What is a Virtual Economy?

The majority of online games does not have a distinct win or lose scenario. Instead, they are designed to allow for gamers to build up their Avatars in the virtual society by earning virtual currency and developing skills, so-called “leveling up”, that make each character more powerful.  Property, both real and personal, can be purchased or created in the virtual world and used by the Avatars.  As such, the virtual world society works much like that of a real world society.  However, since certain gamers do not wish to invest the time and effort necessary to create a character and build up the level of wealth and status that the game makes available after many hundreds of hours of play, a secondary market has arisen to cater to these individuals.  Many gamers have begun to sell their digital goods, property or Avatars for real world money on IGE, eBay® and other similar eCommerce websites.  In certain cases these items have sold for significant sums, as demonstrated by a virtual island that sold in Project Entropia for $30,000, a virtual representation of Amsterdam in the game Second Life which sold for $50,000 and a virtual space station which also sold in Project Entropia for $100,000.  Some research has stated that last year more than one billion dollars has traded hands as part of this secondary market.  Virtual entrepreneurs have noted this and attempted to cash in on it in various ways, including by setting up digital sweatshops, where third world laborers play online games around the clock obtaining and creating virtual avatars, properties and goods that can then be sold for real world cash.  From these humble origins, virtual world business has blossomed to include the virtual world presence of such blue chip companies as IBM, General Motors, Toyota, CBS, Dell, Cisco Systems, Sun Microsystems.  Moreover, American Apparel, Reebok and Starwood Hotels have offered their products and services for sale to the virtual public.  

    Additionally, certain virtual worlds like Second Life have in-game virtual monetary exchanges. Moreover, various websites allow players to trade in virtual goods and currency for real world money.  The main issue that exists with these sites it that they are generally trading virtual assets that are barred from sale by the terms of the EULAs for the relevant games.  The recent launch of the site www.livegamer.com has eliminated the question whether the transfer of virtual property was in violation of the EULA.  This is due to the fact that Live Gamer partners up with virtual world development companies like Sony, GoPets, Acclaim and others to create a secure system to sell virtual items from their games.  Since Live Gamer only supports transactions for items from virtual worlds they are licensed to work with, there is no question as to the scope of their rights.