>Princeton computer scientist and security researcher Ed Felten offers some interesting thoughts on virtual worlds, working off discussions at State of Play:

Last weekend at the State of Play conference, the “great debate” was over whether virtual worlds should be subject to terrestrial laws, or whether they are private domains that should determine their own laws. But regardless of whether terrestrial regulators should step in, they certainly will. Stock market regulators will object to the trading of virtual stocks worth real money. Employment regulators will object to the unconstrained labor markets, where people are paid virtual currency redeemable for dollars, in exchange for doing tasks specified by an employer. Banking regulators will object to unlicensed virtual banks that hold currency of significant value. Law enforcement will discover or suspect that virtual worlds are being used to launder money. And tax authorities will discover that things are being bought and sold, income is being earned, and wealth is being accumulated, all without taxation. When terrestrial governments notice this, and decide to step in, things will get mighty interesting. If I ran a virtual world, or if I were a rich or powerful resident of one, I would start planning for this eventuality, right away.

>Joystiq notes that some securities analysts are hinting that there might be shortages of Xbox 360 at launch time. Joystiq’s summary of the research note from Deutsche Bank:

“We believe Microsoft wants to offer the scaled-down version but may be looking to control sales because of the possibility of not being able to meet initial demand.” They go on to note that they believe that Microsoft will eventually sell the scaled-down Xbox 360 package without the hard drive and extra accessories once the company is able to rustle up enough of the consoles.

Maybe I’m cynical. If you’re a console manufacturer, production shortages are your enemy, but rumors of production shortages are your friend. I’m sure this is factored into launch plans. If Microsoft can handle launches of Windows without shortages, I’m sure they can handle the Xbox 360. But these rumors help stimulate pre-orders, as Xboxers (and their credit-card wielding parents) reserve their system before they’re gone. So we always hear them just as the anticipation for a new system starts to build.

>RocketBoom, the hip vlog (video blog) hosted by Amanda Congdon, devoted Wednesday’s show to the Second Life, the innovative MMORPG where participants are creating profitable businesses that exist entirely in the virtual world. The segment profiles Nephiline Protagonist, the Second World avatar for designer Kasi Nafus, who is making real-world dollars by selling virtual clothing to Second Life players through an online boutique called PixelDolls. Nafus’ efforts are being chronicled in Ideal World - A Virtual Life Documentary. Interesting stuff.

Virtual market maker IGE recently paid $100,000 to purchase the domain name eq.com, which now takes visitors to a page on the IGE site offering Everquest platinum and accounts for sale. The eq.com domain was previously owned by Laserlight Publishing, which marketed a book called The EQ Factor (Entrepreneurial Quotient), according to Domain Name Wire.

Meanwhile, PaidContent reports that venture capitalist were “abuzz” about IGE at the recent Digital Hollywood trade show, noting that the company’s marketplace for online currency and MMORPG game assets is “apparently generating fair amount of revenues.”

Beijing-based gaming exec Bill Bishop posts on his blog that he’s hearing “strong rumors” that Rupert Murdoch’s News Corp. is in talks to buy NCSoft, publisher of the huge Korean virtual world Lineage, as well as City of Heroes and most recently Guild Wars. Bishop notes:

The price would be high, but strategically it might fit with Murdoch’s plans to get big fast in interactive media . Clearly News Corp likes gaming, as evidenced by the hefty price they paid for IGN.

How reliable is the report? Bishop is currently CEO of Red Mushroom, an MMORPG publishing house, but was a co-founder and general manager of of CBS MarketWatch until it was bought by Dow Jones last year. It’s a “grain of salt,” but a tasty one from a media veteran.

In the wake of its $650 million deal for IGN, News Corp. still has plenty of cash and apparently is eyeing additional acquisitions in the gaming sector. Who might be next? The Motley Fool’s Rick Munarriz speculates that CNET is a possibility, citing the reach of GameSpot.

