Are microtransactions actually the future?
In a comment here on the VentureBeat article I wrote, Steven Davis stated,
I was with you until your final comments. Outside the US, MMOs/online games are moving to a Virtual Asset Purchase model. They are selling you the songs while sitting by the campfire is free (though you don’t get many songs until you pay, to strain your metaphor). Second Life should be the same. Where they have run into trouble is that they do not manage “song creation” / virtual asset creation by their players well so their DRM system is not effective – and has begun to undermine the player-driven economy. Whether it is possible to do so in a system like Second Life is a subject of a different discussion, but “song sales” seem to be growing rapidly as the business model (according to Gamasutra, microtransactions now drive about 50% of the Korean online game industry).
Well, yes. But no, at the same time.
Let’s take a step back and see what types of microtransactions exist, and what they are for.
All the issues of RMT and microtransactions typically get caught up in the question of what a virtual item is. So let’s settle that issue once and for all. A digital item is made up of database entries. It’s bits and bytes living on a server. It may have been made the same folks who operate the server, or it may not have. It may have been uploaded by someone who pays for the privilege of manipulating the data on the server, or it may have been uploaded by someone who gets access for free.
In some cases, these bits and bytes might be a unique arrangement of data, in which case it is probably copyrighted to someone. In some cases, it may actually be a record of activity instead, in which case and under some laws, it might be subject to privacy laws instead.
In no sense are any of these database entries “objects.”
When you play Pangya Golf, you in fact do pay using a microtransaction. You do so in order to increment a database entry labelled “points.” This is the same as when you purchase Microsoft Live points or when you purchase cell phone minutes or when you purchase acorns in CyWorld. From this point forward, there is no longer a real-world economic transaction. In the dominant model of microtransactions, you are actually using the “wallet” model.
Purchases of new outfits for your golfer, new Live Arcade games, or new furniture for your house are no longer truly “microtransactions.” They are the reduction of a number in one field, and the addition of some data to another. It may be data that says you have access to a given other field in a database, or it might be a change in the records that state that you have access to download something — at which point the download system can go ahead and verify that, then initiate the download.
This may seem stupidly obvious, but it’s worth going over because so many people misinterpret the issue of real money trades for digital items. When one person sells another an EverQuest sword, what is being traded is not actually an item (as in a retail supermarket) or even a stand-in for an item (as in markets for precious metals or pork bellies) or even bytes representing a bet on future price trajectories (as in futures markets), but rather moving some bytes from one column to another that have no analogue whatsoever.
In fact, in the case of EverQuest, you are not even moving a copy of the sword’s information. You are only moving a pointer to the sword’s information, because in practice, there is only one sword defined in a template database. Each local copy is an illusion; your inventory says “you have Sword X.” In many of these worlds, you can think of a piece of equipment and a skill as being exactly the same thing. The same is true for that clothing you purchased in Pangya or that chair you bought in Habbo.
Don’t worry, we’ll get to things like Second Life in a little bit. OK, actually, in a long while, because first we’re going to briefly mangle the history of copyright.
Recently, Steve Danuser wrote over at Moorgard.com about the topic of the proposed Korean legislation that
the only way such legislation is going to work in the rest of the world is if we begin to understand how intellectual property differs from material goods–and that ain’t gonna be easy.
The reason intellectual property seems like such a foreign concept to many in the Western world is that we come from a culture of ownership. We buy a house, we buy a car, we buy a pair of pants, and these things become ours to do with as we please. But intellectual properties like music, movies, and games don’t work this way. The $15 you spend for a CD or a DVD buys you the packaging and a hunk of plastic, but it doesn’t buy you ownership of the music or movie itself. All you’re paying for is a license to use the content within the guidelines established by the owner of the data. You have no legal right to redistribute that content to anyone who has not purchased a license from the content’s owner.
Of course, with the understanding that all these digital trades and RMT cases for gold and swords and whatnot are actually just for moving bits and bytes in a database, we can see that in practice, the core issue behind RMT is not actually IP. The basis behind the companies’ assertion that users are not allowed to engage in RMT is because they assert ownership over the database, and therefore say that they are the only ones who have the permission to earn money from moving bits and bytes around on said database. And this is handled via the EULA, which as Steve notes, explicitly covers the terms of use of said database and the client used to access it.
Where IP can come into play is that the company can assert that the arrangement of bytes in a given database field are a unique creation (for example, they can represent a texture, or a piece of text) that has been fixed into a tangible form. At that moment, it is covered under copyright law and possibly trademark law if it’s a trademarked chunk of data. People trying to make a buck by leveraging the content (since they are not actually selling it, but instead actually selling moving data from one field to another) can run afoul of IP law that way. For example, they might reproduce something copyrighted, like a texture, in order to persuade people to pay for the transfer of bytes from one field to another. But someone engaging in RMT services for, let’s say, powerlevelling someone, isn’t even doing that directly. Keep in mind that the actual transfer of bytes from one field to another is not in itself illegal — it in fact it is the reason why you pay for access to the database in the first place, and RMT would not happen were said transfer not assumed to be a basic part of the functionality of the virtual world.
Copyright laws are in fact a Western sort of invention. They exist because with the advent of the printing press, it was easy for someone to take something someone else had written, copy it and print it up and sell it as their own, and profit in a way that gave no revenues to the original publisher (or the author). Originally, the Stationers’ Company had a monopoly on copyright; whoever entered the title of a publication in the guild’s ledger first was held to have the exclusive right to make printed copies. Later, the Statute of Anne said that in fact it was the author who controlled the rights to make copies, and ever since, authors have negotiated away said permission in order to allow publishers to publish their work.
In the case of the book published back in 1710 when the Statute of Anne went into effect, all the way up through the last book you bought, what copyright controls is who gets to make a buck. The book is a container. Under the Doctrine of First Sale, which was first enshrined in US law back in 1908, you can resell the container (or in fact, sell the container for the first time), and the original author of the copyrighted work has no say whatsoever over what happens to it. There’s little question that the copyrighted work within the container essentially boosts the value of the container; try selling a blank book for the same price as a first edition of Dante’s Inferno. However, you cannot profit by taking the copyrighted work and doing something else with it, say by issuing an audio recording, or creating a new edition of the copyrighted work and printing and selling that instead. The doctrine of first sale is about reselling the original containers, not making new ones.
