The Economics of Virtual Worlds

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Edward Castronova is first up on the PopTech stage in the afternoon session of Day 2. He talks to us about the economics of virtual worlds. Odd theme given that he’s actually a professor of telecommunications at Indiana University.

He transitioned into this ‘other world’ in 2001, when he started to apply value measurement techniques to the economies generated within online video games or “synthetic worlds.” His initial paper reporting these findings, “Virtual Worlds”, continues to be one of the most influential works of economics on the net, with over 30,000 downloads at the Social Science Research Network as of May 2005.

He gives us a sample of numbers to think about:

Star Wars made $50 million as of May 22, 2005
Spiderman 2 made $116 million from June 30-July 2, 2004
Halo 2 made $125 million as of November 4, 2004
Game industry annual revenues, $10 billion in 2004, $7.6 billion of it was software. And its growing.

There are 10 million people playing synthetic world games.

Real money trade, for example, when someone pays $$ for a magic wand or a gold piece…..numbers are $100 million to $1 billion.

and
Synthetic money trade is $2 billion – $20 billion

Compare these numbers to the GDP per capita of China $500 versus the wage of a gold farmer, which is approximately $1.00 per hour.

I thought this excerpt was cool and gives you som perspective into his personality and the way he looks at the world; he includes this in his bio…..

“Our revels now are ended. These our actors,
As I foretold you, were all spirits and
Are melted into air, into thin air:
And, like the baseless fabric of this vision,
The cloud-capp’d towers, the gorgeous palaces,
The solemn temples, the great globe itself,
Yea, all which it inherit, shall dissolve
And, like this insubstantial pageant faded,
Leave not a rack behind. We are such stuff
As dreams are made on, and our little life
Is rounded with a sleep.”

The Tempest, IV 1

Tag: PopTech Tag: PopTech 2005 Tag: Economics of Virtual Worlds

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