Net revenue was RMB265.20 million or US$39.06 million, a decrease of 34.6% from RMB405.25 million a year ago, mainly on lower online game net revenue, which was adversely impacted by adjustments made to the monetization features within ZT Online. Analysts expected revenues of $63.41 million for the quarter.

Gross profit declined 40.9% year-over-year to RMB212.5 million or US$31.3 million, and gross profit margin fell to 80.1% from 88.8% in the third quarter 2007.

Active paying accounts for online games declined 31.6% to 937 thousand, and average revenue per user dropped 4.4% to RMB282.1. Meanwhile, average concurrent users for online games rose 9% from last year to 543 thousand.

Wowee. The interesting thing here is in many Chinese articles I've read, players have cited 'cost' as a reason they are moving from WoW; clearly, some players are not spending less on domestic games. Even considering the drops in revenue and other indicators, sounds like Giant is steaming along — perhaps their unholy mix of 'illicit' MMO features being sanctioned really is just the ticket.

Giant Interactive Q3 profit falls; issues Q4 revenue forecast [RTTNews via PlayNoEvil]

The company will yank ZerA, a role-playing game that took three years and 10 billion won (about $7.5 million) to develop, at the end of January and is preparing to repay users who own paid items.

ZerA got off to a bright start after its debut in February 2006, with the number of concurrent users peaking at 40,000, but has been losing popularity since with critics questioning the quality of play. The lukewarm reception here was enough to kill the company's plan to publish the game in Japan.

The demise of ZerA touches off a sentimental response from Nexon and other Korean game publishers, as it had been anointed one of the ``big three'' from the class of 2006 ― along with Webzen's ``SUN'' and HanbitSoft's ``Granado Espada.''

At the time of their releases, the trio shouldered hopes to expand an industry that looked to be just entering its peak. Nearly three nondescript years later, the games have been reduced to examples of what can go wrong.

How much will people be getting? Time will tell, but it's an interesting good will gesture on the part of Nexon. The Korea Times piece is interesting, especially in context with some recent news happenings. NCSoft announced a dismal 50% drop in profits for the 3rd quarter, the same week Richard Garriott returned from space and announced his departure from the company. There's a lot of movement going on among companies, and a lot of it is due to expensive 'mistakes' — even ones that are reasonably popular abroad.

Aion Shoulders New Hope As Old Games Fade [Korea Times via PlayNoEvil]

The announcement, which was distributed to local tax bureaus, specifically takes aim at those who buy virtual currency from gamers and surfers and sell it to others at a mark-up. Taxation officials are granted the right to determine the original price of online virtual currency if the individual fails to provide proof of an original price, it says.

We'll see how well this pans out — probably better than the attempt at an outright ban, at the very least — as this is a move that is gaining increasing popularity. Australia was actually the first country to start levying taxes on virtual transactions. Considering the RMT market is pretty diverse, it will be interesting to see exactly how the government tries to implement this — and how successful they are.

Real Taxes for Real Money Made by Online Game Players [The Wall Street Journal]

Charges were also filed against 11 Koreans who allowed the scheme to use their bank accounts for money laundering.

Jeong and his ring reportedly sold the game money illegally produced in China using cheap labor and virus programs. They are believed to have taken a commission of three to five percent of the money traded to purchase game money.

And you thought gold farming was a problem. The connection between the gold farming ring and the money laundering ring is unclear, but this is just one more example of RMTs being put to, uh, creative uses.

`Online Game Ring Smuggled Out $38 Mln to China` [donga.com via PlayNoEvil]

These are real economies. In fact, they get much closer to the raw creation of economic growth than many national economies as these "virtual" economies prove quite convincingly that wealth isn't capital or labor but instead knowledge and creativity. Building a working infrastructure to support capital inflows and outflows in a trustworthy manner is very much a core problem we want to address.

In many ways we're facing the merging of intellectual property and "cash" into one entangled entity. When someone steals a virtual thing they've stolen real value. Cash was created in many ways because barter was hard, and cash creates prices. However if prices are now known in some exchange rate, the virtual good that was stolen is a bill denominated in the exchange value of that good in the first place.