There’s two big exceptions: software, and phonorecords. The exceptions are about leasing, lending, and renting the container objects, not sale. And these exceptions, frankly, have zero to do with logic and everything to do with who had better lobbyists in Washington DC at the time. (Ever wonder why you can rent movies at Blockbuster, but not audio recordings?) In the muddled case of software, publishers rely on EULAs and shrinkwrap agreements, not copyright.
What does all of this have to do with microtransactions?
Well, Moorgard said of Second Life,
Second Life, in so many ways, is an aberration that cannot continue to exist in its current form. As with Mark Cuban’s point about YouTube, Second Life will eventually have to face the music (literally) for allowing the unlicensed distribution of copyrighted content.
But in many ways, it’s the copyright regime that is an aberration. For one, it’s only a few hundred years old; prior to that, people copied and reproduced with abandon. Today, you can get sued for parodying (and even though you shouldn’t lose this case, sometimes you do); for briefly excerpting; for repurposing; for outright use. What’s more, the length of time for which a given copyright lasts has been hugely extended. The Statute of Anne only granted 14 years for new works.
For another, we’re increasingly entering a world where the notions of “container” are being stretched quite a lot. The stretching started to happen when things like cassette tapes, photocopiers, and cameras came along. All of a sudden, reproductions of copyrighted works could be created by instantly creating a new container for them.
Then there’s the issue of streaming content of various sorts. The courts ruled a long time ago that it was OK for you to record audio off the radio or TV signals onto videotape. The reason is that there are plenty of non-infringing reasons to do so, most specifically time-shifting. In fact, you the consumer pay a premium for blank media of all sorts precisely because of this. It is presumed that the added hidden costs on the blank media cover the losses that the copyright holders incur from people pirating stuff off of “streaming” media. (The copyright holders actually wanted to instead make illegal the sale of methods to record streams, but the courts found against them).
On the Web, everything is streaming. In fact, when the content reaches the computer, it is in fact the first time it has been put into a container for sale. This meant that once you bought something via download, in theory you could have then turned around and sold the disk you downloaded it onto, under the doctrine of first sale. Except that putting it onto a disk in fact is making another copy. In the world of digital data, everything is infinitely, perfectly reproducible. Basically, MPEG encoding or any other form of encoding is just sort of an alphabet, and the plastic disc you have that has MPEGs on it is very much like the paper-and-glue object that carries stuff encoded in a different alphabet. The difference lies in how easy it is to read — some alphabets require special reading tools (like DVD players and screens) and others do not, because our brains are adequate to the task.
This fundamental disjoint with the notions of how copyright and first sale should work is what ultimately bequeathed us the DMCA. In a nutshell, the DMCA says that in this brave new world of easy copying, that it’s illegal to try to get around the technological barriers that publishers may have put into their “containers.” It went further than any previous copyright legislation, and made it part of copyright law that there be anti-copying measures in the decoding tools.
It also, fortunately, provided something called “safe harbor” for all those poor intermediaries who found that because of how digital media work, that they were making copies of everything that passed through their routers and servers, willy-nilly, without even knowing it. You see, when you send something to someone else via the Net, you’re not sending “it,” you are always sending a copy. What’s more, tons of copies get created at intermediate hops all along the way. Once it gets reassembled at the other end, there’s another copy there, and if someone then scrapes that content or archives it, there’s another copy. The DMCA says “well, they didn’t know where it was coming from, so they can’t be blamed.”
Now, finally, we get to Second Life. That “safe harbor” provision is exactly what both YouTube and Second Life rely on, you see. That’s why they don’t check in advance what gets posted; if they were in an editorial position, they’d be liable. By not putting themselves in such a position, they can instead just accept takedown notices as they occur. As long as they follow the letter of the law, they should in theory be OK. Lawsuits against the likes of YouTube arise because copyright holders feel that YouTube is following the letter of the law, but not its intent: that they are knowingly profiting off of a flood of copyrighted content that is illegally uploaded, and their business model depends on it, even though they don’t actually have any one specific piece of copyrighted content in mind.
This gets even more tangled when you realize that much of the Web works by linking as opposed to just uploading. Generally speaking, you can point to anything you like, and because of the way the web works, it’ll show up as part of your content, indistinguishable to the end user. Worse, an end user could link to something and make it look like part of your site… you get the idea.
I mentioned before that when you buy a piece of furniture in Habbo Hotel, you were actually not buying anything. Let’s look at the specific process that we go through:
- An artist creates the particular arrangement of pixels that we see as a chair when parsed as a particular image format. (Keep in mind that it could also be parsed as audio, as braille, as ASCII, or any other of numerous “alphabets”). It is now “fixed” in digital form, in copy #1 on their machine.
- Copyright immediately vests in this artist.
- Except that as a condition of employment, they actually assigned the copyright for their work-related creations to the company.
- The work is probably copied up to several servers: a version control database, a build server, a run-time server, and so on. Copies #2, #3, and #4 are made.
- From there, more copies are made as the item is reflected out to the local databases of all the other developers.
- A user maybe pays the company for the right to connect to the server which has, among other things, a database entry somewhere with the bytes that look like a chair when parsed in a particular way. Or maybe the user doesn’t pay, and they can connect for free. Either way, when they connect, they agree with the company operating the servers that there are some activities they won’t engage in with the database, and that the operator can kick them off if the operator so chooses.
- The user pays money in order to increment a field in the database associated with their account. Said money goes to the company.
- The user voluntarily reduces the value of that field in their account, and in exchange gets a pointer in their account to the database entry that holds the bytes that when assembled correctly, look like a chair.
- At some point, the bytes are fetched from the database, and sent over the network to the user’s client. Many copies are made along the way in this process, but most of them are erased instantly.
- A copy now exists in memory on the user’s computer. If it’s cached, it might also get written to the hard drive (so the user has two copies, at least until they exit the program).
- The “alphabet” is parsed and the bytes are arranged into a graphic that we recognize as a chair when it is displayed as colored dots on a screen.
- The excited user takes a screenshot, and…
Oops. Even though there have been probably a dozen copies made throughout this process, it’s this last one that is suddenly a possible violation of copyright. Even though the user has two or three copies on their machine at that moment (one in the cache and one in main memory and possibly one in video memory) nobody is worried, because “that’s just how it works.” In fact, if you made a copy of your cache as a backup, in case you had to format your hard drive, nobody would really say Boo.
But start uploading that screenshot, and someone might get a takedcown notice under the DMCA. Clip out the pixels that represent that chair, and paste them into another texture and upload it to Second Life, and someone might get a takedown notice under the DMCA.
You see, even though the data stream from the server may be encrypted (and it’s illegal under the DMCA to circumvent that), there’s the equivalent of the “analog hole” — you can always just capture what appears on the screen or plays through the speakers. Once the decoder is our senses, there can be no DRM.
The Habbo scenario and the Second Life scenario (I told you I’d get there eventually) are in fact identical in every way except the issue of who holds the copyright on it. You can trace the entire chain and get the Second Life scenario with the sole change of dropping bullet #3, the one that reads “Except that as a condition of employment, they actually assigned the copyright for their work-related creations to the company.” And that is why Second Life made headlines back when they irst announced this policy back at the first State of Play conference.
Many companies have asserted that the act of uploading grants them either copyright in the work, or a variety of publication rights. In fact, Second Life also has to assert that it grants them some rights, because they are in the business of replicating and distributing this content. They don’t stand in an editorial position, though, because to do so would require that they vet the content for copyright and trademark violations, and that’s expensive. So they take the position that they do not look at the stuff, they just blindly copy it and redistribute it, just like a forum does when you post on it.
Where does this leave microtransactions?
Well, everything I have said till now is based on following the letter of the law. But in practice, here’s something we do know. The law doesn’t work. Copyright, since the days of the Stationers’ Guild, is premised on social consensus — it is completely unenforceable against anyone outside the law or who does not share the same social framework. Some countries have something called a “moral right” to creative content, but like most morals, it’s visible only to those who share the same morality.
Ever since there has been copyright, there have been people copying, because copying is the default mode of learning. We learn songs by listening to them, writing them down, watching a performance, and sharing tab on illegal guitar tab websites. We learn to paint by copying the Old Masters, and we learn to write by imitating other authors. In many of these cases, the copying is subtle; in others it is blatant. In the cases of fan fiction, we leverage so much of the original creation that there’s little doubt we are co-opting someone else’s creation, without which ours would not exist. The line between a legitimate use and an illegitimate one is often questionable — see the recent case of the sequel to Peter Pan, for example.
In particular, since anything that can be seen by our senses can be reproduced, for better or worse, all digital forms of enforcing copyright are doomed to fail. Every form of encryption is moot, because everything must be decrypted in order for us to see it. At some point, the data is in the clear, and then it can be copied.
What’s more, the dominant mode of discourse on the Internet is no longer the central-server model that serves the microtransaction systems so well. Today, end users of remote Internet services upload as much data as they download. This is true even in the case of the closed service MMORPGs that make their living by effectively broadcasting the state of their database to you. You chat, and they log it, storing gigabytes worth of data. You move, and you do things, and they track a history of frequently highly private information. And you write reviews to upload to Amazon, you upload graphics in Second Life, and you post stuff on this blog — more data, in fact, in comments than there is in the posts.
In the end, microtransactions are an ancillary business model because there are copies of everything everywhere. Microtransactions from the server side depend on the notion of monopoly. The artist at Habbo or EverQuest is ultimately able to sell you access to that image solely because you cannot get it any other way. But other ways are increasingly available. In order to prevent you from getting it, they have to impose forms of DRM. They have to tell you “no, you cannot upload images.” They have to tell you “no, you cannot transfer access to these bytes to another user.” But all of these depend on the user not simply choosing to go somewhere else. After all, were there a completely open uploading platform like say, Second Life, they could simply take all the screenshots of Habbo furniture and upload them as textures there instead, and thumb their noses at you.
We see this in operation on the Web, where easily copied content has led to the result that pretty much everything on the Web is freely available all over the place. The only thing stopping you are scruples, savvy, and the vigilance of the copyright holder going after every place which hosts the content, sending them DMCA notices to make them take the stuff down. Scruples have a way of bending. Savvy has a way of always increasing. And the latter mechanism, IP-holder enforcement, only works as long as the host site shares the same social context (try enforcing copyright into North Korea, for example).
The reason iTunes can make money is not the content, it’s the service: it makes music easier to find, with a slick interface and useful databases. In terms of actual end-user utility, it’s far worse than illegally downloading stuff off of a P2P service. After all, it imposes all kinds of license-based restrictions on where and how you can listen to that music, and its database is far smaller than the extraordinary array of stuff available on the Web.
In the end, these are the truisms:
- RMT is not about IP. IP is just the method that companies use to maintain monopoly access to stuff in their DB.
- Microtransactions work as long as providers have monopolistic or cartel-level control over the data.
- In a digital world, it is impossible to maintain said control. Everything can be copied.
- Copyright only functions as long as everyone agrees to it.
- “Broadcast” unidirectional services are going, going, gone.
- Providers can still make quite a lot of money even if they give up on the notion of control, if they instead embrace the idea that what people really want access to isn’t the bytes that look like a chair, it’s the service.
In the end, what people want isn’t the picture of the chair, or the picture of the sword. It’s the value of having a chair in your apartment in Habbo Hotel, the value of having a badass sword in EverQuest because you can kill more stuff. The actual IP bit is mostly useless outside of that context.
To say that Second Life (or indeed any world which permits uploads of user content) is an “aberration” or doing things “wrong” because they aren’t wedded to the broadcast model and the notion of DRM is silly. In fact, saying that SL didn’t do enough in terms of implementing DRM is silly — it actually has MORE of it than Habbo does to protect its own assets!
If anything, it’s the market in Korea not quite catching up to the full implications of the bi-directional Web. It’s the misapprehension that this is at core about copyright. What is really at stake is the question of how much permission users have to reach into the database and twiddle the bits, and whether the results of that twiddling can be considered a service provided to other users in exchange for payment. It’s whether it’s fair game to make use of, resell, or otherwise appropriate content once it’s tied to a container that you own. In the end, the debate is actually about whether the screen belongs to you, or to the person sending the bits down the wire.
The value is in the service, not the content. In the service, not the microtransactions. A digital item is worth nothing. What is of value is the context. People are increasingly not willing to pay for the experience of hearing a song by itself in the abstract. They pay for the concert as a whole (the iTunes experience as a whole, the CD experience as a whole, the movie-going experience as a whole, the EverQuest experience as a whole), and it will be smart venue operators who survive and make the money in the long run.
