Games Everywhere – and the ubiquitous metaverse

Livegamer’s move into a “free economy” of sorts is the topic of an insightful blog posting by Wayne Porter, and I’m hesitant to comment much because I’m such an amateur at this stuff.

Porter points out that the trading of virtual goods is brought repectibility by LiveGamer and its significant venture capital backing. The broadening of economic trade outside the magic circle of games is further evidence of not only a migration of people to virtual worlds but wealth and economic production as well.

From my amateur’s armchair, I’ve given my take before on the economies of virtual worlds, riffing off the work of Edward Castranova, including my disagreement with him over the concept of protecting the magic circle.

Castranova argues for the protection of the magic circle, but I’ve been arguing that the membrane is too porous to protect – so long as people value objects, markets will be created for those objects whether in shadow economies, black markets, or legitimate exchanges. While there will still be true game environments, I can’t think of many MMORPGs that could survive without some sort of economic engine – it doesn’t need to be gold, necessarily, it could be tools, equipment, etc. Otherwise, they’re not virtual worlds, they’re shooters or simulations.

There’s thus the question of whether game environments are tainted by the intrusion of “real” commerce. The argument against this ‘taint’ is the importance of protecting space for play and immersion. But I believe, as Porter points out, that this is an anachronism of the “big game” era. While spaces for play and creativity should thrive, I think this will be achieved through ubiquity, not through protecting the walled gardens of the “big worlds”.

Metaplace is a taste of what’s to come. Islands and builds in Second Life are CLEARLY a sign of things to come. Games will be created by kids in their basement, companies wanting a quick new way to train staff on a new product line, and educators wanting to throw together a virtual classroom with live collaborative project and presentation spaces.

We’re well past the walled gardens, we’re headed into an age of the metaverse everywhere. There will soon enough be little mini worlds attached to mySpace pages, Facebook group profiles, and corporate Web sites. And the rapid emergence of augmented reality games not only means little universes everywhere, but the overlay of our own universe with information shadows and game grids.

Emerging business models such as the Twinity and Metaplace approaches to transparent commerce (use their coins, or use your own payment systems using Web services) demonstrate that the future of virtual worlds and games will include seamless bridges where commerce and content will flow freely into and out of these spaces.

There are, however, a few notes of caution:

Control of Mudflation
Most virtual worlds have economies because there is some sort of control over supply and demand. Objects in worlds cease to have any value if they aren’t consumed. In games like WoW, goods are consumed by being made into other goods, and in some cases made into objects that are non-transferrable. NPCs also play an important function in consumption – buying up the raiding junk that won’t sell at auction, but at least keeping some kind of market afloat. The issue of consumption of goods is critical – if goods don’t decay, if they don’t exit the world because NPCs buy them, through degradation, or because player’s toss non-transferable items as they level up, then you’ve got rampant MUDflation on your hands. But controlling for these factors can be a very fine balancing act on the part of the game developers.

Arbitrary Currency Control
The other thing to note is that game developers have levers in place to control the flow of currency into and out of worlds. This allows subtle shifts in the supply of money. Without these controls, players who are partly interested or motivated by the economics of virtual worlds (whether through actually “making” money or simply levelling up by purchasing better gear) can get side-swiped either through sudden spikes or decreases in the supply of money and thus prices.

As virtual worlds increase the level at which they’re seamless with “outside” economies, platform owners may start to control fewer and fewer levers. It won’t be too long before we see cases of economic collapse because, in essence, the federal reserve has been shuttled out of the picture.

Invisible Economic Metrics
Conversely, however, platform owners can play tricks with virtual economies in ways that aren’t transparent to users who may be highly invested in particular virtual worlds. The example of Second Life pegging the Linden to the US dollar is an example. This is arbitrary, and the spread of the actual rise and fall of the Linden is covered by Linden Labs. But just as it’s in their power to control against a sudden decrease in the value of the Linden, it’s also in their power to remove their hands from the wheel (for financial or other reasons) and let the economy spin off on its own.

Let’s face it – with X billions of objects in Second Life, few of which deteriorate (although MANY of which are lost in someone’s inventory), surely the value of a shirt is worth less now than it was a year ago. How many shirts have been made? But so long as the Linden is pegged at an artificial rate, the illusion of an economy can be maintained. The real SL economy is in the island and off-world economy, but these statistics aren’t tracked (or if they are, they aren’t published).

Users often take it for granted, in a cycle of trust, that the platform owners are working in their best interests – they have an interest in working economies that don’t collapse, otherwise they lose their users. But as virtual worlds grow and real economic value starts to accrue to them, this might be courting disaster.

I’m as interested in understanding the economic underpinnings of virtual worlds as the Terms of Service IP provisions. Metaplace, for example, promises seamless flow-through transactions, and is offering Metabucks as a mechanism for making micro-payments simple across multiple currencies. I’m eager to hear how they solve the dilemma of exchange rates and whether they would ever float the currency (or will it always be a Metabuck out for every real buck in?)

The Gift Economy
Lost in the discussion of virtual world economies, however, is something that I think is far more profound and would be worth far more to measure, and that’s the value of the gift economy. Virtual worlds support the notion that in an increasingly open source, grassroots, user-controlled world that reputation and sharing can be worth far more than how much you got paid for the latest sword. Gold farmers in China might grind out a living, but increasingly the real value, as in the open source software community, will be in how you’re perceived within an economy of gifts, contribution, and reputation. This is as true in a guild system as it is in an ‘open world’ like Second Life and the worlds like it around the bend.

I’d love to see a study on how many goods trade hands without an economic exchange. My guess is that the ‘gift’ economy might be worth far more than the exchange economy. And my second guess would be that as we come to terms with the implication of this, just as Microsoft and IBM have come to terms (in their own ways) with the “gift” economy of Linux, that we’ll start to understand that the real engines of production are both right in front of us and yet invisible.