Online gaming: Spinning straw into gold 2020 style?

In the popular Brothers Grimm folk tale Rumpelstiltskin,
an imp spins comparatively low-value straw into gold. The moral of the tale
hinges on this transformation not being costless, and the audience is warned: A
deal that looks too good to be true probably is. Fast-forward to 2020, and the massive
surge in online gaming
observed during COVID-19 lockdowns has raised
questions about their economic and social effects, about which the moral from Rumpelstiltskin
might prove insightful.

A teenager raises his fist in victory while playing Fortnite – via Twenty20

Spinning gold from digital ether

Online gaming is big business, generating $143 billion in consumer spending in 2019, compared to a mere $24 billion spent on music. Gaming could even challenge TV and video for dominance of the entertainment business: Its market share could grow from 31 percent in 2019 to 36 percent by 2023, with an estimated 200 percent increase in the user base of some games and huge increases in traffic to gaming websites during COVID-19 lockdowns.

Those concerned by Facebook’s digital advertising market effects might be interested to know that this industry is already generating more than twice Facebook’s annual worldwide advertising revenues and is growing at a faster rate. Online gaming, it seems, might actually be a lucrative way of spinning the digital ether (thin air) into gold, at least for gaming platform operators, just as has been suggested of other forms of entertainment. 

Once seen as the domain of millennials, Gen Z-ers, and role-playing gamers from the physical world, consumer demographics in gaming are rapidly changing. The time-rich elderly, held captive in their homes by lockdowns, are now viewed as a lucrative new market segment — the “grey gamers” — “reaching for Candy Crush Saga or similar hyper-casual games when they need a quick on-the-go fix.” They are also the target of online multiplayer versions of traditional games such as mah-jongg, in which both the social and competitive elements of the physical world can be (at least partially) recreated.

Informed choice?

Online gaming occupies a legitimate space in the entertainment industry, and it provides substantial benefits that individuals are prepared to pay for (in dollars and time). For the most part, individuals can make informed choices to purchase access. (Just as for all online trades, vendors make their terms of trade available to prospective purchasers.) Many games are either free or available as cut down versions in which players view ads or play under other sponsored arrangements. In a creative recent example, Games for Carers — an initiative of the UK interactive entertainment industry — offers free access to over 85,000 games to frontline National Health Service staff engaged in COVID-19 service.

Trading and gambling

Less visible, however — and arguably outside the control of game platform operators — are the economies being built in and around some online games. Many games have in-game currencies that can be earned through play or purchased with real money to “buy” virtual goods and services. While the transfer of virtual currencies outside the game is mostly prohibited, many games allow in-game transfers between players.

What may seem like harmless low-stakes activity in a game, however, can become big business. For example, a weapon from the game Dragon Lore sold for nearly $61,000 in 2018, only a couple of months after it had changed hands for just half that sum. Some games even feature and permit trading of in-game items with purely cosmetic effects (and no effect on game performance) but which nonetheless become collectors’ items (“skins”). For a percentage of game players, skin gambling on third-party websites has become just another part of the gaming culture, albeit one in which individuals (including children) frequently bet — and lose — four and five-figure sums.

A modern fairy tale?

As of yet, it is a moot point about how performance of an agreement in the physical world for an exchange taking place in a virtual world can be enforced, should one of the parties renege. If the virtual worlds evolve like the physical one, we might expect to see these games developing their own sophisticated property rights, trading, and legal systems to address such concerns, and perhaps even using technologies such as smart contracts and cryptocurrencies. A self-regulatory regime for skin gambling might even arise.

In the meantime, however, is there a gap in the literary market for a
modern-day take on the Rumpelstiltskin story to alert unwary folk wandering in
virtual worlds?

Footnote: Modern research suggests that although they are now considered children’s stories, the Grimm Brothers’ tales were originally targeted at adults, and were more likely collected as an act of capturing and preserving historic German folklore for cultural and nationalistic reasons than to provide moral instruction. The original tales, and the cultural and social mores captured in them, were modified over time to reflect contemporary concerns, but were always intended to influence (i.e. “regulate”) individual behavior.

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