Edit: two things I didn’t cover (because this was damn long already)… One, trademark is a different beastie than copyright, and there are several legit ways in which trademark protection could be used as an argument against RMT. And secondly, not all data is of course displayed on the client end and therefore will be available for copying. Much server-side value can be gotten from stuff that is simply never displayed. The mistake is to rely on copyable stuff for revenue.
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The discussion of RMT has turned toward a discussion of Intellectual Property and Microtransactions, thanks to Moorgard and Raph. One of the common questions from players is: Why the hell don’t I have ownership of the character, coin, and items that I earn in the game? A simple question with a simple answer… Getting killed by another player who then loots something off your
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https://www.raphkoster.com/2006/11/24/are-microtransactions-actually-the-future/
posted a thoughtful and lengthy set of thoughts on microtransations and copyright issues. Raph points out that virtual world “objects” aren’t objects at all, but only specific database entries, and that what you are getting when you transact is just the change of one or more fields in a database (corresponding to, say, gold pieces) in
Original post: Are microtransactions actually the future? by at Google Blog Search: unique ways to earn money Technorati tag: Unique ways to earn money
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Blargh. I now know I can write 4500 words in an hour and a half if I really put my mind to it. 😉
Dang, dude. That’s one long read! If you can write 4,500 words in one hour and thirty minutes, your publisher must be wondering about your next book!
[…] Are microtransactions actually the future? […]
I realized the live streaming is the key of global video broadcasting with commercial reality, after I tried a software named TVkoo. It claimed, one server is enough to support 100 000 users online concurrently without CDN matrix, the quality of video is tested to be perfect,no stops while playing.
If the transmitting cost is as low as they said,
As I was reading, I kept asking, “What about code? Do users really only want a change to the server data?”. Then you finish by talking up service.
It seems you are arguing that microtransactions are valid as long as players are buying service, not just data. I think you’re saying that consumables (health potions) are ultimately more valid than purchase-once static items (a wall tapestry).
Isn’t the difference between a potion and a tapestry in the code the server runs? Is that what you mean by service? ‘Cause I can think of lots of ways to sell server-side execution of code to users (as long as it’s my code).
And to complicate matters, the distinction between what a bank does and what an MMO does is mostly in the pretty pictures.
And this is the key to whole problem, isn’t it?
[…] Two more interesting posts on the everpresent RMT issue, and how it interacts with the microtransaction payment model, from Moorgard and Raph. Raph’s post in particular is very detailed and enlightening (as usual): some very good stuff to chew on there. […]
Oh God! If banks ever get past the MUD stage and go 3D the world is doomed.
But I have to think that this statement has quite a bit of meaning in this context besides a joke. Interesting comment, Isaac.
There is little doubt in my mind that server-side unlocking of functionality in some fashion is going to be a more viable method of microtransactions than just selling access to artwork. We like the artwork now because it’s CHEAP. But over time as systems grow more open, it’s also more easily copied. Server side stuff has the advantage that it can’t be copied (since what you see is only output from the algorithm) and it also tends to enhance the context, thereby making the whole experience more valuable.
Consumables, yes, but not just those — things like abilities, access to special areas or events, special permissions, tools — anything that is functionality.
That’s not the only thing I mean by service. I also mean, well, the entire service, which includes plenty of intangibles as well.
[…] Read Raph’s response entitled Are microtransactions actually the future, because Raph also discussed the Copyright Law, downloading-uploading, user-created content, and other interesting topics. Sad though, he cut his response and didn’t touch on the “trademark” topic. Oh, and RMT (Real-Money Trading), which many Filipinos (Filipino gamers are more Westernize than the rest of the Asia-Pacific region) are not willing to accept and embrace – as an example, gamers view the sudden switch of online gaming to the VAS model as “legalizing RMT” (which is partly true if we will discuss it deeper). […]
[…] Raph Koster has a good post on the nature of copyright in virtual worlds up. Key points include the fact that virtual objects are entries in a database table (and thus not really protected from ‘resale’ by IP law) and the fact that the value in the iTunes store and other similar systems is the service they provide to customers (ease of finding music on iTunes, ease of finding draft partners on Magic: the Gathering Online, etc.) rather than the ‘property’ that they sell. […]
[…] I am not a gamer. Until recently, I had no idea who Raph Koster was. But the more I read of his stuff, the more impressed I am: he is clearly one of the deepest thinkers about the digital world today. Note that I do not say about games: for what he writes has ramifications far beyond the gaming world, and should be read by anyone with an interest in things digital.Take his latest post, called “Are microtransactions actually the future?” This pieces ranges widely, touching on all the big issues that intellectual monopolies like copyright throw up. And he really gets it. For example:since anything that can be seen by our senses can be reproduced, for better or worse, all digital forms of enforcing copyright are doomed to fail. Every form of encryption is moot, because everything must be decrypted in order for us to see it. At some point, the data is in the clear, and then it can be copied.He then goes further, offering a suggestion about how content industries can and must cope with this ineluctable fact:The value is in the service, not the content. In the service, not the microtransactions. A digital item is worth nothing. What is of value is the context. People are increasingly not willing to pay for the experience of hearing a song by itself in the abstract. They pay for the concert as a whole (the iTunes experience as a whole, the CD experience as a whole, the movie-going experience as a whole, the EverQuest experience as a whole), and it will be smart venue operators who survive and make the money in the long run.Amen to that. […]
Raph – Sorry for provoking you to such a flurry of writing on a holiday weekend.
As to your comments on my comment… well, yes and no.
Yes, the value is in the service, not the bits or images. Chris Melissinos used to say that Sun runs the largest MMOs in the world, its stock markets, and Virtual Asset Purchase games are closer to stock markets than anything else. Assets are either like mutual fund shares where more can be created by additional purchase or like regular stock shares where the limited number of items can be bought and sold (or, of course, the items can be gained and lost due to other game mechanisms).
No, iTunes is a bad comparison. Music is a personal (and mostly local) experience. iTunes is, or should be, considered an old fashioned vertical monopoly (Apple has over 75% of both the player and digital distribution market – if the US still enforced anti-trust laws, this vertical integration would be broken up). The value of music comes from its possession and use, not from the iTunes service (completely unlike my Everquest Sword of Coolness… at least so far).
