By S' Gregory Boyd

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Presented to Austin GDC 2008
Virtual Property and Real Money Trade A
Business and Legal Survey

• By S. Gregory Boyd
• gboyd_at_dglaw.com

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Goals and Outline

• Virtual Property Generally
• RMT
• Economic Reasoning
• Virtual Property Systems Compared
• Legal Issues

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Take Home Points - Up Front

• RMT Growing in Importance and Revenue
• Willingness to Pay Is Key
• Careful with Cashing Out

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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

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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

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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

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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

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Economic Reasoning

• Willingness to Pay
• Subscription - Singular Value
• RMT - Adjusts for Willingness to Pay

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Subscription Model
Price
Users
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Full RMT Model - Free To Play



Price







Users
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Blended RMT Model - Price Floor



Price

Users
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RMT Models

• Pay for Perks
• Velvet Rope
• Objects/Land/Boons
• Currency and Dual Currency

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RMT Models - Big Choices

• Create the Goods
• Facilitate Exchange
• Cash Out
• Who owns it?

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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

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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

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Virtual Property Markets

• Station Exchange and Live Gamer
• XBox Live Points
• iTunes?

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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).

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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

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Legal Concerns

• Taxation
• Money Laundering
• Gambling
• Sweepstakes and Lottery

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Legal Concerns

• Securities Regulation
• Banking Regulation
• Disputes Over Ownership

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Alternatives to Cashing Out

• Subscription Time
• Status or other Intangibles I am Rich
• Deep Money Sinks Guild/World Events

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Take Home Points - Redux

• RMT Growing in Importance and Revenue
• Willingness to Pay - Is Key
• Careful with Cashing Out

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Contacts

• S. Gregory Boyd
• Davis Gilbert
• [phone]
• gboyd_at_dglaw.com