Real-world success with virtual goods

Sony says its Station Exchange experiment proved that integrating transactions of virtual goods for real money can work.

Real-world success with virtual goodsPerhaps the makers of virtual worlds shouldn't be so persnickety about allowing players to exchange real money for virtual goods.

In a report set to be released Wednesday, Sony Online Entertainment has concluded that so-called real-money trades can be good for both gamers and publishers if handled at controlled locations such as Sony's own Station Exchange, a 1-year-old experiment to make transactions of virtual goods for real money a direct part of EverQuest II rather than an illicit activity.

The report could finally put hard data to the growing real-dollar market for virtual goods such as weapons, armor and currency in Ultima Online, World of Warcraft and City of Heroes.

Most game makers ban the sale of their games' assets for real money. As a result, the so-called real-money trade of those goods has mostly been limited to third-party sites like eBay and Internet Gaming Entertainment. Those sites don't share their data, making it difficult to put a hard figure on the size of this secondary market, which some believe could be as big as $1 billion annually.

"We've never had reliable data on this phenomenon at all," said Edward Castronova, a leading expert on the economies of online games and a professor of telecommunications at Indiana University.

Sony Online Entertainment's study is the first big step toward ending the mystery. Equally important, Sony execs said the admittedly limited experiment showed that a game publisher's exchange can make real money at little expense to the company while reducing customer complaints.

During the last year, Station Exchange ran on two of more than 30 EverQuest II servers, allowing players to conduct so-called game asset transactions for real money. Sony Online earned $274,083 from its listing fees and commissions on the 51,680 transactions conducted in the first year. While that's hardly a fortune, it cost Sony Online almost nothing to run the service.

Also among the study's highlights was a finding that bringing real-money trading in-house reduced fraud, so the time Sony Online customer service representatives spent handling virtual-goods transaction disputes dropped from 40 percent to 10 percent of the total time spent on calls.

Sony Online execs believe the experiment's results validate their exchange-friendly take on virtual property.

"I'm a big believer that this whole virtual property thing is a big part of the future of online gaming," said John Smedley, Sony Online's president. "So it's about time to shed some light on the facts, rather than the fiction."

The report also indicated that behavior on the Station Exchange EQ II servers didn't differ materially from that on servers not running the service. That conclusion suggests that players will traffic in the market for virtual goods whether it is sanctioned or not.

"While it is difficult to gather authoritative and accurate data" from third-party real-money trading sites, the report said, "a simple comparison of current prices for basic items shows that sales prices on Station Exchange and third-party auction services are about equal."

To Castronova, the fact that the virtual-goods market appeared to be about the same on and off the Station Exchange servers was a surprise. "This is a little disappointing," said Castronova, who has traditionally opposed such trading because it goes against the rules of most games. "I was hoping that the other servers would have less (of the trading). But that didn't happen at all."

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