The value of a virtual asset only exists in context of the service. It is an interesting design and business challenge to think about these assets in a service that is not centralized like a traditional MMO.
As to what the Korean government is up to related to RMT, please visit my blog.
The challenge for Second Life is how to effectively manage its database to preserve the value of virtual items for their creators. As you note, copyright (and patents) are (relatively) young forms of intellectual property protection to reflect the rise of intellectual property that is separable from physical items.
The purpose of intellectual propery laws is to encourage and reward creativity. If we do not find workable mechanisms to do so with the availability of widely available, powerful digital distribution services, we will all lose. (BTW – I do not believe in DRM either as an effective mechanism). Second Life is the only online game that has asserted any protection for third party IP/VP… implemented these protections poorly.
“Dang, dude. That’s one long read! If you can write 4,500 words in one hour and thirty minutes, your publisher must be wondering about your next book!”
@Morgan Ramsay
best post Turkey-Day zinger yet 🙂
@Raph
“Providers can still make quite a lot of money even if they give up on the notion of control, if they instead embrace the idea that what people really want access to isn’t the bytes that look like a chair, it’s the service.”
IMO I think those all seem to be valid points, you’ll note that YouTube has co-opted those who hold the copyrights to the content (Universal et al.) its not maintaining the content, which is transitory and has variable quality, (Market Share) its about maintaining the service (Platform) to distribute various forms of markets in one aggregated channel.
[…] Comments […]
“The actual IP bit is mostly useless outside of that context.”
I’d be curious to see this extended to the case where the same data is used to fabricate a tangible object. It is, after all, only a matter of time before virtual worlds start filling with the 3D data used in manufacturing repurposed for advertising.
Umm, ever heard of fiat currency? All us westerners live in fiat economies. Essentially we agree (well government tells us we do) that paper money has value, and that value is common to all issues of that money – whereas, in its own right, it is just a piece of paper with some fancy printing.
This is even worse when you consider that even paper is more valuable than data held in a bank account database. You can burn paper to keep warm (briefly). Try burning a few bytes when you’re cold.
So we’re really exchanging worthless paper, for worthless data except that we agree that it all has worth.
Horrify yourself by reading this lot, especially the last one:
http://www.financialsense.com/fsu/editorials/kirby/2006/0116.html
http://www.mises.org/money/4s9.asp
http://www.proliberty.com/observer/20030602.htm
And it might be time to think about buying ACTUAL stuff – we already live in a virtual world every day, and government gold farms every second of every day 😉
Raph,
That is a productive writing session 🙂
Another area not covered is the funtionality of the collection of bits. Beyond the value of context, service, and experience, another key distinctive value that makes microtransaction viable for online game businesses is where the collection of bits acts like an object: function.
Digital copies of music, movie, pictures, among what I’ll called “passive” content can have relevance on its own. Before, companies tried to make money from the media players (the function that which give those digital bits relevance). But, they quickly found out that there is value in giving the players for free.
For online games, there are many “active” or “interactive” collections of bits in the database. In this context, they are more like media players. Second Life objects have particular functionality that is condition upon (1) the Second Life platform and (2) the function that the creater give.
So, I would like to hear your take on the funtionality and the object components.
Frank
Doh, didn’t see your comments on the value of functionality. But still would like to hear more about what you think the distinctive value of functionality as applied to microtransaction.
In most cases, microtransactions for online games will rely much on the value of functionality.
Frank
Ever since there has been copyright, there have been people copying, because copying is the default mode of learning.
Actually, it’s the easiest mode of learning. You can learn without copying, but it’s much harder. Thankfully, some people do this on occasion and we see new inventions because of it.
Copyright only functions as long as everyone agrees to it.
Not quite true. It functions as long as someone is willing to pay for its enforcement. Fortunately or unfortunately, depending on how you want to look at it, some companies have very deep pockets and are all too happy to make sure copyright remains enforced (because that’s how they maintain their deep pockets). Popularity also has little to do with laws; many people aren’t particularly fond of paying taxes, but those pesky laws seem to remain on the books somehow. Of course, popularity does impact enforcement; if you aren’t a strong supporter of taxes, you might not rat me out for cheating on my taxes. (Or, if you’re bitter about paying taxes, you might rat me out because you didn’t do likewise.)
Further, an enlightened person realizes that copyright laws are actually beneficial. Even with the glory of YouTube, access to the distribution medium is still a prime factor. If I don’t enjoy copyright protection on my own work, then people with better access to the distribution medium could take my work and profit from it without my involvement. Despite what we think in our internet-enabled life, some people still buy physical media at chain stores. So, having some legal protection for my own work from the distribution cartels is good.
Anyway, I’m not sure how all this really fits in with the title of the post. Maybe I’m too fuzzy-headed after a big meal. 🙂
My thoughts,
While the debate and talk between makers of game and distributors are great and all.
Its the mass of great unwashed players that will make the choice. and i do not see it happening, i’m not for it.
Bottoum line, just because developers and the industry are all for it, does not mean players are.
In the US, we are not. You guys can talk about it all you want.
Trucegore, how can you say “In the US, we are not (for microtransaction/RMT)”? If players didn’t want these things, then they wouldn’t be happening on places like eBay, would they? In fact, isn’t it supposed to be US players who are fueling the gold pharming industry overseas? Someone is paying for something. Maybe not the hardcore gamers, but someone is convincing the Sony’s of the world to pursue free MMORPG’s that make money from taking a cut of virtual sales.
[…] The discussion of RMT has turned toward a discussion of Intellectual Property and Microtransactions, thanks to Moorgard and Raph. One of the common questions from players is: Why the hell don’t I have ownership of the character, coin, and items that I earn in the game? A simple question with a simple answer… […]
[…] Raph Koster has a lengthy and generally excellent post up that touches upon microtransactions, virtual asset sales, DRM, copyright, and more. I wanted to comment on a couple things in his post. […]
Psychochild,
On the flip side, if I want something to be possible with my work, it should be. And that’s simply not true today. Take fanfic for books. Authors CAN’T knowingly permit it because of IP law.
ebay isnt entertainment. I’m only referring to “legal” microtransactions , and last time i checked, transaction on ebay were not micro. they were for whole goods like avatars, or large sums of money, not a new shirt for 20 g-potatos.
