Commentary

Virtual Goods Worth More than Real News: Curmudgeon

Mafia Wars/FarmVille

I usually try to avoid making any statement involving the words "society," "values," or "priorities" -- nouns which are all so vague as to be almost meaningless. I also usually don't see any point in judging what other people do with their time or money, as long as they accord me the same indifference. But a recent realization has prompted me to (oh no, here it comes) question society's values and priorities.

Basically, it dawned on me that Americans will soon be spending more money on imaginary objects than the news. In fact, they already do. According to various estimates and forecasts, Americans spent $500 million on virtual goods in 2008, rising to $1 billion in 2009 and $1.6 billion this year. Fueled by the rise of social games like Farmville and Mafia Wars (and virtual worlds like Second Life, where sales continue to grow) U.S. spending on virtual goods may jump to $5 billion by 2014.

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By contrast, as near as I can figure, U.S. spending on online subscriptions to newspapers was probably about $65 million in 2007 and $100 million in 2008; those are the estimated online subscription revenues generated by the Wall Street Journal Online, which is the only major newspaper publisher to succeed in charging for online content so far. Looking ahead, the Next Issue Media consortium projects online subscription revenues for newspapers and magazines rising to $3 billion by 2014 -- with perhaps half going to newspaper publishers.

To review, that means in 2014 Americans will be spending $1.5 billion on online newspaper subscriptions and $5 billion on imaginary objects. Maybe I find this ridiculous because I'm a reporter and my sympathies lie with the newspaper industry. I understand newspapers have their issues: critics accuse them of political bias (usually left wing) and their credibility hasn't been helped by scandals with journalists fabricating stories. However, Americans still appear to value newspaper reporting at some level, judging by Nielsen figures showing newspaper Web sites attracted 71.6 million unique visitors in the first quarter -- over a third of all U.S. Internet users. And according to Pew, 80% of all links in new media blogs and the like connect to sites maintained by newspapers and broadcast networks (which are also free).

At the same time, I understand that virtual goods -- while imaginary -- give people real pleasure as part of games and online worlds which are also entirely imaginary. I don't have anything against companies profiting from leisure activities; if you earn a living from online gaming, more power to you. And I know that sales of virtual goods can support worthy causes: it's pretty darn cool that Zynga raised $1.5 million for the Red Cross relief efforts in Haiti by selling special edition virtual goods.

But I can't change the fact that something about this situation still bugs me.

It wouldn't be quite so egregious, in my humble op-ed, if newspapers weren't in such a bad way. But the financial woes of the newspaper industry, and the consequent layoffs and newspaper closings, have received a lot of attention over the last couple years.

The advertising side of the business continues to look pretty grim: the latest forecasts from ZenithOptimedia and Magna have newspaper print ad revenues continuing to decline into the middle of this decade, as modest online ad revenues continue to stagnate (Internet ad revenues rose 4.3% in the first quarter to $730 million, per the Newspaper Association of America). Meanwhile print circulation revenues, temporarily buoyed by increased newsstand and home delivery prices, are imperiled by the long-term decline in print readership.

All of which explains the renewed focus on generating more revenue from online subscriptions. But newspapers will have a hard row to hoe, judging by the results of a survey of 2,404 American adults by Ipsos Mendelsohn and PHD last year, which found that 55.5% of respondents said they would be very unlikely to pay for online content from newspaper or magazine publishers, versus 16.5% who said they might pay.

3 comments about "Virtual Goods Worth More than Real News: Curmudgeon".
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  1. Barbara Rocchi from Sugar, August 27, 2010 at 4:13 p.m.

    This has amazed me since I found out the amount of money spent on 'nothing' aka virtual goods. I understand the reason behind it on one hand, it's fun. But on the other, I'm still in shock. It is my prediction however, due to the economy not getting back on track anytime soon, that the estimates for 2011 and beyond will be retracted at a much lower estimate. People will not be able to spend money on 'nothing' in the near future, because they will have to save that money for stuff like, groceries, gas, bills, and the ever growing taxes.

  2. Frank Chloupek from Penton Media, August 27, 2010 at 7:32 p.m.

    well, a lot of our spending is based on "nothing." On some level an online news subscription is as "virtual" as doodads in mafia wars.

  3. John Jainschigg from World2Worlds, Inc., August 28, 2010 at 11:04 p.m.

    It _is_ pretty shocking, isn't it?

    Even more shocking -- while I think Barbara is quite right in projecting that certain kinds of virtual good spending will die out under economic pressure, I'm not sure all will.

    It seems equally reasonable (to me, at least) to project that as virtual goods become more sophisticated, and come to be traded and used in more interesting contexts (e.g., Second Life, as opposed to Farmville), a growing fraction of society's dialogue about selection, taste, consumption, assemblage and display may come to take place (at much lower cost) in virtual terrain -- and economic and environmental pressures may hasten, rather than retard, this trend.

    Ultimately, this may do to 'fashion,' to 'design' and to certain 'luxury' industries in general what the web (and technologies like blogging) did to conventional publishing -- i.e., remove capital and logistical barriers to participation in the dialogue and end up disrupting every relevant business model.

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