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By S. Gregory Boyd - cmpmedia.vo_cash out

VIEWS: 5 PAGES: 24

									 Presented to
 Austin GDC 2008


Virtual Property and Real Money Trade: A
        Business and Legal Survey


                       By S. Gregory Boyd
                       gboyd@dglaw.com
Goals and Outline

 • Virtual Property Generally

 • RMT

 • Economic Reasoning

 • Virtual Property Systems Compared

 • Legal Issues

                                       2
Take Home Points - Up Front

 • RMT Growing in Importance and Revenue

 • Willingness to Pay Is Key

 • Careful with Cashing Out


                                           3
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


                                                                   4
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
                                                        5
A Very Short History of RMT

 •   RMT - Mixed Player Reaction in US

 •   Until Approximately 2006 or 2007 - Near Total US EULA Ban

 •   RMT - “Normal” Asia

 •   Gray Market RMT Blossoms in US

 •   US Publishers - Coming Around

                                                                 6
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

                                                               7
Economic Reasoning

  • Willingness to Pay

  • Subscription - Singular Value

  • RMT - Adjusts for Willingness to Pay




                                           8
Subscription Model




    Price




                     Users
Full RMT Model - Free To Play




    Price




                   Users
Blended RMT Model - Price Floor




    Price




                   Users
RMT Models

 • Pay for Perks

 • Velvet Rope

 • Objects/Land/Boons

 • Currency and Dual Currency

                                12
RMT Models - Big Choices

 • Create the Goods

 • Facilitate Exchange

 • Cash Out

 • Who “owns” it?


                           13
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

                                                           14
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

                                                              15
Virtual Property Markets


 • Station Exchange and Live Gamer

 • XBox Live Points

 • iTunes?



                                     16
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).


                                                    17
18
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

                                                                         19
Legal Concerns

 • Taxation

 • Money Laundering

 • Gambling

 • Sweepstakes and Lottery
                             20
Legal Concerns

 • Securities Regulation

 • Banking Regulation

 • Disputes Over Ownership


                             21
Alternatives to Cashing Out

 • Subscription Time

 • Status or other Intangibles – “I am Rich”

 • Deep Money Sinks – Guild/World Events


                                               22
Take Home Points - Redux

 • RMT Growing in Importance and Revenue

 • Willingness to Pay - Is Key

 • Careful with Cashing Out


                                           23
Contacts

 S. Gregory Boyd
 Davis & Gilbert
 (212) 468-4942
 gboyd@dglaw.com




                   24

								
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