Behind every virtual world there is a real economy
Virtual marketplaces are creating more than real economic activity in video games, marketplaces, meta universes etc. This is a topic to which L’Atelier the foresight agency of BNP Paribas dedicated their review “The Virtual Economy”.
According to Wikipedia “A virtual economy (or sometimes synthetic economy) is an emergent economy existing in a virtual world, usually exchanging virtual goods in the context of an online game, particularly in massively multiplayer online games (MMOs)”.
“The Virtual Economy is an opportunity to short-circuit the system failure. It is an environment where entrepreneurs, prospectors and skilled agents can generate significant wealth very quickly without the need for startup capital. Esports players, streamers, skin designers, level boosters are just some examples of the creative new ways that people are generating wealth in this new economy.”
There is a whole galaxy of activity behind the digital curtain. A new economic frontier that could be the answer to the generational wealth gap. And there are already people who have found themselves, their vocation, or gotten rich in digital worlds.
The majority of entrance barriers that exist in the “real” market don’t exist in the virtual economy. It stands out because practically anyone can succeed in it—young or old, wealthy or poor, regardless of gender, nationality, religion, location, ancestry, or social status—as long as they possess the necessary technical skills, intelligence, and initiative.
What’s going on in the virtual economy? It’s a place with varying degrees of immersion visited by some 2.5 billion people via phones, consoles, laptops, desktops and headsets.
Revenue from multiplayer games, virtual simulations and “interactive media” was ~$120 billion in 2019. Compare that to $62 billion four years ago, according to SuperData. In 2020 the game industry grew 12% to $139.9 billion as many industries shrank during the pandemic, according to a report by market researcher SuperData.
Approximately 85% of the revenue generated by the virtual marketplaces themselves consists of repeat purchases of currency, avatars, weapons, and other items such as emots in Fortnite and Travis Scott’s virtual merchandise (skins, clothing, characters, accessories, and more) but also virtual real estate plots, virtual houses, currencies, etc. These often repeating purchases, called microtransactions, generate a steady stream of revenue.
“The success of virtual platforms has also spawned a wild multibillion-dollar world of online grey and black trading of in-game currencies and goods, casino gambling, money laundering, and online piracy”.
There also “are third-party sellers who effectively lease shop fronts on the platform to sell their goods. These sellers can make enormous sums of money selling customised costumes, weapons, skins, and other modifications.” – L’Atelier
The publisher normally does not allow the external sale or transfer of those assets outside of the gaming environment because they are the exclusive owners of anything developed on the platform. Because of this, selling them for real money is challenging, with the exception of the illegal trading in virtual products on gray and black markets.
there is of course also the world of NFTs and NFTs Market platforms as wells as markets within Meta universes etc.
Game studios and publishers are trying to set the rules, oversee the new economy, establish capital controls, create new virtual assets, and control the supply of resources.
“The virtual economy has emerged as a way to address our fractured social order and to bring opportunities for individuals around the world to improve their lot in life. For the first time in human history, there’s now the opportunity to earn money from jobs that are: in the comfort of your own home, resistant to ‘real world’ economic shocks (like COVID-19), not limited to your geographical location, and flexible — you can work whenever you want, for however long you’d like.” – says John Egan, the CEO of L’Atelier
L’Atelier has catalogued the 20 most common occupations or jobs in the virtual economy. Because they typically have fewer barriers to entry (such as capital, education, social status, or age requirements) than “real” jobs, virtual jobs provide a significant opportunity for a huge number of people to continue earning a living even if the “real” economy closes.
The 20 most common virtual occupations identified by L’Atelier include, for example, just to mention a fiew:
Farmers are players who repeat the same actions in the game to accumulate items and pump up characters, as well as search for rare artifacts and earn resources to sell to other users or virtual value stores (RealMoney Trading – trading virtual goods for real money). L’Atelier found that more than 150,000 people worldwide earn up to $25,000 a year in real income from “farming” and selling valuable items in the game (2020 data). For example, a significant number of people in Venezuela had been “earning” in-game currency for the online fantasy game RuneScape for some time. This virtual currency was then sold to other players for real money, was bringing farmers about $40 a month in a country where unemployment is still common and the average wage is $7.50 a month.
Esportsmens and coaches
There are more than 100,000 cybersports (esports) players in the world. Superstar gamers can earn anywhere from $25,000 to $3 million a year from tournament winnings, affiliate agreements, sponsorships, salaries, and advertising revenue. As cyber sports become more professional, it also creates additional job opportunities. Today, more than 2,000 cybersports players, often already “retired,” earn up to $140,000 a year coaching and advising cybersports teams, and hundreds people work as “commentators” (commentators on cybersports competitions), earning up to $75,000.
Indie game developers
More than 40,000 people now generate income from developing games for digital distribution on independent marketplaces such as Steam and the Epic Store. Fewer developers work on games whose production is directly funded through Kickstarter or Patreon with no support from studios or publishers.
What to expect from virtual economy in future
As the coronavirus has shut down the “real” economy and collapsed real-world mobility, it has sparked a new wave of acceptance of creativity in the virtual economy, with people looking for virtual ways to generate real income and provide traditional offline experiences online.
The opportunities that will arise in the virtual economy over the next decade are increasingly intriguing, especially in the entertainment and education industries. The research shows that the virtual economy is already significant in size and growing rapidly. We expect a marked acceleration in the growth of the virtual economy as people devote more and more of their professional and personal lives to digital platforms and mixed reality. Society, culture, and economy will be transformed as virtual tycoons, decentralized government, and digital nations emerge in the virtual economy.
Although the future is uncertain, the virtual economy is already making a significant contribution to shifting the global economy’s center of gravity and providing people with new opportunities. In addition, as these virtual platforms develop and the communities who use them keep expanding, we may expect to see a rise in new business models and services created especially for virtual assets and revenue. The virtual economy may provide millions of people the best route to social mobility at a time when the “real world” economy is struggling and possibilities for the young and least fortunate members of society are dwindling.