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MMO Gold-farming comes of age

By on November 26, 2008

Two recent stories have demonstrated how the real-world economies of massively-multiplayer online games are thriving.

TechCrunch reports that Playspan has raised $16.8 million to expand its virtual goods marketplace. The money came from existing investors including Easton Capital Group, Menlo Ventures, Novel TMT Ventures, and STIC.

PlaySpan logoPlaySpan calls itself “the games industry’s first publisher-sponsored in-game commerce network”. It enables users to sell in-game items to each other in a secure, publisher-friendly marketplace. It’s the kind of activity that has been going on for years on ebay and other sites, but there are key differences: much of the trading can take place in-game, giving consumers confidence in the transaction, and it is supported by the publishers, who get a share of the revenue. The company claims to have signed up publishers with over 10 million gamers, including K2 and Gala-Net.

Playspan has also signed up Chris Deering, former Mr Playstation in Europe, to its advisory board, and aims to expand in Europe and Asia. The capital raising demonstrates a belief amongst the financial community that trading of in-game goods is a viable independent business, notwithstanding the grumblings that some publishers have historically made about third-party virtual goods auction sites.

Meanwhile, the Chinese government is threatening to tax gold farmers. According to a blog post in the Wall Street Journal, the Chinese government will impose a 20% income tax on profit from virtual money. Given that this is a high-profile, high-profit growth industry, authorities say that they are concerned about the risk of money-laundering, protecting the property rights and the implications for real-world inflation of rapid growth in virtual goods.

It is quite a step forward for an activity that has long been reviled by gamers, banned by publishers and ignored by authorities to be the source of substantial investment (even in a recession) and to be of sufficient importance to a major world government that it brings in tax rules. Where China goes, expect others to follow – so look out for a slew of legislation or cases seeking to define the boundaries and property rights surrounding “virtual money”.

About Nicholas Lovell

Nicholas is the founder of Gamesbrief, a blog dedicated to the business of games. It aims to be informative, authoritative and above all helpful to developers grappling with business strategy. He is the author of a growing list of books about making money in the games industry and other digital media, including How to Publish a Game and Design Rules for Free-to-Play Games, and Penguin-published title The Curve: