Virtual Worlds A Brief Tutorial

1. Virtual Worlds A Brief Tutorial Presenter: Jessica Mulligan jmulligan@imaginventure.com Jessica.mulligan@gmail.com Jessica Mulligan

2. TODAY’S AGENDA • Definitions • Some History • Numbers and Trends • Q&A Jessica Mulligan

3. WHO AM I? • EXPERIENCE: • 22 years in Online Entertainment • 50+ online products, 12+ MMOs • CURRENT POSITION: • COO, ImaginVenture SA • AUTHOR and COLUMNIST • Developing Online Games: An Insider’s Guideco-authored with Bridgette Patrovsky • A Royal PITA Jessica Mulligan

4. Definitions Virtual World (VW) A computer-based simulated environment intended for its users to inhabit and interact via avatars. Jessica Mulligan

5. Second Life July 2008 Jessica Mulligan 5

6. Definitions VWs normally have the following: • Persistent Environment: The terrain and objects are the same for all viewers. • Persistent Effects: When one person changes something, others perceive the change. • Persistent Avatars: Avatars can have their data changed and reflected throughout the world. Example: Inventory items, skills, attributes. Jessica Mulligan

7. Definitions Types of VWs • Social World: The main purpose is the social interaction of the inhabitants. • EXAMPLE: Habbo Hotel, Second Life, Club Penguin • Game World: The main purpose is to experience and advance within the context of the game rules. • EXAMPLES: Runescape, World of Warcraft Jessica Mulligan

8. Definitions Types of VWs • Workspace World: Used for internal corporate, government or NGO communications, meetings and collaboration. • EXAMPLE: Sun’s MPK20, IBM’s Bluegrass Project Jessica Mulligan

9. Definitions The Park Analogy • Social World: The Neighborhood Park • Game World: A Theme Park • Workspace World: An Industrial Park Jessica Mulligan

10. Definitions • AVATAR: The representation of the players in the virtual world. • MMOG: Massively-Multiplayer Online Game • MMORPG: Massively-Multiplayer Online Role-Playing Game Jessica Mulligan

11. Some History Jessica Mulligan

12. Generation I:1969-1978 • Connecting more than 2 people to play simultaneously • Proprietary networks • PLATO • NovaStar • Mainframes used to play simple text games • Original Empire Jessica Mulligan

13. 1978:The Universe Changes Professor Roy Trubshaw at Essex University asks his students a question: “Can we use UNIX to create many-user programs?” The answer: Jessica Mulligan

14. Generation II: 1978 to 1995 The Multi-User Dimension, a.k.a. MUD I Jessica Mulligan

15. Generation II:1978 to 1995 • The Trubshaw/Bartle text MUD kicked off the online VW revolution • First game world to allow more than 100 simultaneous players • The source was distributed to other schools and, eventually, was used to build Internet MUDs • Trained a generation of online designers Jessica Mulligan

16. Generation II • Over 20 Major VWs • 1978: MUD I • 1982: MegaWars I • 1984: Islands of Kesmai • 1986: Air Warrior • 1986: Habitat • 1991: AD&D NeverWinter Nights (AOL) • 1993: Multiplayer BattleTech Air Warrior by Kesmai, 1987 Multiplayer BattleTech, 1992 AD&D: NWN on AOL, 1991 The Realm by Sierra Online, 1995 Jessica Mulligan

17. Generation III:1996-Present Ultima Online by EA, 1997 • The Internet & flat-rate fees take over. • Meridian 59 becomes 1st Internet-capable VW at a flat-rate, kicking off this generation. Meridian 59 by 3DO, 1996 Jessica Mulligan

18. Generation III:1996-Present • Online in Asia is BIG by 2001 KOREA: Lineage by NCsoft, 1999 • 60 million players! CHINA: Fantasy Westward Journey by Netease, 2004 1 million simultaneous players! Jessica Mulligan

19. Generation III Over 100 VWs launched so far • 1996: M59, AD&D Dark Sun • 1997: Ultima Online • 1999: EverQuest, Runescape • 2000: Habbo Hotel • 2003: Second Life, There.com • 2004: World of Warcraft Runescape, 1999 Habbo Hotel, 2001 World of Warcraft by Blizzard, 2004 Jessica Mulligan

20. Numbers And Trends Jessica Mulligan

21. The Current VW User Jessica Mulligan

22. The VW User • Hard Core: No time or price sensitivity • Moderate: No price sensitivity, lots of time sensitivity • Casual: Both price and time sensitive Jessica Mulligan

23. The VW User Jessica Mulligan

24. The VW User • Movement down the pyramid is easy • The Hard Core player will try all types of games • The Moderate gamer wants to find a good MMO, but is comfortable with Casual games • Movement up the pyramid is hard • The Casual player is price and time sensitive • The Moderate player is time sensitive Jessica Mulligan

25. Markets • Kids (Age 5-17): A combination of Social and Game Worlds • Habbo Hotel • Club Penguin • Runescape • Adults (Age 18 to 42): Mainly Game Worlds • World of Warcraft • Eve Online • Age of Conan Jessica Mulligan

26. Markets • Workplace: 3rd Parties building corporate, government and NGO VW spaces • Rivers Run Red • Millions of Us • Research and Education: The short end of the stick • Few of them • Needs to be more support here Jessica Mulligan

27. Virtual Worlds Today • WoW, Blizzard/US – 10.5m subscribers • Habbo Hotel, Sulake/Finland – 9.5 million Unique/Active • Runescape by Jagex/UK – 6m Active • Club Penguin, Disney – 1m active • Age of Conan, Funcom/Norway – 700k subscribers • Second Life, Linden/US – 500k+/- active • EverQuest II, Sony/US – 400k subscribers • Eve Online, CCP/Iceland – 250k subscribers Jessica Mulligan

28. Virtual Worlds Today Jessica Mulligan

29. Virtual Worlds Today Jessica Mulligan

30. Behavior Hardcore Simple Complex Casual Jessica Mulligan

31. Club Penguin Jessica Mulligan

32. Second Life Jessica Mulligan

33. There.com Jessica Mulligan

34. Habbo Hotel Jessica Mulligan

35. World of Warcraft Jessica Mulligan

36. Business Models • Monthly Subscriptions • Free-to-Play (FTP) with Adverts/Upgrade to Monthly Subsc. • FTP w/adverts and Virtual Item Sales Jessica Mulligan

37. The Trends • Revenue continues to be from Game Worlds • More movement to free-to-play • Supported by adverts, virtual item sales and an up-sell to premium status • More Browser-based products • Social Worlds at critical growth stage • Millions use them • The revenue model is still fragile Jessica Mulligan

38. Which Governments are Investing in VWs? • China: $2 billion USD commitment • Equivalent to $14B USD for local COL • Universities • Private Companies • Government R&D Centers • South Korea: About $1B USD so far • Subsidies for VW developers • Tax Breaks • Middleware Initiative • Paid to bring fiber to 70%+ of homes • Canada • Provinces setting good tax incentives Jessica Mulligan

39. Summary • Virtual Worlds are mainly Social Worlds, Game Worlds and Workspace Worlds. • Game Worlds are the revenue leaders today • Social Worlds are potentially the revenue leader in the future • The business model is trending to Free To Play/Use Jessica Mulligan

40. Summary Free To Play/Use is supported by various revenue, including Adverts, Virtual Item Sales and up-sells to subscriptions The West is not investing adequately in Education and R&D China and Korea want to own VWs, so are investing billions in education and R&D July 2008 Jessica Mulligan 40

41. Thank you for listening! Question and Answer Period Jessica Mulligan