24houressay.co.uk | Online Economies

Sample Work > BUSINESS

How are online economies, such as those in 'Second Life' and 'World of Warcraft', becoming real-world concerns?

While rumours of a possible hack-based online invasion of 'Second Life' by a 'World of Warcraft' army gather pace, the release of 'Modern Warfare 2' highlight a growing problem for the games industry, which is finding it increasingly difficult to charge high RRP's for products ('Modern Warfare 2' has a RRP of nearly £60 in the UK) while online game environments are often either free or, at the very least, far cheaper. Furthermore, online game environments also allow users to generate profit and, through various mechanisms, to transfer those profits to the real world. A number of individuals have already become real-world millionaires thanks to online economies such as those operated in 'Second Life' and 'World of Warcraft', and most analysts suggest that these economies - which are already extremely powerful - are likely to become massively more important over the next decade, to the point that they may dwarf the national economies of some of the world's smaller nations. However, critics note that these online economies lack effective regulation, and that criminally-acquired assets can sometimes (at least in theory) be laundered through such systems; calls for proper external regulation of such environments have been growing in recent years. It's clear, therefore, that the high prices of real-world boxed software is having a dramatic effect on the development not only of online life, but also the broader world economy as a whole.

One reaction to increasing game prices has been a boom for online gaming, with some services reporting that 2009 user figures are almost double the level reached by the end of 2008. Even online games that charge a modest subscription fee are finding that users are far more willing to pay a few pounds or dollars for a one-year gaming experience, than up to £60 for new boxed products such as 'Modern Warfare 2'. While many boxed games now come with online playability built in as standard, gamers are increasingly side-stepping the need to buy physical games, and are instead flocking to online environments such as 'Second Life' and 'World of Warcraft'. Both these MMORPG (Massively Multiplayer Online Role-Playing Game) environments allow users to effectively construct their own gaming narratives, limiting their interaction with other plays if they prefer to remain solo, and more or less allowing completely free movement through the gaming environment. In fact, while some analysts believe the next step in the evolution of gaming will see games such as 'Modern Warfare 2' become solely online experiences, some commentators believe the real next stage will involve cross-compatibility: for example, characters from 'World of Warcraft' might be able to interact with characters from 'Second Life', either in a neutral gaming environment or even, if reports of attempted hacks are to be believed, with armies from 'World of Warcraft' invading 'Second Life'. Clearly, online gaming is reaching a tipping point at which the creators of the games may soon lose control over the environments in which players operate.

Many users also see online gaming environments as a means to generate profit, and although only a tiny percentage of such players successfully earn enough to live off, this doesn't stop thousands (and potentially millions) from attempting to establish in-world businesses that can generate a real-world profit. 'Second Life' has been the market leader in this sector, and the online environment created by Linden Labs is estimated to have a GDP of $64m - still far behind real-world national economies, but nonetheless unprecedented for an online game environment. In fact, the existence of the Linden Dollar as a form of in-game currency has attracted considerable attention from fiscal regulators around the world, since some critics argue that 'Second Life' is effectively operating an economy that allows players to (potentially) launder money within the online environment. So far, Linden Dollars have existed in a kind of grey area between real-world money and gaming tokens, but many experts believe that the continuing growth of 'Second Life' will make it essential for Linden Labs to agree to stronger external regulation of its increasingly complex in-game economy. Similarly, games such as 'World of Warcraft' feature substantial and highly valuable online assets, such as powerful characters who can be sold to new players. Many people attempt to make a living by building up and then selling such characters, and although this is a somewhat hit-and-miss way of making money, skilled players are able to demand thousands of dollars for powerful characters. Again, there is very little regulation of this increasingly influential online economy.

It's clear that the development of online gaming economies is only just starting to mature, and that both game developers and real-world financial regulators will become increasingly concerned with efforts to ensure online currencies such as the Linden Dollar aren't used to launder assets or propagate banned activities. For now, however, Linden Dollars - like most parts of the 'Second Life' environment - are controlled by the Linden Labs company, and players who want to make a profit from this world are forced to find a way to understand not only the way in which Linden Labs works at the moment, but also the possible future decisions that the company might make, decisions that can be so influential in the online gaming world that many called them Acts of Linden, equated them with real-world Acts of God. Although this leads to a less than satisfactory regulatory system for online gaming environments, the high prices of boxed games such as 'Modern Warfare 2' make it likely that more people will turn to online gaming in the future, especially as the social stigma of spending large amounts of time playing such games continues to evaporate. It's unclear at what point national governments might step in to regulate the exchange of assets and other goods within environments such as 'Second Life', and for now Linden Labs appear to be taking steps to prove 'good faith' and try to self-regulate its gaming world. However, while this strategy might work in the short term, in the long term it's likely that at some point there will be a major overhaul of the way in which online economies and currencies work, and in particular the way in which they can result in real-world payouts for players.

RELATED ESSAYS

dot

How are computer games and films starting to merge?

BIBLIOGRAPHY

Denton, Nick (2007). Virtual World's Supposed Economy is a Pyramid Scheme

Linden Labs (2009). Second Life Economy Stats

Sloan, Paul (2005). Anshe Chung is Raking in Real Money in an Unreal Virtual World

Order your custom essay or dissertation here

Order your custom essay or dissertation here