Like all other games, the game has to be good, for people to care abut the freeness, or the new shirt. I have yet to see a “Free” game approach the numbers that p2p have, no do they ever have the quality of content or community’s, something that most gamers hold higher than any other thing when looking at there next game to play.
I think people need to remove the large sum of “Its working now” proof that they seem to get from ebay or other sites like it.
Keep in mind, the price of weed would drop as far as value if it was made legal in the US. lol. Same thing applys, those ebayers are doing it to get an edge, something that they know most people will not do due to “Morality checks” in gaming honor, thus giving them a leg up.
Apples and oranges.
A Very Wii Thanksgiving…
A whole lot of heartburn and 9 hours of driving later, I have returned home from visiting my girlfriend’s parents over the Thanksgiving holiday. Per usual, it was great to visit family and be away in a different neighborhood for a few days, but …
This is something a tiny cadre of elite creators can consider as true I guess. In my world creativity is fueled by something else, like fk’n Rock n’ Roll. The value of creativity lies with the creator directly, not in the product that was created.
Look at Raph himself as an example, will you go to a new website or listen to an audio stream which profits from advertisement if Raph “makes an appearance” through it? (I usually do.) The same goes for musicians, I myself as a musician find myself rewarded if I have an audience when I play a Live show. I know creative musucuans usually are motivated by knowing that the audience is bootlegging their stuff. And feel honored if they rather go to a free gig than not. The money most artists make is not enough to make a living, but thats a luxury for the tiny elite cadre who live in a world which is going to become history.
These elite artists will be going out as history unless their personalities are directly valuable to their audiences. This is where Blizzard is valuable to their players, the ability to maintain WoW makes us keep on playing. If Tigole or whoever makes an appearance in a magazine a lot of gamers will pay for it.
1. Shopping is a game. The effects of shopping are simply more realizable and produce more visible real-world results. For many people, shopping is entertaining, fun, and even therapeutic.
2. Microtransactions are not barters; thus, your “new shirt for potatoes” example doesn’t make any sense. Also, avatars aren’t “whole goods” and currency are not products.
****
Microtransactions are fairly common in the marketplace. We’ve long been able to purchase reprints of articles from magazines, back issues of publication volumes, and even letters and words in classifieds. Many commercial telephony services place fees on units of time. Even retail apparel outlets allow the purchase of individual elements of outfits. We don’t call these transactions “microtransactions” and we don’t classify most purchases as “microtransactions” in accounting, but by definition, most products are parts of a whole.
The automotive parts business is a perfect example of the parts-of-a-whole model executed to the extreme. One of my uncles is a product manager in this industry. He’s in charge of one-million parts, or rather, one-million products. There are more than several product managers at the company for which he works.
One problem with the term “microtransaction” is its applicability. Transactions are only described as microtransactions when the “whole” aspect of a purchase is readily visible to and commonly desired by consumers. A video game is a bundle. It’s a whole. It’s a transaction. There are elements of the game that are unneeded or undesirable by an individual customer. When we add microtransactions to the mix, then what we create is a platform for new interactive experiences. We enable users of this platform to either play the provided game or build their own game by participating in microtransactions. Clearly, microtransactions generate many possible choices, which can cause problems with decision making, but in an era of personalization, providing digital content consumers with the ability to engage in microtransactions stands to yield great benefits for all involved.
In my opinion, much of the antipathy toward microtransactions-in-games stems from poor communication about games-as-platforms and microtransactions in general. As I’ve read on Joystiq, many gamers feel that microtransaction-enabled games are “incomplete” and that greedy corporations are just trying to milk as much money from them as possible. I believe these are marketing problems, and I still believe that there is a lot of room for the advancement of marketing in interactive entertainment.
Here is something to consider:
Instead of selling ‘content’, a savvy provider would actually sell the service of ‘filtering’. As you say, combing through content for liable material is costly. So is organizing and filtering, but herein lies the value. While user-driven content systems frequently contain a lot to be desired, they also up the noise-to-signal ratio significantly. In a search-based interface, this is rarely a bad thing as it is the searcher who must ultimately do the filtering. The important point to consider with any service is who is responsible for filtering.
With a search-based service, the service is aggregation (the more the merrier) and typically rendered to the submitter. With a browse-based service, the service is the filtering itself and rendered to the consumer.
A traditional MMOG or community site is a browse-based interface, more Yahoo than Google. The very concept of a community (in negative space) is effectively exclusion: keeping out those who are not. And here, I see great value in a central-server index model. If I am looking for immersion within a fantasy world, allowing players to upload whatever they want and having a server that postures itself as blind means that I can guarantee there will be no consistency of either style or content. It would be like going to the Classical section on iTunes and having to wade knee-deep in classic rock. Attempting categorization without some sort of imposed rigidity is a time-waster at best (ever try searching id3 tags on any anarchy based file sharing system?)
So while Second Life is a brilliant concept (if even only just to further discourse), it feels to me more of a platform than a service. And I feel it is somewhat unfit for being a commercial entity for some of the reasons it is (The YouTube ad/impression revenue model however works perfectly for it). While it is counter to what Second Life ultimately is, if they were to shard off worlds or lock down zones based on some sort of imposed filtering, I feel the value of the content (and manageability of ownership within that space) would go up significantly.
Perhaps the split is on the seperation between an Multiplayer Online Game (by my definition: ‘a shared “space” and means to play’) and a community. Maybe things should be discussed in terms of ‘pool’ and ‘filter’ (my own arbitrary terms I know, pick your own to replace those).
The filter that makes YouTube useable to me is my friends and my RSS. I do not browse or often ever search YouTube. So to me, YouTube provides me no direct service. Instead it services those who wish to share content with me by providing them a means to do so. And yet microtransactions are on the other side of the service coin, the consumer.
Without anymore wind I will sum up: I believe that central-server content delivery services have more meaning now than ever and will probably only increase in time as people dizzy from the access to a widening sea of unfiltered content.
I agree the microtransactions within a ‘wallet’ are effectively a moot transaction other than as a service medium. Perhaps alternative methods could be explored (or have been): Old microfilm systems in which you pay for a given amount of access time to search. A microtransaction system could offer ‘content’ as free and charge for the time you spend using the service (sort of the whole pay-for-data-packet style that seems so opposed in the US). You put a quarter in, and you get a number (seconds) which is spent as you go, without being attached to any content. Under a method like this, the service that allows you to find the content in the least amount of time/money (of which I believe time is the only real currency, everything else is a database number shifting around) is the superior value.
