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Current Analysis and Future Research Agenda on Gold Farming

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Current Analysis and Future Research Agenda on Gold Farming Development Informatics Working Paper Series The Development Informatics working paper series discusses the broad issues surrounding information, knowledge, information systems, and information and communication technologies in the process of socio-economic development Paper No. 32 Current Analysis and Future Research Agenda on "Gold Farming": Real-World Production in Developing Countries for the Virtual Economies of Online Games RICHARD HEEKS 2008 Published Development Informatics Group by: Institute for Development Policy and Management University of Manchester, Arthur Lewis Building, Manchester, M13 9PL, UK Tel: +44-161-275-2800/2804 Email: [email protected] Web: http://www.sed.manchester.ac.uk/idpm/dig View/Download from: http://www.sed.manchester.ac.uk/idpm/research/publications/wp/di/index.htm Educators' Guide from: http://www.sed.manchester.ac.uk/idpm/research/publications/wp/di/educdi.htm Table of Contents ABSTRACT ..................................................................................................................1 INTRODUCTION ...........................................................................................................2 A. AN OVERVIEW OF GOLD FARMING .............................................................4 A1. THE ORIGINS OF GOLD FARMING .........................................................................4 A2. ACTIVITIES OF GOLD FARMERS............................................................................5 A3. MAPPING THE GOLD-FARMING SUB-SECTOR .......................................................8 B. ECONOMIC ANALYSIS OF GOLD FARMING.............................................19 B1. ENTERPRISE COSTS AND PROFITS .......................................................................20 B2. EXCHANGE RATES AND ENTERPRISE VIABILITY.................................................22 B3. GOLD-FARMING SCALE ECONOMIES ..................................................................24 B4. INFORMATION FAILURES AND REAL-MONEY TRADING......................................25 C. ANALYSIS OF GOLD FARMING FROM THE PERSPECTIVE OF INDUSTRIAL SOCIOLOGY...................................................................................29 C1. THE HISTORICAL SOCIOLOGY OF GOLD FARMING..............................................29 C2. GOLD-FARMING VALUE CHAIN ANALYSIS.........................................................31 D. ENTERPRISE ANALYSIS OF GOLD FARMING..........................................38 D1. ANALYSING ENTREPRENEURS AND SUB-SECTOR ENTRY ...................................38 D2. CLASSIFYING EXISTING GOLD-FARMING ENTERPRISES .....................................40 D3. CHARTING ENTERPRISE PROGRESSION...............................................................41 D4. COMPETITIVE ANALYSIS ....................................................................................43 E. DEVELOPMENTAL ANALYSIS OF GOLD FARMING...............................54 E1. WORKING LIVES AND LIVELIHOODS OF GOLD FARMERS....................................54 F. OTHER SOCIOLOGICAL ANALYSIS OF GOLD FARMING.....................57 F1. PERCEPTION AND DISCOURSE .............................................................................57 F2. THE REAL AND THE VIRTUAL.............................................................................61 G. SUMMARY AND CONCLUSIONS: THE GOLD-FARMING RESEARCH AGENDA ....................................................................................................................64 G1. SUMMARY ..........................................................................................................64 G2. GOLD-FARMING RESEARCH ...............................................................................66 REFERENCES .............................................................................................................68 APPENDICES..............................................................................................................80 Current Analysis and Future Research Agenda on "Gold Farming": Real-World Production in Developing Countries for the Virtual Economies of Online Games Richard Heeks Development Informatics Group IDPM, SED, University of Manchester, UK 2008 Abstract From the start of the 21st century, a new form of employment has emerged in developing countries. It employs hundreds of thousands of people and earns hundreds of millions of dollars annually. Yet it has been almost invisible to both the academic and development communities. It is the phenomenon of "gold farming": the production of virtual goods and services for players of online games. China is the employment epicentre but the sub-sector has spread to other Asian nations and will spread further as online games-playing grows. It is the first example of a likely future development trend in online employment. It is also one of a few emerging examples in developing countries of "liminal ICT work"; jobs associated with digital technologies that are around or just below the threshold of what is deemed socially- acceptable and/or formally-legal. This paper reviews what we know so far about gold farming, seeking to provide the first systematic analysis of the sub-sector. It assembles available data at the sectoral, enterprise and worker level. Five main analytical lenses are then applied. Economic analysis shows how exchange rate variations and scale economies do and do not impact gold farming; and the strong influence of information failure in the purchase of virtual items: known as "real-money trading". Analysis from the perspective of industrial sociology charts the commoditisation and globalisation of the sub-sector, while value chain models identify resource dependencies and power inequities. Enterprise analysis investigates enterprise entry, existence and progression, and outlines the competitive forces shaping the sub-sector's development; particularly threats. Developmental analysis investigates the impact of this sub-sector in macro and micro terms. Finally, there is a sociological analysis of the role played by perceptions and other social forces. In using a broad base of analytical perspectives, the paper aims to encourage, and provide a stepping stone for, further research on this growing phenomenon. It concludes by outlining and justifying a future research agenda. 1 Introduction Technological change readily throws up phenomena that sit under the radar of academic research for many years. Gold farming is one example. As defined here, gold farming means the real-world sale of virtual goods and services produced in online games. For example, many online games have a virtual economy and an in- game currency. Gold farmers can play in-game to make some currency. They then sell that for real money – typically via a web site and using the PayPal payment system – to other players of the game. This activity has been large enough to call an economic sub-sector – employing tens of thousands in developing countries and with global trade worth hundreds of millions of dollars – since at least 2003. From a development perspective, it is providing income, jobs and skills. It is thus offering one answer to the conundrum of how to create new livelihoods from the ICT infrastructure spreading throughout developing countries. And it is the first example of what will be a much larger set of economic activity in future; not just given the 80% per annum increases in global online gamers (White 2008) but as people spend more and more of their time interacting in cyberspace generally and in virtual worlds specifically. Gold farming is thus an early example of online employment – what we might otherwise call "cyber-work" – in developing countries. It is also an example of what we might call "liminal ICT work": work associated with information and communication technologies that is around or just below the threshold of what is deemed socially-acceptable and/or legally-permitted1. Yet, to date, there has been practically no academic research on this topic. It has been noted in the mainstream media and, given the strong feelings it arouses, has been the subject of much opinionation in the blogosphere. But there does not appear to be a single journal article on gold farming2. Box 1: Understanding Online Games The first computer game – a version of noughts-and-crosses – was created in 1952, with the first two- player game appearing ten years later (Kelly-Bootle 2006, Damer 2007). Our story, though, really begins with the creation of MUDs – multi-user dungeons – in the late 1980s. These were text-based games run on networked mainframe computers that created imaginary worlds, including imaginary objects (swords, armour, magical rings, etc). Players started occasionally trading those objects for real money. MUDs gradually metamorphosed into MMORPGs – massively-multiplayer online role- playing games. To date the most successful example of these is World of Warcraft from US-based Blizzard Entertainment (part of Activision Blizzard). Players pay a monthly subscription fee of around US$15 and create a character that can then enter the virtual world of Azeroth. Their character (or "toon") can be seen on-screen (as an "avatar") and can travel through the virtual world killing "monsters" (creatures that inhabit the world which form a sub-set of all NPCs: non-player characters); undertaking activities like mining, fishing or crafting virtual items; and buying or selling items with other players. When a monster is killed it "drops loot", i.e. the player can collect both in-game currency and valuable items.
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