With credit card fraud, stolen card numbers, chargebacks, and other security breeches an increasing problem, we'll no doubt see more and more focus on what can be done to prevent fraud in its many forms (though Steve at PlayNoEvil seems to harbor doubts that companies really pay enough attention to security and fraud issues, especially when it comes to implementing successful and cost-effective solutions that don't cripple usability for the consumer).

Vindicia's Hoffman On The Science Of MMO Fraud [Gamasutra]

Earlier in the year, SOE and LiveGamer built a new platform for microtransactions, incorporating and ultimately replacing EverQuest II's Station Exchange. The result of that collaboration is the Live Gamer Exchange in-game economic platform, and LiveGamer will be providing the RMT service and technology for both new titles as well.

As SOE says character customization will play a significant role in espionage action-shooter The Agency, players will be able to purchase new clothes, weapons, vehicles and other identifying items that "tailor their gameplay."

As for free-to-play, family-friendly adventure title Free Realms, in addition to a range of avatar customization items for purchase, players can make and trade their own on the transaction service as well.

Full release follows the jump.

Sony Online Entertainment and Live Gamer Expand Transaction-based Game Play to Additional Titles

Live Gamer Exchange to Power RMT in The Agency and Free Realms

SEATTLE, WA - May 14, 2008 - Live Gamer, the premier operator of a publisher-supported marketplace for real money trading of virtual items, has announced it has entered into an agreement with Sony Online Entertainment (SOE) to offer real money trading (RMT) in the upcoming titles published by SOE — The Agency™ and Free Realms™. The two companies are leading the evolution of the gaming industry into transaction-based business models that open emergent game play styles for gamers and opportunities for publishers.

Live Gamer's service, called Live Gamer Exchange™, will provide the SOE gaming community within these new games with a trusted way to conduct real-money transactions. Earlier this year, Live Gamer incorporated SOE's proven Station Exchange technology, the first publisher-developed and sanctioned RMT marketplace, into its own e-commerce platform. The Live Gamer Exchange is currently operating within EverQuest® II, SOE's popular MMORPG (www.livegamer.com)

The next genre of SOE MMOGs to incorporate the Live Gamer Exchange will include:

* The Agency, a fast-paced online action shooter, will let players experience the life of an elite espionage agent with a "you are what you wear" level of customization. As they travel to exotic locales, infiltrate enemy organizations, and seek global domination for their own agency, gamers will be able to customize their characters through attire, weaponry, gadgets, vehicles, gear and aliases that tailor their game play.
* Free Realms, a whimsical fantasy adventure game targeted toward families, will be free to play and offer a catalog of items made by and for players to customize their avatars as much as they wish. The Live Gamer Exchange will provide a new and efficient mechanism for trading these items within the game.

Said John Smedley, president of Sony Online Entertainment, "We are actively exploring free-to-play and other revenue models, and always looking for new ways to engage and entertain gamers. Live Gamer is a proven partner that protects and supports our gamers who participate in RMT. We trust them to handle this area of the business for us so that we can focus on creating and growing our games."

"SOE pioneered the MMO genre and continues to evolve it by offering new game play experiences, revenue models and expanded demographic appeal. Live Gamer is proud to be a key part of the movement toward transaction-based game play," said Live Gamer co-founder and president, Andrew Schneider. "We're now building on the launch of the Live Gamer Exchange with EverQuest II, and expanding our relationship with SOE to power additional games including these two titles for which the idea of RMT has been built in from the very early stages of design."

Wu began by discussing the recent Bragg v. Linden Labs court case — in brief, a legal battle between a Second Life user and the world's parent company over land that Bragg apparently improperly acquired, resulting in a ban from the world by Linden. That case, Wu says, was a landmark in that it demonstrated that virtual property rights have tangible value in the court system ....

"What are the prevailing customs that should apply?" Wu asked. "Is it the country where the company is based? Is it the country where the customer lives? We don't even know what the basic virtual property rights are that we should be concerned with."

These sorts of issues will get nailed down eventually (maybe?), it's a serious balancing act in a lot of ways. And once you mix in the reasonably global nature of many MMOs? Well ....

Human and Property Rights in Virtual Worlds [Worlds In Motion]

The Complaint (which is, remember, by its nature entirely one-sided) tells a dramatic and undoubtedly controversial story about virtual property company IGE. It starts at the beginning, when the founders allegedly met playing Everquest, and proceeds like a script for a straight-to-video movie.

