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Slide 1 VIRTUAL WORLDS VS. REALITY BY: ALISON OLSON Slide 2 VIRTUAL WORLDS: A FIRST-HAND ACCOUNT OF MARKET AND SOCIETY ON THE CYBERIAN FRONTIER Norrath: is a virtual world that exists entirely on 40 computers in San Diego. 12,000 people call this VW home 20% a place of residents ~60,000 people are active in Norrath at one time Slide 3 MAKING MONEY IN VIRTUAL WORLDS 2004: annual revenues were expected to top USD 1.5 billion Developed assumptions to be made for the future of VWs to be the main source of online activity Meeting place Market place Home Slide 4 EXCHANGE OF CURRENCY Norrath Currency vs. US dollar Highly liquid (if illegal) currency market Surpsses both Japanese Yin & Italian Lira Avatar shoes vs. Car tires Slide 5 COMMERCIAL POTENTIAL Mindark: Private Swedish Company Build up a global network monopoly in internet interface Commercial Potential: Lara Croft lookalike avatar will be able to follow up her tough day of adventuring with a run into the nearby virtual JC Penney -- to buy her owner a new suit, for real money. Slide 6 3 FEATURES OF VIRTUAL WORLDS 1.) Interactivity: it exists on one computer but can be accessed remotely (i.e. by an internet connection) and simultaneously by a large number of people, with the command inputs of one person affecting the command results of other people. 2.) Physicality: people access the program through an interface that simulates a first-person physical environment on their computer screen; the environment is generally ruled by the natural laws of Earth and is characterized by scarcity of resources. 3.) Persistence: the program continues to run whether anyone is using it or not; it remembers the location of people and things, as well as the ownership of objects. Slide 7 OTHER VIRTUAL WORLDS Meridian 59 or M59 (1995) Ultima Online (UO), (1997) 3,600 employees & $1.3 billion in annual revenues Sims Online (2002) Slide 8 MONOPOLIZING HUMAN BASED NETWORK User purchases game software User purchases additional monthly fees ($10-$20) to allow access on an ongoing basis Sony monthly revenues Everquest ~$3.6 million Online gaming revenues $208 million (2000) Estimations made for $1.7 billion by 2004 Slide 9 WHY ARE VWS SO APPEALING? Be whoever/whatever you want to be Customize your avatar Short Be tall Desire Brilliance Wizard Aggressive Immense Strength Fly, teleport, shoot flaming fireballs, (*budget constraints apply) Slide 10 WHY ARE VWS SO APPEALING? (CONT.) Real equality of opportunity Born penniless Same minimal effectiveness Bad reputations can be stripped clean & replaced Slide 11 CONSTRAINTS IN VIRTUAL WORLDS Death robs Avatar of some/ all powers Large amount of goods can only be obtained from other Avatars or biots Always at cost of risking death No free lunches Social roles are not open all Must compete against other Avatars to obtain a role Slide 12 HOW TO GAIN MONEY Develop social roles Surpass a new level Avatar at level 6 kills 100 kobolds level 7 Leads to enhancements to make the Avatar more desirable socially Slide 13 ARE VIRTUAL WORLDS REAL? Economists view it is real Labor force Gross national product Floating exchange rate Norrath > currency transactions than other VWs Norrath is distributed over 40 different servers Slide 14 EARTH VS. REALITY 20% live in Norrath as a permenant resident 22% express desire to always spend time there 40% claim that if a satisfactory wage were available they would stop economic activity of Earth (i.g. work or school) 60,000= population, 12,000= permanent residnce Slide 15 NORRATH DEMOGRAPHIC Well-educated, single, U.S. man, 20 yrs. old, earning $20 per/hour 35% students Residents: lower education, fewer work hours, lower wages, less likely to have major obligations (spouses, children) 4 hours per day for visitors 6 hours a day for residents Slide 16 INCOME a2a markets= scarce goods Buying & selling weapons, spells, etc. Shrewd buyers travel to zones where the goods they seek are abundant Two markets: a2b markets for hunters to gain their wages by killing monster biots & selling their loot to merchant biots a2a goods market, existing in all zones but heavily concentrated in just one, where merchants and hunters engage in a cumbersome trade in certain scarce items. (auction and trade) Slide 17 TRADES IN VIRTUAL WORLDS Norathian goods are underground Intellectual poperty Trading for U.S. currency is considered theft Foreign trade markets & exchange rates Several $ based for platinum pieces, Avatars, & auctions exist on web auction sites. Ex.) Earthling A gives Earthling B the money. Then they both create avatars in Norrath and meet at an agreed-upon spot, where Norrathian B gives Norrathian A the item Slide 18 TOTAL VOLUME OF SUCCESSFUL AUCTIONS Successful Auctions= 112 Totaling $9,200.32 Currency transactions conducted= 32 Totaling $3,700 At an annual paces