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VIRTUAL GAMES, REAL MONEY

Cash in with online games

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Go ahead and rear pigs or dig for gold online. It might just make you some cash. The tax is real though.

Can growing virtual crops or developing real estate online make you real money? Though most addictive games end up making people spend cash on virtual goods, some smart gamers are actually playing for profit. Last year, the Supreme Court in South Korea even equated virtual currency to real-world money. And the government has now ruled that game currencies can be legally converted into real-world cash. This means that gamers could make a living by digging for treasure online or looting nearby 'virtual' villages.

The landmark ruling was passed in a case where two gamers were jailed for amassing real cash to the tune of 20 million won (Rs 8. 14 lakh approx) by buying and selling millions of 'Adena' - the virtual currency of 'Lineage', an online role-playing game. Of course, the duo's earnings are also taxable according to the new law.

But while trading in virtual money isn't new, it is the first time that it has been recognised as valid by any country. "That is just the beginning, " says Beth Robertson, director of payments research at Javelin Strategy & Research, a financial services and security consultancy. "Virtual currencies are going to move more and more into a mainstream environment. "

FUTURE OF SPENDING

Game money, aka credits, which one can earn by farming and tending cattle on Facebook, already lets people in the US buy everything from digital magazines to productivity apps. In fact, Warner Brothers recently started renting out their film The Dark Knight in exchange for Facebook points. According to reports, Facebook sold nearly $1 billion worth of credits in 2010.
And while the social networking site does not monetise credits in India, the scenario is about to change, says Anand Shrivastav, who is chairman of Beam, an Indian mobile commerce company. According to Shrivastav, Facebook's virtual economy will soon start rolling out in the country. His company, he says, is already in talks with the service and the Reserve Bank of India to make credits a viable currency here.

Facebook, of course, isn't the only company betting its money on virtual cash. Apple Inc has already allowed iTunes developers to charge subscription fees through their applications, making iTunes the gateway for a new breed of transactions. Research in Motion announced a similar initiative a couple of years ago, as did Google (Checkout, Android), Microsoft (Xbox points) and Paypal. Analysts at Javelin Strategy and Research believe that about 20 per cent of all online transactions have started taking place over these alternative payment systems. While this may not sound like much now, it can be a game-changer (literally) as financial institutions were the only ones managing the function of trading money till now.

FUTURE OF SELLING

The biggest advantage of virtual money is that it allows for impulse buying, avers Kenny Rosenblatt, co-founder of Arkadium games on Facebook. "With credits, when people want to buy, they can do it instantly, " he says. "They don't have to leave the social network to go fill out a form, or add their credit card details. "

"It's also a win-win-win situation for everyone involved, " Robertson says. "For instance, say you buy a jacket using Facebook credits. Here the social networking service wins by taking a slice of the transaction - they charge 30 per cent for every transaction made using credits. The jacket maker gets free or cheap advertising on Facebook;and, finally, the buyer wins because the manufacturer might give them a discount as a reward for posting about the purchase on their Facebook page. "

Blizzard Entertainment, the makers of the popular role-playing game World of Warcraft (WoW), struck a deal with First National Bank in the US to release a 'World of Warcraft Visa card'.

Like credit cards that offer redeemable points for money spent, every time gamers used the WoW Visa card to make purchases they were rewarded with free game time.

After receiving a free month of WoW for their initial purchase, players received "game time at the rate of 1 per cent of every dollar" for subsequent purchases. That means for each $1 spent on their WoW Visas, players stood to receive $0. 01 credit toward their $14. 99 monthly subscription fee.

Naturally, gamers caught on to the deal in a big way giving the credit card company an extra boost in sales without having to put in any real cash towards marketing the product.

FUTURE OF EARNING

"How do you turn virtual gold into the real item? This might sound like a digital alchemist's question, " says Richard Heeks, professor of Development Informatics at the University of Manchester in his paper 'Real Money from Virtual Worlds. ' But hundreds of thousands of 'gold farmers' in developing countries have found a lucrative answer to the question, he says. These farmers are making their living by playing online games like WoW. By assuming fantasy roles in these games, they kill monsters, mine ore or engage in other activities that earn 'virtual gold' which they then sell to other players, often in rich nations, for real-world currency. He describes gold farmers in China who play these games and sell virtual currency to earn the same wage (and sometimes even more) as that paid for assembling toys in a local factory for 12 hours a day. "But this trend of earning online currency in virtual games and selling it for real money hasn't restricted itself to poor nations, " Heeks says in his research paper, "People across the world are starting to resort to this method of earning money. " Indians too have caught on to this trend. Ambarish Deshpande, an MBA student from Bandra, Mumbai, says he has earned a few hundred rupees by selling the online currency he earned in WoW. And this is not completely unofficial either. Games such as WoW, Lineage, EverQuest, Eve Online actually have online exchange sites such as IGE. com and Mmobux. com that let you convert game currency into real money.

According to the going rates on IGE or eBay, for example, 3, 500 units of Gold from WoW could rake in $10 (Rs 500 approx).
"This means every time you go online and kill monsters, you are creating value as if you were working a shift at a local restaurant or petrol station, " says economist Edward Castronova, associate professor of telecommunications at Indiana University.
He explains that economies get more intense in a world like Second Life because publisher Linden Labs lets you own virtual property and create new virtual objects to sell to others. Anyone can cash out, and sell a valuable avatar or a big batch of gold on eBay;exchanging virtual goods for big money, he says in his book Synthetic Worlds: The Business and Culture of Online Games.
"This is just the beginning of a whole new economy, " says Max Levchin, chief executive of US-based social gaming company Slide. "People will start trading in virtual currency just like people trade in commodities like iron and steel today. "

The question, however, is whether these virtual worlds are blurring the lines between a real and a virtual economy. "It's possible that I am wrong and a lot of games are just... games. But 25 years from now the trading markets might actually be willing to rate bonds issued inside of virtual worlds, " Levchin says. "It's just an issue of liquidity and commitment, " he explains, "and all indicators show the trend might actually be a real one. "

CURRENCY EXCHANGE


1 US dollar equals

10 Facebook credits

336 WOW gold (World of Warcraft)

80 Microsoft points (Xbox)

1, 97, 628 Lineage 1 Adena (Lineage)

250 Linden Dollars (Second Life)

Reader's opinion (2)

Ashish KhandelwalApr 21st, 2011 at 03:18 AM

Now that day is not too far when there are companies who hire people to play games and earn for them.

Sumit WahieApr 19th, 2011 at 02:52 AM

This is the best Investment opportunity for the future if we seriously look into it. We can benefit fromm it if we get involved with it.

 
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