Second Life Virtual Property Boom

The Guardian Gamesblog has an interview with Philip Rosedale, Second Life's CEO and Founder. In the wake of last week's virtual property slaying, they discuss the realities of owning something intangible. From the article: "We launched Second Life without out of world trade and after a few months we looked at it and thought, 'We're not doing this right, we're doing this wrong.' We started selling land free and clear, and we sold the title, and we made it extremely clear that we were not the owner of the virtual property. USD$.4m a month is traded directly to world markets in Linden Bucks on Gaming Open Market. That's USD$.4m redeemed, or Linden Bucks turned into US dollars. In May 2005, the total amount traded in-world was USD$1.47 million. There were 1.3 million transactions between 19,500 unique users."

Comments

so..

[Turn-X Alphonse]

So you give them money for land (Lets say 1 block) and they keep said money and give you this block of data.. then.... they keep your money and..?

This is one huge ass scam type deal, yet totally legal and ingenius. Even if someone goes "No thanks, I'd like to sell you the land back, can I have my money please" they still get the intrest in the long turn and make a profit.

It's like selling magic beans, either way they win..

Re:so..

[BrookHarty]

Its more like a Tax on the virtual land. The tax (monthly payment) pays for the servers needed to host your virtual land.

Now, your land could be in a highly marketable area, and be worth MUCH more than normal. Just like real land, location makes it more valuable. Waterfront, Adult areas, private location, no wierd neighbors. Of course, nobody is stopping you from buying your own server for a giant piece of land, setting up a community and leasing it out to people. Its done all the time, private clubs, etc.

I picked up a lot near a major building area, and had water front on 2 sides. Now, when I switched my account to free, I gave the land away to a friend, instead of defaulting it back to Liden.

Liden's cant give away the land, servers cost money, someone has to pay. They just figured out how to make it self sustaining by the customers, and then spin off the technology into other markets. They have developers to pay also.

I'm not seeing the sinister plot here....

Re:so..

[TexVex]

This is one huge ass scam type deal, yet totally legal and ingenius.

No, it's not a scam. They're trading value for dollars. It's also not ingenious, it's Economics 101. They couldn't do this if the virtual estate (as opposed to real estate) didn't have any value to the game's subscribers.

Game players have been trading the rights to pixels on eBay for as long as there have been persistent-state worlds. Sony is in an endless fight to keep EverQuest items off eBay so they can create their own service that does the same thing, while EA pretty much ignores Ultima Online real money trade. Now, Second Life has merely chosen to cut itself in on the action.

This isn't even a new business model. Magic: The Gathering Online does a brisk trade in completely virtual playing cards. There was a game before them called Star Trek ConQuest Online or something like that, which did the same thing and didn't even give you the option to convert a complete virtual set of cards into a complete real set of cards.

And, how's this really different from buying the rights to use a bunch of bits that make a song come out of your computer's speakers?

Look son, I've developed it!

[winkydink]

When I read about "virtual real estate" I can't help but think of the
character who played Woody Allen's father in Love and Death and his
"valuable piece of land".

What's next? Virtual commodities trading?

Yes, I understand it's primarily for entertaihnment value, but somewhere
in Marketing (insert preferred afterlife here), a large group is laughing
themselves silly.

Western vs. Eastern

[GPLDAN]

I think we may be missing something here. The power of the notion of land ownership. In some societies, namely China, Japan, the Phillpines, the idea of land ownership is beyond fathoming for many people, who can otherwise afford broadband and computers.

To them, the notion that land "exists" in the virtual world connects to their ideas of self-worth in a very tangible way.

Re:Western vs. Eastern

[Moiche]

I strongly disagree. Your claim that land ownership is beyond fathoming for many people in China, Japan, and the Phillipines is objectively verifiable as incorrect. Japan, in particular, has a real estate market that has been over the past 20 years more volatile and widely held among Japanese than the American real estate market. Japanese real estate reached such a height of speculation in the late '80s that the Imperial Gardens in the center of Tokyo were valued at an amount greater than all the land in the United States at the time. About $60 billion USD was invested in Chinese real estate speculation in 2001 (private purchase and sale of real estate in China has been legal for decades despite the communist government). The Phillipines has operated on a thorougly Americanized capitalist model since WWII, and your inclusion of it is bizarre.