these numbers put the gross exports of goods & currency at more than $5 million (3.5% of gross annual outout) Slide 19 AUCTION TRADES Avg. price of a platinum piece in U.S. dollars= 0.01072 A little more than a penny Higher currency than Yen & Lira The market for avatars can be used to develop an estimate of Norrath's GNP per capita Avatar accounts= $500 to $1,000 (ready made loose freedom to design your own personal wizard) Auctioned Avatars have a pre made account Higher Avatar levels increase their stock wroth Slide 20 SHADOW PRICES $13 dollars per level of Avatar Data from NES (Nintendo Entertainment System) shows that Norraths Avatars create about $15,000 in avatar capital in an hour Gross national product = $135 million Per capita = $2,266 According to GNP data from the World Bank. Norrath is the 77th richest country in the world, roughly equal to Russia Slide 21 INFLATION Price index based on 29 different goods (ex. chest armor, boots, helmets, weapons, etc.) Avoided very high end items & low end items All item are equal in weight Looted from biots vs. crafted by Avatars Apart of original Everquest or an expansion of the game Slide 22 INFLATION TABLE Table 4. Price Indices For Norrathian Items INDICES Q4 2000 Q12001 Q2 2001 Q3 2001 Overall Item Index - Weights each item equally 100.00 89.85 82.05 71.17 Loot Index - Items not made by avatars 100.00 90.68 81.36 69.28 Old World Index - Items before Kunark and Velious 100.00 93.76 87.26 82.73 New World Index - Items from Kunark and Velious 100.00 79.60 68.39 40.84 Craftwork Index Items crafted by avatars 100.00 84.67 86.40 82.97 Old World Loot Index - Looted old world items only 100.00 95.90 87.46 82.6 Slide 23 NOMINAL WAGES Hourly Wages < Earth Wages Estimate wages of platinum pieces by amount of work Avatar has put in 3,619 NES respondents gave valid information on 7,397 of their Avatars Avg. Avatar makes 319 PP per hour Market exchange rate of 0.01072 PP per dollar= $3.42 per hour Avg. Earth wage in NES= $20.74 Norrath Residents= $17.57 Avg. Norrath Resident utility worth= $14.15 80 hrs. Norathian Cash & Goods worth= $273.60 1 month= $1,000, 1 yr.= $12,000 Slide 24 POVERTY& INEQUALITY Single Person in U.S. =$8,794 Higher Level Avatar= more wealth than lower Avatars with wealth holdings allow us to calculate two stats: 1.) poverty rate as the % of Avatars wealth >50% of te median wealth (33% of Avatars are poot) 2.) poverty rate at mean wealth, poverty rate =68%, Norrath is less equal that its distribution in post-industrial societies on Earth Slide 25 WHY ARE ECONOMISTS & SOCIAL SCIENTISTS SO INTERESTED? Unique laboratory for research on human society Potential to be the most important forum of human interation (telephone) widespread changes in organization on Earth society Expansion is likely to keep growing Tens of thousands spend more time on VWs than at their paid employment Similar #s use Earth money to buy things in VWs $1 million & growing willingly pay monthly fees Slide 26 FUTURE OF VIRTUAL WORLDS Project Entropia: Buy things for Avatars with real currency & credit cards Mindark: Virtual Jobs (ex. Walmart uses you Avatar to sell Avatar clothes in a virtual Walmart) Norrath: chat based a2a meetings & classes Emailing reports to the boss, will eventually become "going to work" in a virtual office and holding face to face meetings with the avatars of coworkers Family gatherings while living thousands miles away, etc. Slide 27 DICE 2010: DESIGN OUTSIDE THE BOX PRESENTATION PROFESSOR JESSE SCHELL Slide 28 BEYOND FACEBOOK Farmville > Twitter Facebook is HUGE Lead Generation > Direct Payment Play games for free Gain virtual $$$ Only use virtual $$ if you pay real $$ Get credit cards for virtual money LG is making more $ vs. Direct payment Slide 29 FACEBOOK: BIG, STRANGE, UNEXPECTED Wii fit: $1 billion Club Penguin: Inexpensive flash game for kids, millions a month, sold for $350 million to Walt Disney Guitar Hero: $70 dollar plastic guitar, winning game of the year Webkinz: Estimated value at $2 billion Slide 30 WHAT DO ALL OF THESE GAMES HAVE IN COMMON? Involve psychological tricks Club Penguin Free to play at first Gain vritual $$ Spend by being a paid member Webkinz: $12= $20 Magic animal inside stuffed animal (bring to life) Mafia Wars Play real friends want to beat them All busting through into reality Slide 31 WHY ARE PEOPLE DESIRING MORE REALITY? Reality TV Organic Foods Authenticity Book Are things real or authentic? Virtual has taken us form nature Desire to be real now Fantasy football, Weight Watchers, growing virtual plants in cars to motivate fuel efficient driving, etc. Slide 32 FUTURE Disposable technology Can of pop= wifi with a screen Points for brushing teeth, eating cereal etc. Using bus= tax incentives from government POINTS will be for everting inspire us to be better people is the games are designed right presentation/