Moon sale brings in cash, marketing

Last month, Entropia Universe “discovered” a new moon. Today, the company announced that the moon “sold” for $150,000 to a player-led group of investors.

This isn’t the first time the company has “sold” virtual property — a virtual setting called “Treasure Island” went for $26,500 in 2004. In 2005, “Club NEVERDIE” sold for $100,000 — and was re-sold for $635,000 in 2010. The “Crystal Palace Space Station” went for $330,000 in 2009. And “Calypso Land Deeds” brought in a tidy $6 million over the last two years.

The word “sale” means something different here than in does in normal use. It’s not like buying a website, where you’re buying an actual asset. Once you’ve bought your website, for example, you can move it to different servers.

But when you buy property in Entropia you can’t, say, move it to Second Life or Blue Mars or another platform where you get a better deal on hosting.

When you buy a website, you can upgrade its content management system or rewrite its back-end software. You can’t do that with virtual land in Entropia Universe.

And it’s not like buying a grid. If you were to buy a grid — say, you offered me a chunk of money for HypericaÂ — you would get all the grid databases, all the assets and inventories and users and everything else in there, and I’d throw in the associated website, too. You could choose to continue to use the hosting company I’m using now, or you could migrate it to a different host. And I would have nothing to do with Hyperica from then on.

“Buying” land in Entropia Universe is more akin to buying property in a Monopoly game. Yes, you “own” it, and you collect “rent” — but only until the game is packed up and everyone goes home. You don’t actually get to take a deed for Park Place home with you. And you buy it for Monopoly money, not real money.

The thing is, the folks who spent $150,000 for the moon weren’t spending Monopoly money. Entropia’s in-world currency is, like Linden Dollars, convertible with real money.

They probably had a good reason for doing so. They had the money lying around and weren’t doing anything with it, and they could afford to lose it, and buying the property increased their enjoyment of the game, and there’s always the chance that they’d come out ahead. They will be able to collect rents or taxes on that property, and maybe even resell it for a higher price later on.

The folks who bought “Club NEVERDIE” the first time certainly did well out of it.

It still seems kind of risky, though, to me.

But what I’m more interested in is what the Swedish company MindArk, the guys behind Entropia Universe, get out of the deal.

Cash infusion

MindArk basically sold a bunch of empty land. A potential virtual moon, really, more than an actual one. It will go online sometime in the next few months.

The company can use the money to design and develop the new property. Or it can install some ready-made structures and spend the money on anything else. Like hats.

Marketing support

Better yet, the new buyers have a vested interest in recruiting players to populate the new space.

The deal seems structured to reward them for bringing in brand new users, rather than pulling in existing users from elsewhere in the game.

Given the kind of money the buyers are spending, it would serve them well to have some kind of marketing plan in mind.

And if the marketing is a flop and the moon fails to pay for itself, the buyer loses both the initial investment and any money they spent on sales and marketing. MindArk basically unloaded a bunch of its risk on its customers

OpenSim implications

In the OpenSim space, I could see something similar playing out with commercial grids. InWorldz, say, or Avination or another big grid can auction off a newly-discovered continent.

The new “owners” would get a say in how the new continent would be built out, would get a cut of all sales taxes and land revenues collected on that land, and a cut of all future spending anywhere by new users who sign up specifically to be part of this new expansion.

Sure, the new owners could just start their own grid instead, but then they would need to invest in building all the grid infrastructure — website, currency, events, profiles. Plus, when new users show up there won’t be anything for them to do at first or anywhere to go.

By being part of a large, successful, commercial grid, the new landowners get to be part of an established world with a working economy instead of having to build everything from scratch, at better terms than they could get in, say, Second Life. And they would be part of a closed world, so that content creators could feel safe.

This strategy could allow closed commercial grids toÂ accelerateÂ their growth, and bring in cash for expansion and development without requiring the grids to borrow money or sell shares in their company.

Risks and downsides

Investing in a new continent on an established grid carries risks for both the buyers, and for the grid itself.

Virtual worlds come and go Â — a grid that is popular today may lose ground to another grid tomorrow. A grid is most likely to hold a big land auction when it’s at the peak of its popularity, so as to attract the maximum potential buyers and get media attention.

If everything works out well, the land purchase will serve to make the grid even more famous and popular, and both the grid and the buyers come out ahead.

But if the sale occurs just as the grid enters its downswing, the buyers will be left holding worthless, empty land.

Worse yet is if the auction fails to attract many bidders. Entropia’s recent moon auction only drew one participant, and the moon sold for the minimum bid.

Then it’s a public embarrassment for the company holding the auction, and for the buyer who probably now worries that they may have overpaid.