My 2cents/2ms
g-potato
you cant really compare buying parts for your car, microtransactions.
Yes, Raph, we’ve all absorbed the message that if our eyes can see it on our screen and our ears can hear it on our speakers, it has already gone through so many copies and is in such a wide and multi-forked stream that we can’t expect it every to be a “commodity” that is something we can “own”.
Except…people don’t change their minds and perceptions about these things as quickly as you expect, and the go on emulating property relations in the relatively new and foreign setting of the Internet (as compared to the rest of history) as if copyright exists. Perhaps copyright is a newfangled Western concept but everyone knows what a distinctive Ming vase is, and one imagines they had pretty basic and brutal ways of enforcing “copyright” in the old days to ensure the value of branding and value.
I don’t feel as I have to automatically accept the premise that just because software commands bytes and “things” on the 3-D Internet only seem like commodities, that they are therefore only in the domain of those who code.
Imagine the typewriter, or wordprocessor, the printing press of today, and paper. Books are typed on typewriters if the authors are oldfashioned or printed out from wordprocessors on to paper and saved on a disk. And author sells his manuscript and the book is published. Microsoft, or Dell, or Hammerhill, have no piece of this work of creativity. They originally created the alphabet that is rearranged into words or ideas, but they don’t become proprietary about their alphabet contained on a typeriter, a computer, or a page of bond paper, the way programmers retain their clutches over bytes. Why? Because they are just carriers, facilitators, mechanics, and they know their own limits. They make enough selling paper or computers or even old-fashioned typewriters not to have to have their hands out grabbing for a percent of your book.
It’s quite conceivable that people will develop the same attitude toward programmers, who will become less god-like, and will view their ability to create the “alphabet” of virtuality with less awe and fear, and will merely treat it as a service not unlike a gas-station attendant. What will matter is how you configure the bytes into that unique pattern, just like the book.
To be sure, there’s the problem of the book-store or book publishing warehouse equivalent in this analogy — the database, the server, and the owner of the servers. These folks wield a lot of power and weight which they throw around, too, imagining that just because we all have to house our specially-arranged set of bytes we designed on *their* servers that they can pwn us for evermore. They charge us for this separately, althoug some day, this will all be folded into one price that the merged entities that are both ISPs and telecons and virtual-world providers (VWPs) will lay on for our use.
Just as Napster was defeated and turned into a for-pay service, and just as Jay-Z’s lawyers stopped his live stream in Second Life, the people who still treat IP as a commodity in this “old fashioned way” you and other programmers dislike, may have a good long run. If anything, the history of what has happened to free downloads of everything from mp3s to waves to videos is a push-me pull-you story that is far from being over yet. Once, it was easy to collect thousands of mp3s and wavs and make DIY slideshows with RealSlideShow on your Internet site. Today, with all the takedowns and lawsuits and rearrangement of the whole industry, you have to pay — if nothing else, for a new container called “the iPod”.
But of course another direction is possible, even though I think that the “lawyers” will have a good long run. And that’s the notion of paying for streaming entertainment like a movie ticket. You pay $15.96 or more likely a higher price and you get access to everything in that context — all that IP. People who create will, like the artisans of old, scurry around looking for big companies to sustain them. These companies won’t care about micropayments because they will be looking for eyeballs for sale of all their products, and provide Second Life type of entertainment as a break-even or loss-leader operation, or they will sell subscriptions too, using their new downloaded third-party registration APIs which you can read about here.
In this model, your notion of micropayments evaporates. A Sony or a Warner or a Nike isn’t going to care about little $300 or $10 Linden transactions — that would be folly. They’ll simply have a sign-up page where you get a subscription to all their content, like you do a cable TV subscription.
I imagine all these big things like Microsoft or Google or Blizzard will lumber around and mill around for some time before eventually all or part of them merge into One Big Thing or at least Several Competing Big Things which will amount to a giant pipeline to bytes — bandwidth, access to servers, and access to rearranged bytes all bundled into one giant telecon/virtual world/thingie.
Coming back to the historical act of the Lindens that everyone so celebrates, it’s only within the context of other MMORPGs who have drastic ways of enforcing their emulated commodities ownership through IP bans and such, that they seem progressive. They granted IP for a short historical period by creating tools with “permissions” in their game — copy/no-copy, transfer/no-transfer, etc.
That enabled a nation of shopkeepers and landlords to emerge and populate the servers and create the density of a society on the platform required to attract the bigger entities.
These thousands of mice emulating property relations of the old world scurried around but then in one day, in one swoop, they were made irrelevant not only by CopyBot — CopyBot doesn’t even work very well and is kind of wonky and geeky to operate — but by the supreme indifference and hostily of LL, big corporations, and their sherpas to the notion of copyright — indifference you bolster by recounting this history here, in which we are all to accept as “irrefutable premises” certain points about streaming and data and how it’s all copyable.
The indifference and hostility of course is at odds with the earlier promise of IP and emulation of property rights held out to the nation of shopkeepers and landlords.
Because what matters is only the platform, and those who develop it, as you can read here:
When LL first held out the dream of IP, they held it out essentially for *developers* — that there could be all those SL equivalents of “Bose to JBL to tiny start-ups” making, adjusting, adopting, tweaking *the platform itself for use*.
They didn’t really think about girls from Minnesota making little tintable prim shoes for avatars — they are expendable, because they don’t help develop the platform, they clog up the assert server, and their shoes, which should be disposable and are perceived as such, go out of fashion or are overtaken by a more influential girl from New Jersey the next week. LL can’t care about girls from Minnesota screaming that girls from New Jersey stole their new look for avatar pumps. Let them duke it out, and let them be savvy enough to copyright their designs if in fact they haven’t stolen them from RL Gucci webpage jpegs to start from : )
What LL and their developer friends care about is whether the avatar’s feet can throw shadows (I’m not kidding) or whether they will always walk like clunky, bobbing jack-in-the-boxes or be amenable to “animation overrides”.
At what point does any entity that tells you that you have IP dissemble, if everything is eminently copyable? Well, the entire thing depends on social mores, as you’ve aptly pointed out. Most people don’t steal books, and don’t copy them on Xerox copies — they buy them, if not new, at least used.
The problem is that for all their hard work for 7 years, the Lindens and co. haven’t figured out how to code social mores as compelling, instrumental law — though they’d like to try.
