Though the real world economy might be experiencing a significant downturn, an article in the NY Times assures us that businesses dealing in virtual goods are doing just fine. We were staggered to learn that estimates place annual worldwide revenues for this fledgling industry at $1.5 billion, most earned from customers making purchases that range from $0.50 to $5. These “products” include online games and other applications as well as clothing and accessories to make online representations of yourself more appealing.
Though U.S. companies have been late to adapt to this trend, one is attempting to bridge the gap between offline celebrities and luxury brands and their simulated manifestations. Virtual Greats, a Huntington Beach based start-up, is banking on a model that brings unique copyrighted material into realms of virtual worlds and social networks. Their client roster already includes such diverse names as Snoop Dogg, Elvis Presley and the Incredible Hulk.
Some don’t see licensed virtual goods ever expanding beyond a niche aspect of the larger market, already dominated by generic competitors, but with almost no overhead, any hook that can create some form of exclusivity and generate buzz is certain to translate into higher profits.
Virtual goods have profit margins of 70 percent to 90 percent because they do not cost much to store, reproduce or distribute. Still, making a profit requires high volume. Next year, Virtual Greats hopes to represent 30 worlds and more than 50 artists.
It is talking with movie studios about licensing rights to characters like Ferris Bueller and with sports leagues for the rights to jerseys. It is also courting luxury brands like Gucci, Prada and Chanel for the rights to represent their goods online.
One challenge for Virtual Greats and its partners is to create legitimacy for the online brands while ensuring that there is not too much supply.
Though an aftermarket already exists for users to resell their used virtual goods, we won’t truly have reached critical mass until knock-offs start becoming available on the virtual black market.
[via NY Times]
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