EconoMUDtrics

Dave Rickey's otherwise tack-sharp take on the virtual-property question, previously cited, contains one passing assertion that could maybe use some sharpening:

"Where the US/European MMO market is over $200,000,000 per year of revenue (and Asia is even bigger), it's doubtful that the secondary market in items and characters is even as much as 10% of that."

I'm curious to see how Dave calculated that estimate for the "secondary market." (Gosh, if only he were a regular commentator on this blog... oh, wait... Dave?)

My own estimate goes something like this:

Starting with Ted Castronova's figures for sales in eBay's Internet games category, we get an annualized total of $16 million. But that is surely only a fraction of total sales in the market. In the Ultima Online market, for instance, the best-educated guesses put the total for non-eBay sales (through sites like UOTreasures, UOEmporium, et al.) at twice the eBay figure. Working that formula on UO alone adds $6 million to the total. Applying it to the rest of the games traded on eBay would add another $26 million. But just to be on the safe side, let's throttle the multiplier back from 2-to-1 to 1-to-1, adding $13 million instead, for a total of $35 million.

We're not done yet, though. We still haven't even begun to reckon with the behemoth that doesn't trade on eBay: EverQuest. Back when EQ auctions weren't yet contraband, Castronova figured the market at $5 million. And that wasn't counting non-eBay transactions. Nowadays, EQ trades still thrive on the gray-market auction site PlayerAuctions, and at superstores like IGE and Jonathan Yantis's MySuperSales. We could assume the market hasn't gone down any since the eBay ban (the subscriber base has only gone up, after all), and we could apply the 2-to-1 rule, for an additional $15 million. But again, let's be conservative, estimate the non-auction sales at 1-to-1, and guess that the market has dropped by half since Castronova's calculations. That adds another $5 million to the total.

Bottom line: $20 million (or 10 percent of industry revenues) looks more like the absolute minimum size of the player-to-player market. A better guess would be more like $40 million. And if you wanted to go nuts (or already are), you could even say it's as much as $63 million.

Still no match for the business of creating worlds, but nothing shabby in its own right. And don't forget, that Asian market no doubt has a secondary market of its own, whose size, if ratios hold, may well outdo the primary market in such backward regions as our own.