Both IGN and Gamespot are likely to lure a whole lot of traffic in the near term; all three video game console makers will be rolling out their next-generation systems over the next year. An attention-hungry empire would hate to miss out on that traffic. However, CNET would cost News Corp. far more cash than the purchase price of MySpace and IGN combined.

In other Fox-IGN analysis, GameDaily’s Media column wonders how the deal will affect the balance of power between the enthusiast mags and gaming web sites:

For a long time, at least behind closed doors, many print folks considered online sites as minor league employment opportunities. Now, things may be changing. It’s not too hard to imagine how a video game website intimately related to a major entertainment company could become a premiere destination even for firmly entrenched print editors.

True enough. But GameDaily also alleges that “Ziff’s 1up.com blog approach was a unique and fresh idea.” Gee … gameblogs, who would have thunk of that?

So much for the planned IPO for IGN. The gaming publisher will instead be bought by Rupert Murdoch’s News Corp. for $650 million. Many industry analysts expected such a deal, as IGN began publicly shopping itself right around the time News Corp. went public with its ambitions to buy gaming-related properties. It seems the logic finally made itself apparent to the buyer and seller, and a deal was struck.

IGN reportedly isn’t profitable as a stand-alone business, but its audience (predominantly consisting of demographically desirable young males) is valuable to News Corp., providing eyeballs for cross-marketing of Fox properties (and vice versa). Is another shoe yet to drop? News Corp. has reportedly budgeted $2 billion for gaming acquisitions, so there may be more deals ahead.
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It’s a genius headline, an irresistible click magnet. How To Meet Women Playing Warcraft is the title of a story at Tom’s Hardware Guide that’s a perfect storm of geek gaming interests. I couldn’t resist, either. Can you? You know you want to read it.

Japanese police have arrested a Lineage II gamer for creating a bot-controlled character that acquired a huge cache of game assets through “virtual muggings” of overmatched players, and then sold them through an auction site. The perpetrator of the virtual crime spree was a Chinese exchange student, according to the writeup in New Scientist:

Several players had their characters beaten and robbed of valuable virtual objects, which could have included the Earring of Wisdom or the Shield of Nightmare. The items were then fenced through a Japanese auction website, according to NCsoft, which makes Lineage II. The assailant was a character controlled by a software bot, rather than a human player, making it unbeatable.

The incident highlights a harsh reality of the new virtual economy: when game assets have cash value, obtaining them illegally can land you in jail. But what is “illegal” in a virtual world? Do game publishers’ terms of service become de facto criminal statutes that extend into the real world? Bots and mods that juice gaming capabilities are creating some interesting offline ramifications these days, and this is one more area where “meatspace” mechanisms for sorting out such dilemmas will be tested.

Virtual crime has been a hot topic on Terra Nova in recent weeks, where the RSS feed is beginning to look a little bit like the police blotter.

Sony’s Station Exchange virtual trading service faced a real-world economic challenge over the weekend, when a duping bug in Everquest 2 disrupted prices of goods, causing rampant inflation in the virtual world. The duping - a hack or program bug which allows players to create endless copies of game assets - was used to generate large amounts of Everquest platinum, flooding the currency market at Station Exchange. “The amount of money in the game increased by a fifth in about 24 hours,” said Chris Kramer, director of public relations for EQ2 publisher Sony Online Entertainment. “We have a lot of alarms for this kind of thing, and they all went off on Saturday.”

Sony’s prompt identification of the problem may have been helped by safeguards introduced after an earlier duping incident which is described in an article at Plaguelands. While some are skeptical of the claims, the account is accompanied by screen shots, as well as an acknowledgement of the bug in a message from Everquest II senior producer Scott Hartsman:

This was actually a short-lived timing bug caused by the introduction of offline vending, which has been around for a good few months now, and was fixed the instant it was brought to our attention. As a result, it caused us to introduce some new kinds of econ reporting that we weren’t previously doing. It was a bit of a pain for the invalid coin to be tracked down and deleted on the handful of servers in question, but that gave rise to some new tools to make that easier as well, making the event not a complete loss.

Perhaps those new kinds of econ reporting came in handy Saturday.