[…] Here’s my response to Raph Koster’s blogs about micropayments — which is really about copyright and CopyBot. […]
Ok, now I understand why I like programming more then going into legislation, heh.
So just to get this straight if we take a game like Spore for example: who will the creatures that are made by users belong to? Can the owner of the Spore server sell the *monster data* to another gaming company? Could an MMO make an ever shifting creature population in a game using it or would that be a royal mess?
Back then in most cultures there were trade secrets for manufacture, and there were guild licenses enforced by the government. In other words, there was no independent manufacture, it was all state-controlled in some fashion. That’s what it was like in England until the Statute of Anne as well to some degree, with the Stationers having the state right (though indies were going wild pirating stuff too).
I have zero doubt that this will happen.
I don’t think we will ever see the industry move to a flat fee for everything. Even flat-fee based industries have tiered pricing — it just makes more economic sense given typical consumer patterns.
Not exactly… don’t confuse the permissions system (which is a means of enforcing licensing rights) with the sttement that they don’t claim ownership over uploaded content. They are similar, but not the same thing. The big step was the break with precedent on the actual IP ownership, not the enforcement tools.
The enforcement tools are basically a nicety — very important nicety, but a nicety to the real step, which is the IP ownership. Without said nicety, you’d be left with exactly the same tools for enforcement as you have in the real world.
Well, you want more than law, you want physics. That’s the essence of DRM, in the end. The permissions stuff is DRM.
The thing about social mores is that they very frequently do flow in the direction of convenience. We shouldn’t kid ourselves that most music today moves as CDs or even iTunes purchases. it’s mostly free. And we shouldn’t kid ourselves that if there were a way to dump a book in a hatch and get out a perfect copy of equal quality, that people wouldn’t do it in droves. Photocopying is not preferred because it’s just not convenient enough yet.
Then we hit the culture clash I was talking about.
And at some point fairly soon, we’re going to be hitting this sort of issue with manufactured real world goods…
[…] Keep in mind that the actual transfer of bytes from one field to another is not … and RMT would not happen were said transfer not assumed to be a basic part of … In fact, you the consumer pay a premium for blank media of all sorts …Read more: here […]
When can we get away from the model of copies which pays attention to the mechanics of how things get from A to B?
I don’t recall anyone requiring copyright to assemble printing plates (that’s a copy), one for each color and depth, to make copies that they actually got the right to make originally…
It’s annoying when they say ‘ahh, but there’s a copy in your cache, and a copy on your screen, and a copy…’ Yeah, there’s a copy in the shed, a copy on the cyan, yellow, and magenta plates, and another on the black brown, and cutting plates, and there’s a copy in the glazer, but we don’t actually make the copy, that’s just the extra ink sloughing off the page…
Not to mention the copy that’s pasted on the front of the news stand and the only blazoned on the billboard and the newsprint clipped out of Mrs Mac Gregor’s copy…
*grumble*
>there were guild licenses enforced by the government. In other words, there was no independent manufacture, it was all state-controlled in some fashion.
Perhaps Second Life is more like this ancient concept and 3-D virtual worlds with all their men in tights do represent regression, not progress.
Here’s “>a statement from Ginsu Linden on the forums which clarifies how LL sees itself:
“In Second Life, subject to certain licenses in the terms of service, you
retain the intellectual property rights you may have in your content,
including copyrights. “Intellectual property rights” are completely
separate to the rights of ownership of data – the bits and bytes that
reside on our servers. In order for us to provide the service of Second
Life at a reasonable cost, we must retain the right to own what we
physically own or control – the server infrastructure, including the
data on it. But ownership of bits and bytes of data does NOT by itself
give Linden Lab the right to publish or distribute your copyrighted
material.
I think there is a good analogy to hosted email services, like the
webmail services provided by many Internet portals. If you write an
email on those services, you own the copyright to the content of that
email. If you attach your copyrighted image to your email, you still own
the copyright to that image. In providing the service of sending that
email, the service provider hosts data that represents that email and
the attached image. The service provider owns the server infrastructure,
including the data on it, and stores that data for your email and
attachment in the “Sent” mail folder. But they can and will delete that
data anytime they need to, for service and scalability reasons. The
email service is more valuable to the extent they can store more of your
content, but for cost reasons they cannot guarantee that nothing will
ever happen to that data. However, regardless of what happens to that
data, under most terms of service for webmail that I’ve seen, you will
still own the copyright to the content represented by that data.
– Ginsu Linden
[…] I’ve unfortunately not been able to take the time to get actively involved, but there’s been some decent discussion over on Raph Koster’s blog on the subject of microtransactions. It apparently started with a comment on that Venture Beat article I previously mentioned (reLink), which led to a first MT post, “Are microtransactions actually the future?” (Link) and then a second, current post, “Microtransactions getting a bad name” (Link). Although heavily skewed towards the subject of microtransactions in videogames, it’s worth following if you can spare the time to keep up with the comments. […]
[…] here’s some more stuff to consider.First, off, Raph (where does he find the time?) once again has posted a thoughtful and lengthy set of thoughts on microtransations and copyright issues.Raph points out that virtual world “objects” aren’t objects at all, but only specific database […]
[…] about its long-term inherent value aside for the moment, there seems to be little question that gaming has provided the impetus for […]
[…] innovation economy copyright CopyBot reality virtual worlds synthetic Life Second) […] Raph’s Website » Are microtransactions actually the future? 11.24.06 | 11:53 […]
[…] Free” that made the rounds of the blog-o-twitter-o-sphere a couple of weeks ago. I also remember Raph’s perceptive comments on this topic back in 2006 when Second Life was hit by the Copybot […]
[…] של WoW. לא תרגישו בהבדל בטעם (עשוי להכיל אספרטיים) – מה זה ‘מיקרוטרנסאקציות’. איזו מילה ארוכה, אלוהים. אני חושב שנקעתי את האונה […]
[…] penny here, a penny there. Buy this story, it’s super-cheap. And of course there are always tales of a mysterious land […]
[…] Are microtransactions actually the future? […]
[…] Raph Koster’s: "Are microtransactions actually the future?" […]
[…] purchase for games and virtual worlds may be a billion dollar industry, but it’s based on microtransactions. These virtual items are pieces of code for which a person pays, in some cases, 2.7-cents. How do […]