THE NEW ‘NEW DISCOVERY’?
In 1492, Christopher Columbus led a fleet of three ships and over 100 men sailed westwards to India, as opposed the conventional easterly route by land. Although he never reached India, he accidentally ‘discovered’ America and thought he reached India. So he reported to his King that the world is round, not flat. His discovery redefined the global economic, social and political patterns ever since.
Although there are no more new continents to be discovered on Planet Earth, we are probably on the verge of another round of ‘new discovery’. Through the so-called massively multi-player online role play games (MMORPGs), including both virtual social worlds and online fantasy games, numerous virtual worlds have been created in the cyber space, each attracting from thousands to millions of participants. Some of these new virtual worlds are direct reflections and extensions of our physical world (e.g. Second Life); while others are parallel virtual universes almost completely separated from our everyday reality in the physical world (e.g. World of Warcraft). In many cases, there are significant social and economic crossovers between our physical world and the virtual worlds.
This new round of spatial expansion could have far greater economic - as well as social and technological - implications than the discovery of America by Columbus. Columbus only discovered one new continent, but numerous new virtual worlds are being created in cyberspace. Columbus convinced his King and Queen that the world is round, not flat, but these virtual worlds are adding numerous new dimensions to our existing physical and electronic worlds, and these new extensions are only limited by technological constraints and by our imaginations.
Although these new worlds only exist ‘virtually’ and are often regarded as not ‘real’, for most players MMORPGs can be an extremely intense social and emotional experience, with direct actions and interactions amongst and between the players and with the virtual environment, which is perhaps more ‘real’ – and more engaging - than people sitting in their living rooms watching television or going to the cinema. Many players already spend as much as 40 hours per week interacting with other players and with the virtual environment, buying and owning virtual properties, developing electronic gadgets and virtual products and services for self consumption or selling to other players. Overall, billions of real dollars (US) are spent and made both on and within these games, and a growing volume of trading also takes place outside those games (e.g. on e-Bay).
The business – and more broadly, the economic, social and policy - implications are very profound. The most popular MMORPG by number of subscribers is World of Warcraft, an online fantasy game. In early 2007, its total world wide subscribers reached 8 million, with more than 2 million players in North America, 1.5 million in Europe, and 3.5 million in China. Most subscribers paid US$15 subscription fees per month to play the game, bringing in well over US$1billion revenue each year from this one income stream alone to Blizzard Entertainment, the owner of the game. By early 2008, subscribers have exceeded 10 million. In addition to monthly subscription fees, millions of real dollars are also spent by the players buying virtual gadgets and services from each other for their virtual characters (known as Avatars) – including buying fully developed avatars themselves. To feed these demands, some skilled players have given up their real life jobs and set up virtual businesses inside and outside the game. Many virtual games have their own game currencies, which can be easily converted into real world currencies.
Back in 2001, a study by Edward Castronova revealed that in Everquest, a fantasy MMORPG, the average gross domestic product (GDP) of each of the two million or so ‘residents’ was around US$2,000. He arrived at the figure by measuring the monetary value of the virtual ‘items’, such as magic weapons and trade goods that users produce during the 20 hours or so per week they typically spent in the online world (but ignored the subscription revenue that people paid to play the game). The real world nation with an equivalent GDP per capita and population was the African nation Namibia, which had about two million people and a gross national income of $1,790 per capita. In terms of productivity, the gamers in the virtual kingdom of Everquest were as productive as workers in Bulgaria, but more productive than workers in China or India.
In Second Life, a virtual social world, the number of players (residents) has been growing exponentially. On 17th January 2007, the total number of residents was around 2.67 million, and these residents spent US$805,096 in the preceding 24 hours. By 12 March 2007, this had grown to 4.56 million, and the residents spent US$1,771,418 in the preceding 24 hours, while by 15th May 2007, 6.24 million registered users but spending dropped slightly to US$1,598,803 in the preceding 24 hours. By July 2008, total residents exceeded 14 million (http://www/secondlife.com). It should be noted that the total number of people logged on at any given time in Second Life tended to be in tens of thousands rather than millions. This, however, did not stop between 150 – 200 in-world entrepreneurs each making over US$5000 per month (US$60,000 per year), with a small number of them making over US$200,000 per year.
The most successful in-world entrepreneur in Second Life has been a virtual property developer by the name of Anshe Chung (her real name is Ailin Graef, a Chinese born language teacher living in Germany) who sells and rents virtual land and buildings in Second Life. In 2006, she became the first online personality to achieve a net worth in exceeding of one million US dollars from profits earned entirely inside Second Life. Her virtual portfolio included virtual real estates that were equivalent to 36 square kilometres of land, ‘cash’ holdings of many million Linden Dollars (the currency used inside Second Life), numerous shopping malls, store chains, stocks in other Second Life companies and she even established her own brands. According to the Financial Times, her business produced US$2.5m worth of annual revenues in 2006. She also incorporated Anshe Chung Studios (http://www.anshechung.com/) as a real world business with offices in China, employing over 80 full time employees and a large network of freelance workers worldwide. Her story has been widely reported in newspapers and magazines.
The rapid development of MMORPGs is not only creating a wave of new opportunities for entrepreneurs and businesses, but also raising serious challenges for policy and law makers. For example, should such income be taxed? And if so, how can it be enforced? Should the tax be paid for in in-world (game) currencies or in real world currencies? There are many social, political, legal and ethical issues involved, too – such as addictions by some players and the associated social and health problems. Some real world businesses have already been set up in developing countries (such as India and China), employing players who spend long hours each day playing games in order to earn in-world currencies (known as ‘gold mining’) which are then converted into real world currencies. It is not inconceivable that a significant amount of future economic growth and new employment opportunities could come from the continued rapid developments of MMORPGs both in developed and developing countries.
I am going to present our findings at this year's Academy of Management (AoM) Annual Conference in Anaheim, California, on August 8-13, 2008.* We will argue that the rapid development of Massively Multiplayer Online Role Playing Games (MMORPG) is creating new virtual worlds and metaverses that significantly extend our business environment. Increasingly, organisations and individuals have to live in multiple spaces incorporating the physical, the electronic and the virtual spaces, which are creating numerous new business (as well as social and technological) opportunities and challenges. Today, MMORPGs – particularly virtual social worlds and online fantasy games - have evolved far beyond mere online computer games, and they are increasingly becoming the next generation user interface with the 3D internet, and are played by people of all ages and sexes, from all walks of lives, in both developed and developing countries. Some MMORPGs, such as the World of Warcraft, are not only generating billion dollar (US) plus revenues each year through subscription fees, but they are also creating numerous business opportunities for the players themselves, and for existing and new businesses to offer products and services to the players. The new business environment challenges existing management theories, creates new opportunities for businesses and entrepreneurs, and call for the development of new management theories and new research methods. Drawing on lessons from recent developments of e-Business and e-Commerce associated with the emergence of the electronic space, we will use identity management and marketing as examples to illustrate the unique business opportunities and challenges associated with virtual spaces.
* Li, Feng, Savvas Papagiannidis & Michael Bourlakis (2008) Living in Multiple Spaces: MMORPGs and their Business Implications. Academy of Management (AoM) Annual Conference, Anaheim, California, August 8-13, 2008. Paper Ref No.13448
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