The E-Sylum:  Volume 7, Number 15, April 11, 2004, Article 16

PLAY MONEY GETTING MORE REAL ALL THE TIME

  A recent article in Wired magazine highlights an interesting
  trend involving make-believe money:

  "The buying and selling of virtual currencies, weapons and other
  goods from massively multiplayer online games like EverQuest
  and Ultima Online may be off most people's radar, but it is truly
  big business.

  One company, Internet Gaming Entertainment, or IGE, has
  more than 100 full-time employees in Hong Kong and the
  United States who do nothing but process its customers'
  hundreds of thousands of annual orders for virtual goods,
  the lion's share of which average nearly a hundred dollars
  each. And demand is so strong, says IGE CEO Brock Pierce,
  that the company is hiring about five new people a week."

  While IGE has had several hundred thousand customers
  since its inception in 2001, it depends on a stable of more
  than 100 suppliers -- hard-core players who sell IGE
  surplus currency, weapons and other goods they regularly
  accumulate.

  "They can play games all day and make a little money for it,"
  says Pierce. "Most of the time, they're selling off their garbage,
  but one man's garbage may be another man's treasure....
  They'll sell us that (extra) suit of armor, or sell the suit of
  armor in the game and sell us the currency, and then they'll
  go pay their rent with it."

  IGE's business treads into controversial waters in the gaming
  world. That's because its buyers are spending real cash to
  improve their lot in life, or at least in the games they play,
  without having to spend the time to do so."

  "This has led IGE to bring on Ken Selden, a Hollywood
  screenwriter and leading peddler of virtual goods, as its
  chief economist.

  "There's a relationship between real-life economies and a
  virtual economy," says Selden. "I happen to believe that
  these virtual economies are very real, serious economies."

  Selden says the strength of a virtual economy is determined
  largely by how stable its currency is. And because IGE is
  the largest secondary market for the currencies of games
  like EverQuest, it has a lot of influence over the stability of
  the exchange rates between the game currencies and U.S.
  dollars.

  "Everything circulates around the exchange rate between a
  real and virtual-world economy," explains Selden. "We set
  the rates that we buy and sell at, and those are divined by
  supply and demand. The amount of currency in circulation
  at any point is extremely important to the out-of-game
  exchange rate."

  "One of the problems is that there isn't enough communication
  between the people who are minting the currency and the
  people outside who are selling it and defining it," he argues.
  "It's almost like the treasury isn't talking to the federal reserve
  in these worlds. And I think it's because the game companies
  are just waking up to how important it is."
  Wired Article on virtual currency.

  Wayne Homren, Editor

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