CopyBot and Virtual Economies

You probably heard about CopyBot by now. If you haven’t here is a quick background:

CopyBot is a tool that allows you to (as the name suggests) copy any object in Second Life bypassing the built in copy protection features. People are getting upset because the content driven economy of the game may fall apart like a house of cards, if just about anyone can copy the expensive avatars and gadgets sold by in-game vendors.

For me this is almost a poetic example of what I have been saying for years now. Real world economics do not work in a digital world. SL is running into the same problem record industries have been fighting (an loosing) for decades now. A scarcity based economic model simply does not work when your product is a stream of bytes.

Personally, I think that Second Life is a great idea on paper. But in practice, I always found the all-present brutal commercialism of the game world a little bit jarring. You log in, and all you see are advertisements, vendor booths, gambling machines, and donation boxes. Everyone is selling or buying something. I visit that world every once in a while, but unless I can find some people to chat or interact with, I usually get bored with all of it within minutes.

But it is a big money making machine. It allows people to run in-game businesses, and make real-world money off of them. But it is a content based economy. Most SL citizens make their money by selling carefully modeled avatars, or cleverly scripted gadgets. They are trading with intellectual property, and they protect their copyright by using built in copy protection schemes. It all sounds logical and sensible on paper. But in reality it is a deeply flawed business model. I’m sure someone can write a whole dissertation disproving that statement, and showing why do such economies work. But I can tell you why they don’t work.

You know that a business model is bad if it can be completely destroyed by adding a fairly simple new feature into the mix. The sheer existence of CopyBot threatens economy of the whole SL universe. Of course you can make use of CopyBot against ToS and ban anyone who uses it. But that doesn’t validate the business model.

Let me tell you who is not affected by CopyBot – owners of the big Second Life Casinos, artists who create customized avatars and/or objects for commission, organizers of interesting in game events, and advertisers who use SL to spread the word about their RL business. Why?

Because these people make money by providing services, not products. The casino turns out a profit because it acts as a social center, and offers variety of games and amusements for the in-game crowd. Someone can come and copy the whole casino bit by bit, but it is not going to diminish the profits of the casino owner. Even if the whole area is recreated in another region of SL, people will still frequent the original because of it’s reputation. What good is a casino that no one knows about?

The artist for hire doesn’t sell you a product – they sell you a service of making an in-game object to your specifications. You can’t copy an avatar with your face on it using CopyBot. You can only pay someone to make one for you. The fact that someone copies it later does not diminish the value of artists work because he/she already got paid. It also does not impoverish you because you still have your personalized avatar.

In virtual economies there will be always demand for custom services. Selling content on the other hand is doomed for failure. So I say, let the CopyBot stay. Make it legitimate – hell, build it straight into the SL client. Have the in-game economy buckle and crash. It would be an great social experiment that would teach us about what awaits us in not so distant future. We should carefully observe the crash of the content based economy, and take notes as we witness the growth of new economy in the post-scarcity universe.

But of course that is not going to happen. Linden Labs will bail out the content pushers and ban CopyBot just like real world governments bail out entertainment industry by tweaking the copyright law to protect their business model from emerging technologies that threaten it…

[tags]copybot, copy bot, second life, sl, content based economy, service based economy[/tags]