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Online game economies weathering real-world financial blizzard

November 13, 2008 |  8:00 am

World of Warcraft: Wrath of the Lich King

Millions of Americans are spending more of their time these days in Azeroth, a land where they don't have to worry about economic crises. There, you can make a living as a tailor, healer or equipment vendor. And if you find yourself falling on hard times, you don't collect welfare. You go out and kill more gold-toting monsters.

Azeroth, the fictional world in which the massively multiplayer online (MMO) game World of Warcraft is set, is bustling with activity. Gearing up for the release of the second expansion pack, World of Warcraft: Wrath of the Lich King, which hits stores today, the game's 11 million players worldwide logged more hours in the virtual world than usual -- a phenomenon seen by developer Blizzard whenever an update is imminent.

Activision Blizzard, the parent company that lost more than $4 billion in market value in just one week last month, is looking for a huge boost from the update to its best-selling title. "Historically, recessions have kind of affected us less -- not that we're unaffected," said Rob Pardo, Blizzard's executive vice president of game design. "But I think gaming, in particular, has a lot of value for the money."

The new version adds a slew of original items and quests for players to complete, as well as upping the maximum level a character can achieve, from 70 to 80.

One might think the U.S. economic snowstorm would cause users tight on money to cut the $15 monthly fee from their budgets faster than ...

... Web celeb Kevin Rose canceled his cable TV. Pardo says that's not the case.

"It hasn't been something we've seen happen," Pardo said when asked about an increase in cancellations. "It may have happened at a small, small percentage level, but not really noticeable compared to the incoming players."

When you realize that a large population of World of Warcraft players are signed on more than 60 hours a week -- more time than most people spend at their full-time jobs -- $15 a month begins to seem pretty reasonable. And for some who auction off their high-ranking characters and rare items, the game can turn into a profession of sorts.

Though Pardo says the company strictly forbids selling in-game content for cash and will ban offending users, EBay and specialty websites such as ToonStorm.com are populated with virtual goods selling for hundreds of dollars. Yes, real dollars.

Many players detest character peddlers because they feel the practice minimizes the effort they put in to build their own legitimate characters. World of Warcraft is supposed to be separate from the real-world economy, after all. Blizzard doesn't even police its own financial system.

"There's no cap on how much gold can be inserted into the economy because at the end of the day, it's just a game," Pardo said. "It's not quite like we're the Federal Reserve. There are some different MMO games out there that really try to run their economies that way."

Second Life is one of those games. Time spent in that virtual world is more like traveling to a foreign country. U.S. dollars still have value there -- once converted into Linden dollars, the in-game currency.

For the last year, the value of the Linden dollar has remained fairly stable at 265 L$ for every USD. But considering the USD has been weak for the last few years compared with other currencies, that could translate to relatively feeble game money.

Much like the U.S. housing bubble, Second Life is not without its own real estate price fluctuations. Developer Linden Lab announced last month that it would be increasing the price of certain areas of land by two-thirds.

But players needn't worry about any emergency bailouts in this virtual world. While companies including Reuters and American Apparel have bases set up in the game, Linden Lab is really the only company on which the virtual economy relies, and it's turning profits, Chief Financial Officer John Zdanowski said in an e-mail.

"Unlike the real world, there are no companies in Second Life whose operations could affect the entire economy other than Linden Lab," Zdanowski said. "Despite the chaos in the world's economies, economic indicators for Second Life remain strong."

You know, John McCain said the U.S. economy was "fundamentally sound" right around the time the banks were failing. Just saying.

-- Mark Milian

Photo of World of Warcraft: Wrath of the Lich King, from Blizzard

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