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Virtual Property Investor Recoups Investment
afaik_ianal writes "Remember that guy who bought a virtual island in "Project Entropia" for £13,700? Well BBC is reporting that that he has managed to make his money back in under a year. According to the article, 'He made money by selling land to build virtual homes as well as taxing other gamers to hunt or mine on the island.'"
Virtual Property, eh? Not at all like domain names, right?
Online "property" has as much value as people are willing to pay for it. This is why we spend thousands of dollars on shiny rocks and metals (to say nothing of the diamond cartel). This is also why we hold onto generally worthless items because of sentimental value. (I had my Chuck Taylor All-Stars for years after they were too worn out to wear).
So I'm not surprised that this guy is making money. He found something that he expected people would want, and snatched it up so he could be the one to sell it to 'em.
What this guy has done is create a service whereby he can onsell his asset at a low price point. Not really that stupid after all.
The same rules apply in the virtual world. You've got an area you call your own, the resources on said area are also your own. You could try to get a return on your investment by holding these resources until the time is right to sell, sell off portions of the resource or do nothing and be happy spending money.
Would you live on a farm that produced no product? If there were natural resources such as gems, petroleum or even attractions like waterfalls wouldn't you be at least thinking about ways to make money on them? Sure, there are some that would let people see the attraction for free, ignore the value of minerals that must be harvested in crude ways or refuse to let people shoot their animals and hook their fish for any reason, especially for money.
It's exactly like buying an island and turning a third into a resort, a third into destination spots (businesses, pristine land, room for activities) and leaving the remainder to your own enjoyment.
I mean, this guy does hunt on his own virtual island right?
Get your Unix fortune now!
I assume this is a capital gain. I'd love to see the IRS, or Inland Revenue (they don't say what country the gamer lives in) have a field day with this. It would make a funny court case!
Project Entropia's fundamental idea is that everything in game has a real-world value. You begin the game with nothing; and must purchase in-game items with real money. Items you use to harvest resources, kill monsters, or any other activity which generates saleable objects in the system decay over time. You give Project Entropia money to buy objects in game, that money flows into MindArk. When you sell an object and withdraw real life cash, that money flows away from MindArk.
Given that, the Project Entropia system cannot generate rewards greater than the amount of money fed into the system, minus however much MindArk takes off the top.
You are using a virtual tool that decays, purchased with real money, attempting to generate a positive income in a system already rigged to prevent such a scenario on average. Your tool will break, and you will buy another one, in the hopes of getting that big payoff. It's a gambling system dressed in some livelier colors.
This got me to think a bit, how is this any different from buying an over priced pair of shoes? or a nice car that costs $250k USD? Or a diamond necklace that is not truly rare at all? It's an idea that is being sold, and idea that this particular exchange has value. Market value, someone is willing to pay.
I personally don't see the need or even want in this but it's not my money..
No. This guy understood the phenomenon of the pet rock and the wisdom of "There's a sucker born every minute."
I don't want knowledge. I want certainty. - Law, David Bowie
and you have "made your money back" instantaneously!
This guy may have beaten the interest rate on a CD, but a CD doesn't require hundreds of hours of micromanaging, either.
It would be interesting to find out how much time he spent selling his sub-divisions or enforcing his taxes. If this took the equivalent of a full time job or a lot of time, he hasn't necessarily made any money back, just earned a small wage as well as loosing part of his initial investment in the sales.
The funny thing is, this analysis may apply to the real estate market in the real world, as well.
So he managed to regain his investment, but what could he have made with his time and money if spent elsewhere. In a CD the money would have easily been earning 5% annually and could have potentially returned much more if put into more risky investments. More importantly what could he have earned if he spent his time working at some other occupation instead of hyping his real estate? You can easily earn over £13,700 working a real job in a year. Opportunity costs are the name to the game here.
I don't get how this is stupid...
::shrug:: seems like simple economics to me... nothing stupid about it.
I would wager that ALOT of the folks who will end up reading this play these games... WoW, Everquest...etc.
Do you pay to play these games? yes... you're paying to spend your time to build up repore in an online game and have fun. This is no different.
Buying a peice of online real-estate is no different than buying software, a database of information (email addresses... phone numbers... businesses...etc)..
Actually... it's REALLY similar to buying a domain name. How many of you have domain names? (nyposse.net?)
You have to wonder whether "Deathifier" is as intelligent as so many people on this website are suggesting, or whether he A) was one of the lucky ones or B)simply worked alot harder than the other people to sell his property. This second option makes alot of sense, and is supported by his commitment that was demonstrated by his willingness to make such a large investment. Could you imagine paying that much and NOT making it back?
However, if his goal was making money, then this probably was not a good (intelligent?) way to go. He worked for a year -in order to make his money back. Is there a guarantee he will see much more profit coming off of that? Not likely, given that he made his money by selling his land away. Overall, he could've done better flipping burgers for a few months.
Ease off his nuts already. Not only did he make a gutsy move a year ago, when (nearly) everyone slammed him for flushing his money - but now that he's proven it was a winning investment, he gets slammed again.
What everyone is failing to mention is that this land will continue to produce $20,000+ per year, which he can bank, or sell the deed to it for $50k or more.
That's $50,000 pure profit, from playing a game he obviously enjoys. The dude has a PhD - that's no coincidence.