It includes third-hand allegations of cash from an earlier venture being spent on illegal drugs, a claim that Pierce's dog was shot by the "Spanish FBI," and allegations of minors being transported across state lines for sex. The complaint even takes a swipe at former-child-actor Pierce's filmography (Pierce played a young Emilio Estevez in The Mighty Ducks and The Mighty Ducks 2, and the lead in First Kid). In short, this is not your average business spat.

PlayNoEvil has some insightful comments up regarding some general problems this case points to. In any case, rare is the court filing that is this entertaining.

Lawsuit Against IGE Founder Brock Pierce Alleges Underhanded Dealing at Virtual Property Company [Virtually Blind via PlayNoEvil]

The question we might ask is: why would this matter? Other than for tax purposes or interpreting the language of wagers, do we really need to place those beads neatly in one of two boxes: money or esteem?

If you can exhange Quest gold for an Amazon gift card, then it is money. But if it also "show[s] everyone how active and helpful you've been on Askville" then it is also something else—a token of esteem. So, like many status markers out there that people might pursue ..., Quest gold belongs in both boxes at once. Prizes have valences in market, reputation, and ludic economies.

I am far from an economist, but the spread of RMT and other in-game economic developments, as well as 'ludic' transactions in non-game settings, is interesting to ponder - will the application work outside of games? Do people buy into it? An interesting piece that's worth a read through (and some clicking on the links if you have time).

World of Answercraft [Terra Nova]

The main Southern Weekly article on ZT Online follows a gamer as she first becomes interested in the game, through her rise to power, and her eventual disillusionment with the money-sink it had become.

Woven into the narrative are descriptions of the often shockingly brazen tactics ZT Online uses to soak the "RMB gamers" who would rather spend money than grind out levels. The picture resolves into that of an online casino dressed in the trappings of an adventure game, and Shi Yuzhu [the brain behind ZT] ends up looking a lot like a shady used-car salesman.

It's a really, really great (if somewhat lengthy) article from a number of perspectives - it's one of the better mainstream media articles I've read on gaming, though not without its flaws. But as the PNE commentary points out, the fascinating thing is how it turns a lot of ideas about 'good' MMORPGs upside down ... and is reaping major rewards. From the sounds of it, I doubt we'll be seeing it Stateside, but one never knows.

Gamble your life away in ZT Online [Danwei via PlayNoEvil]

The more I have considered this issue, I think spectacular, arbitrary punishments are the best penalty for gold buyers.

I'm leaning towards "The Roll Back". The game operator detects a gold buyer. He reviews the account file and makes a notation of where the player was when he bought the gold (or farther back, or at the time he is detected). This state is quietly saved. Then, at some random date in the future - say, 1 to 6 months later, the player is notified that he was busted for gold buying and his account is rolled back. No gains, no experience, no nothing from the time since counts.

This should be done rather publicly on a daily basis... banner headlines - a Player was rolled back from Level 63 to Level 20. He lost X gold, Y experience, the following items..... One of those annoying news tickers (with RSS feed, of course).

He's got some more interesting thoughts that are worth a quick read through. While such a system seems fraught with potential technical challenges and ups the amount of effort that must be invested by the operator, it's not like companies aren't spending any time going after farmers/buyers - and what better way to stem the tide of RMTs for virtual gold than putting a punishment system in place that punishes not just people you actually catch, but the whole system?

Proxy Products for Gold Farmers and RMT in Blizzard's World of Warcraft [PlayNoEvil]

The report says, "... a criminal enterprise could open several thousand MMOG accounts. Each could be used to trade with other players in the purchase or sale of in-game assets, the funds from which would ultimately be withdrawn from the accounts. Since thousands of accounts may engage in millions of transactions, each with small profits or losses, it would be difficult to trace the true source of the funds when they are withdrawn. These transactions can be conducted worldwide without the oversight that typically accompanies international bank remittances. In fact, in February 2007, China's central bank and finance ministries called upon companies to stop trading QQ coins and virtual currencies, presumably to curb the unregulated exchange of currency."

As if gold farming wasn't enough of a problem. I guess we can look forward to more official oversight in the grey area of virtual world transactions?

Second Life, WOW a target for money laundering [M-Net]