement. It's the same basic story. A guy creates virtual things (in this case, "sex toys") in Second Life, others copy them, and he's pissed off, so he sues. But he's suing Linden Lab, perhaps because it's better to sue a company that actually has money.

But legally, it seems like a huge longshot. The copyright claim should get tossed out pretty quickly due to DMCA safe harbors. The guy filing the lawsuit claims they don't apply "because it is aware of the rampant infringement of Alderman's copyrights and trademarks, and hasn't take proactive steps to prevent that piracy." Unless there's specific evidence of Linden Lab being informed of a particular infringement that Second Life ignored, it's hard to see how this isn't protected by the safe harbor. The trademark claim isn't covered by safe harbors (which is a problem...), but it's difficult to see how anyone could claim that Linden Lab is the one violating anyone's trademark here. Yet again... someone who can't handle the fact that digital goods are copyable feels he needs to lash out and sue everyone, rather than adapt.

Filed Under: copyright, dmca, liability, safe harbors, trademark, virtual goods
Companies: linden lab

A Few Extra Virtual Maps Isn't A Real Reason To Buy A Video Game

from the it's-about-the-scarcity dept

There's definitely been an ongoing battle in the video game world from some executives complaining about used game sales for console games (there's been a bit of confusion in the past tying this to video game DRM -- which is more focused on PC games). We noted that EA was among those concerned, but was hoping to give people more reasons to buy new, rather than second hand. However, some folks in the comments complained about the methods EA was using, and that's worth a further discussion, especially as other examples are being shown. Reader DEF points out that another video game company, Epic, is trying to encourage original purchases by giving buyers a free voucher for certain in-game items, such as special maps. Such vouchers would only work for the initial buyer, thus, in theory increasing the value of the initial purchase.

There are a couple of problems with this approach. While I do think it's better to come up with "reasons to buy" rather than trying to sue people or pass laws requiring a cut of the secondhand market, this approach may get it backwards. Effectively, they're selling "infinite goods" rather than scarce goods, and that seems likely to backfire, for a few reasons. First, it actually diminishes the value of the game. One aspect that buyers take into account is the resale market. An active second hand market increases how much people are willing to pay for the original product, because they recognize that they can sell it later.

Second, when the focus is on charging for infinite goods (or only promising them to those who buy first hand copies), the incentives get risky. Suddenly, gaming companies are put in a position of choosing what "virtual" items are allowed in the game for first hand buyers vs. second hand buyers, and that leads them to make bad decisions in locking up important aspects of a game, frustrating potential buyers.

Plenty of games have shown that money can be made in charging for the service (a scarce good) of connecting and accessing an online world or community. If video game makers focused on that, then the entire issue of the second hand market wouldn't be such an issue. In that case, they'd want to get the actual games distributed as widely as possible, with as many features enabled as possible, to make the idea of playing in the online environment even more appealing.

Filed Under: infinite goods, video games, virtual goods, virtual map
Companies: ea, epic

Dutch Kids Convicted For Stealing Virtual Magic Amulet

from the are-you-kidding-me? dept

It's been over five years ago since we pointed out how silly the world would be if we started bringing real world justice into virtual worlds. It sets up a ridiculous situation, since the way any virtual world works is based on how it's programmed. If there's a problem with an action, it should be up to whoever controls the game to fix the problem, rather than the real world police. If you start setting a precedent where the "theft" of a virtual item in a video game is considered theft, then how do you deal with online worlds where theft is a part of the game? If the game allows it, then it should be a part of the game.

Even with plenty of people warning about how ridiculous it would be for police to get involved in searching for a stolen magic sword, it seems that hasn't stopped people from going to the police. In the past, the lawsuits have usually been for other crimes besides theft, though. We had one for illegal computer access, after a woman logged into a boyfriend's account and deleted his virtual objects. In another case, someone was charged with copyright infringement for "copying" weapons.

However, now we have a case of an actual theft charge in the Netherlands. Two kids have been convicted of theft of a (I kid you not) "virtual amulet and a virtual mask" in the game Runescape. The details are pretty scarce, but apparently the two kids "coerced" another kid to hand over the items, and to the court that's as good as theft:

"These virtual goods are goods (under Dutch law), so this is theft."

I have to admit I don't know much about Runescape, but a quick look at the website mentions that it can involve "fights to the death." Does that mean we'll soon have murder charges stemming from the game? Update: Some folks in the comments have helpfully filled in some of the details that were lacking from the original article. The two kids in this case apparently beat up and threatened at knifepoint (in real life) the other kid in order to get him to give them the virtual amulet. As others in the comments point out, it sounds like they should have been charged with assault and battery, but still not theft.

Filed Under: laws, netherlands, runescape, stealing, theft, virtual goods, virtual worlds

Bad Ideas: Trying To Build A Marketplace Of Virtual Goods

from the let-me-explain-some-basic-economics... dept

I've seen a few company lately trying to build marketplaces around the idea of selling virtual goods, and the latest one, Live Gamer, gets a big writeup in the Wall Street Journal over its plans to build a marketplace for virtual goods and characters from online worlds. This is hardly a new idea, as there's been significant trade in these types of goods either on company approved sites or more informally through sites like eBay. However, it seems quite dangerous to base an entire business on this concept. The economics of virtual goods gets screwed up very easily once you realize that there are no truly limited resources within virtual goods. Sooner or later people figure out how to copy virtual goods, just like they've learned to copy music and movies -- and suddenly the idea of charging directly for those goods becomes a lot more difficult. It's just basic economics. The VC firms betting on this new concept seem to believe that the company (or the various gaming companies) will somehow be able to hold off this economic reality, but that seems incredibly risky. The entire market is based on an economic model based on false scarcity, and that seems quite dangerous. It may work temporarily, but there's a big reality called "infinite supply" that's likely to make any such model come crashing down eventually.

Filed Under: economics, marketplace, virtual goods
Companies: live gamer