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Black Snow Interactive and the World's First Virtual Sweat Shop


Originally published (in edited form) as a sidebar to "Unreal Estate Boom, or, The 79th Richest Nation on Earth Doesn't Exist," Wired magazine, January 2003.

Early last year a small Southern California company called Black Snow Interactive made a business move you could almost call shrewd if it weren’t so surreal. They rented office space in Tijuana, equipped it with eight PCs and a T1 line, and hired three shifts of unskilled Mexican laborers to do what most employers would have fired them for: playing online computer games from punch-in to quitting time. The games they were required to play were Ultima Online and Dark Age of Camelot, two of the most popular massively multiplayer role-playing games online. As the workers sat mouse-clicking virtual trolls to death, their characters acquired skills and gold at a brisk, assembly-line pace. For this, Black Snow paid the Mexicans piecework wages -- then turned around and sold the high-level characters and make-believe money on eBay, where a grandmaster dragon-tamer account from Ultima can fetch $200 and a Dark Age gold piece trades for roughly what the Russian ruble does.

It was the world’s first virtual sweatshop, and it was more or less a money-making machine. A few months into operations, though, the machinery started to sputter. Mythic Entertainment, producers of Dark Age of Camelot, suspended Black Snow’s game accounts and had its eBay listings banned, alleging that the sales infringed its intellectual property rights. Black Snow in turn alleged unfair business practices and hauled Mythic into U.S. district court. They wanted their revenue stream back, but more than that they wanted an answer, once and for all, to the knotty question their business model hinged on: Exactly who owns the products of virtual game economies? The companies that produce the games? Or the players who produce the economies?

Players themselves are divided on the issue. For some, the ability to sell virtual goods for dollars isn’t so much a right that needs defending as a cheat that needs patching; their own in-game accomplishments are rendered meaningless, they complain, when any newbie can match them with enough out-of-game cash. But for less purist players -- to say nothing of the dozens who now make six- and even seven-figure incomes buying and selling MMORPG items on eBay and specialty sites like PlayerAuctions -- out-of-game trades make both ethical and economic sense.

For one thing, they put players who have less time than money on an even footing with the 60-hour-a-week hardcore gamers. For another, they give credit where credit is due: in their heart of hearts, after all, all players know that what makes a level-50 darkness-spec’d runemaster or a +120 magery power scroll worth hundreds of dollars isn’t anything the game designers did. It’s the hundreds of hours some player invested in bringing that commodity into the game world. Or as Lee Caldwell, Black Snow’s director of sales, put the point in arguing against Mythic’s intellectual property claims, “What it comes down to is, does a MMORPG player have rights to his time, or does Mythic own that player’s time?”

Needless to say, the game companies tend not to see the millions of dollars flowing in and out of worlds they invented in quite the same light. But they also don’t see eye to eye about the matter among themselves. Sony Online Entertainment, for instance, which runs the market-leader EverQuest, has adopted an even harder intellectual-property line than Mythic, imposing a strict ban on player auctions that turned one of eBay’s busiest trading communities into a ghost town overnight. Microsoft, on the other hand, explicitly permits players of its Asheron’s Call to sell their characters to one another but taxes those sales, as it were, by charging a one-time account-transfer fee.

And then there are the companies that have decided to go for a piece of the action themselves. Last September, Origin, the Electronic Arts subsidiary that runs Ultima Online, dismayed veteran players and delighted noobs by announcing it would now be selling advanced characters custom-built at $29.95 a pop. Wisely, Origin set the fee roughly in line with auction prices for characters generally, thus avoiding the impression that they’re out to undercut and overtake Ultima’s unusually robust auction market. But a new virtual world called Project Entropia -- now in beta -- suggests that in the future companies may not be so delicate. Developed by Swedish firm MindArk, Project Entropia will forgo the traditional monthly subscriber fees and generate revenues instead by selling everything in the game for dollars -- a move that could finally make corporate peace with the independent auction markets by rendering them completely superfluous.

But that would hardly be the same thing as working through the tricky legal and social issues raised by BlackSnow’s suit against Mythic. And the work definitely needs doing. Ed Felten, a Princeton professor and encryption expert who has tangled with the film and record industries over their efforts to outlaw any kind of fiddling with digital antipiracy code, notes that “as our world becomes increasingly virtual, more of our property will become virtual -- and increasingly under copyright protection.” As owners of virtual property, Felten argues, we need to start challenging its privileges as intellectual property. And if ever there was an opportunity to see how far that challenge can be taken, it was BlackSnow Interactive v. Mythic Entertainment, Inc.

Unfortunately -- and perhaps not surprisingly in a case focused on commerce in imaginary commodities -- the opportunity proved too good to be true. In early May, gaming sites broke the news that Lee Caldwell and fellow BlackSnow principal Richard Phim had just received a summary judgment and a $10,000 fine from the Federal Trade Commission for auctioning off nonexistent computers in a previous business incarnation. Shortly thereafter, Caldwell, Phim, and BlackSnow’s entire operations skipped town without a trace, leaving behind unpaid debts including $23,000 to a longtime supplier of Ultima gold and the latest bills from their law firm, which promptly dropped them and their case against Mythic.

Impressively enough, the boys from BlackSnow managed throughout the entire episode to keep a lid on any news of their Tijuana undertaking. Which was just as well, since it probably wouldn’t have helped their case to have it known that the hard-playing game lovers they claimed to be standing up for were in fact Third World wage slaves with mouths to feed and a quota of faerie drakes to slay before their shift ended.