Where you got the idea that these countries are characterized by an inability to fathom land ownership is difficult for me to fathom. Perhaps you are perpetuating absurdly out of date stereotypes about attitudes toward material possessions among adherents to Buddhism, Shintoism, Communism in South-East Asia? If that is the case, please read up. Buddhism is officially suppressed in China, Shinto is on the wane in Japan, both religions have a vast majority of adherents who do not find accumulating material possessions to conflict with their religious beliefs, and the Phillipines is a majority Catholic country! Also -- as I already pointed out, the communist government in China has permitted private transactions such as real estate sales since Deng Xiaping's reforms -- which began 30 years ago.

Finally, your contention that virtual land, through appealing to the self-worth of the peoples you've pigeonholed as not being able to understand land ownership, borders on the absurd. Why would ownership at all contribute to self-worth among people who supposedly can't contemplate it in the first place? Wouldn't feelings of self-worth just be derived from accumulation of material possessions -- which in turn would require virtual land to be worth something?

Your entire line of reasoning smacks of the "Mysteries of the Orient" trope which was (barely) excusable in the 1870's, but is no longer. Spend some time in China, Japan, or the Phillipines, and you will find millions of savvy, throughougly capitalistic and materialistic businesspeople more than willing to buy and trade things worth money. Sure they may extract feelings of worth from accumulating an ass load of land -- but then again so does Donald Trump, and last I looked he lives in the East.

Come on people, we are better than this.

Moiche

Re:Sure, until they try to shut down second life..

[Kesh]

On the flip side, isn't paying for webspace on a server the same thing? You're paying for virtual property on a host, so that others can access that host and enjoy your creation.

If the webhost goes under, files bankruptcy, shuts down tomorrow... do you have any legal basis for a lawsuit? Just because they're not hosting you anymore?

Re:Sure, until they try to shut down second life..

[mindstrm]

Or they'll pull out their contract, which you agreed to before purchasing the service, which covers their ass in this situation.

Dutch Tulip Bulbs

[Moiche]

Like Dutch Tulip Bulbs, virtual real estate on Second Life will continue to have customers as long as it looks like there may be a greater fool to pay more for it down the line. The moment that purchasers cease to believe they will be able to sell their properties at a profit (or at all), we will see bubble-bursting, where everyone tries to sell their property at the same time, and the property instantaneously becomes valueless.

What is particularly scary about virtual property in a massive multiplayer is that the good is so completely unlinked to reality that virtually anything could burst the bubble. An executive in the company hosting is accused of embezzlement -- *pow*. The hosting company enters Chapter 11 -- *pow*. A new fad massive multiplayer starts up -- *pow*.

This is why the comparisons against derivatives are misguided. True derivatives are not physical things, but still, an option to buy pork bellies at a certian price in the future will not become worthless without pork bellies themselves becoming worthless. Whereas property on Second Life can become worthless for an infinite set of reasons.

I believe that the idea of objectively valuable virtual property, as explored by Neal Stephenson in Snow Crash (The Street), will someday become a reality. But not until: (1) hosting the massive multiplayer is distributed among organizations that can't go bankrupt; (2)the massive multiplayer is either continuously upgraded or technology independent (perhaps a standard forum that will be interpreted in different ways depending upon the users client; (3) the massive multiplayer somehow guarantees scarcity, at least of more and less desirability property (perhaps by having a hotspot located near the hubs where avatars log on as seen in Snow Crash); (4) accounts are protected by really, really, really good user authentification programs (or else victims of a dictionary attack could lose 20k over night); (5) at least some of the user base is able to access the universe of the massive multiplayer in a thorougly immersive way.

I think it's just a matter of time before these conditions are met, and spending real money on virutal property starts to make sense. But I don't think we are there yet, and those who are looking at virtual property less as a game and more as an investment are playing with tulip bulbs.

Moiche

What happens when game goes away in a few years?

[Optic7]

Like one of the comments posted on the article, I also wondered what happens 10 years down the line when the company goes out of business, or the game is no longer profitable and is shut down?

I guess consumerism has reached it's logical conclusion. How long before companies start selling us our own thoughts and emotions? I guess they already have, in indirect forms (entertainment/media). Meanwhile in the real world, millions of people die every year of starvation and disease.

Re:Sure, until they try to shut down second life..

[patio11]

If the website goes under, and you sue them, and you win, then you're just another unsecured creditor for the bankrupcy court to say "Sorry, bub, better luck next time" to :)