( game sound effects )

Alex: I've been playing video games for about 25 years.

One of my first memories was begging my parents

for a quarter at the arcade just so I could get a little bit further

at "Galaga."

Games used to be simple.

You pay for the game, you play the game.

But eventually, that all flipped.

Instead of paying to play...

- ( machine gun firing ) - ...you could be playing to get paid.

Whether that's from streaming or e-sports.

Emcee: ( shouting ) He just made history!

Three million dollars in prizing!

Alex: But there's another economy at work,

where players can buy in-game items for real cash.

This flaming mace is in "Echoing Fury."

In 2012, it was sold for roughly 10,000 real American dollars,

making it one of the most expensive video game items ever sold.

Which brings me to my question:

"Why would you spend money in a video game?"

( music playing )

( light buzzes )

Games have taken up years of my life. Literally.

I've spent more than a year on the games "Counter-Strike" and "World of Warcraft,"

and as you can see, I was a pretty serious gamer.

No!

Over the last 20 years, developers have made it possible

for you to spend more money on games.

I sold my first-ever Quest account on eBay for about a hundred bucks.

And years later, I paid my rent by playing "World of Warcraft"

and selling the gold I made.

( thunks )

What's up?

- Oh, are we doing this? - Yes!

Welcome!

So when we talk about a virtual item,

- in a video game... - ( laughs )

...these are a range of items and collectibles

that can be bought, sold, traded, all depending on

- the game that you're playing. - These are things like...

- skins and weapons and...yeah. - Yeah. Totally.

Sometimes they can make you more powerful, but

- sometimes it's just clout. - Mm-hm.

- Showin' off. - Yeah, exactly.

Take "World of Warcraft"...

In that game today, you can buy this.

This is Hogrus, a flying pig

that you can ride on.

- A flying pig? - Yeah.

Is this also $10,000?

This is only $25.

You can get the snazzy "Fortnite" dance.

It's called "Tidy," for about 500 V-Bucks.

That's "Fortnite's" currency.

And those V-Bucks can be purchased for 5 real dollars in the game.

I'm sorry. What-- what is the Tidy?

Uh...

it's like a window-wipe dance move.

- I haven't actually seen it yet. - ( laughs )

This is a skin in the game

and basically it's just like a--

it's a visual accessory that changes the way this gun looks.

And this particular skin sold for $61,000.

- $61,000? - Nuts.

It's just a commemorative, special version of a skin

that was very rare.

There are many ways to buy virtual items.

Free-to-play games like "Fortnite" allow you to buy

items directly from the game using an in-game store.

- ( coin rings ) - But other games use online marketplaces,

usually run by the gaming companies.

In this case, players buy and sell items among themselves,

and the game company takes a cut.

But there's also another way.

And it largely exists beyond the control

of gaming companies. These transactions

take place on third-party sites.

They're unregulated and mostly against the rules.

But players still use them to buy and sell items.

Back in 2012, only some game makers allowed you to buy, sell, and trade items

in-game with real cash.

And the total sum of virtual items in the market

was $15 billion.

And some investors estimate that today

the total value of these goods could be as high as $50 billion.

- Wow. - To put that in perspective,

that is more than the global box office of the same year.

Why is this worth so much?

My guess--

I--I actually have no idea.

- ( laughs ) - I have no guesses.

Essentially, things are worth what anybody will pay for them.

So, if I have a fictional castle and you want it,

and you think it's worth $5, then it's worth $5.

So an in-game economy is the same as a real-world economy.

You've got a lot of people, you've got a lot of goods, and you've got currency.

What's the difference? Nothing.

Alex: Games are designed to give you a better experience the more time you spend in 'em.

In some games, like "World of Warcraft," there are daily quests

where you have to log in and do the same thing

time after time after time. But in most games you just have

to grind and spend a lot of time to be at the top of the game.

On average, a player over 18 will spend more than seven hours a week

in these digital worlds.

I have a weapon in this game that took me 14 years to get.

14 years!

But what if you could buy a better experience

instead of just grinding out the game?

Then a new thing started to happen when developers offered items

that you couldn't even earn in the game.

I'm talking about flying pigs.

I'm gonna show you how to get one.

So, to get Hogrus, I'm going to go to the main town,

and I'm going to open up the store.

It's really easy. You just hit "Buy Now,"

it connects you to the shop.

Find my credit card.

And it says, "Thank you, you have just earned

Hogrus, Swine of Good Fortune."

I earned it, guys!

Oh, he's in a little gift box.

So, let's see what happens when I click him.

- ( mouse clicking ) - Hello? Are you there?

"Unwrap."

And there he is, he popped out.

( music playing )

So, he runs--oh!

Look at him.

Look at those wings.

So this is the joy

that spending $25 in a video game can bring you.

So this is pretty cool.

I'm going to go to a "Counter-Strike" tournament and see why

other players are buying virtual items.

I'm headed to Skokie to talk to some gamers

at the national championship series

for an online shooter called, "Counter-Strike: Global Offensive."

Today, we're gonna see players compete for $10,000.

- ( explosion ) - Yeah!

Whoo!

So we practice almost every night.

Those guys look kinda intimidating over there.

Player: Singularity is number fourth in the U.S.

Anything that you're, like, prepared for, excited about, afraid of?

"MAC-1": We're not really preparing for anything.

It's kinda like, the skill-gap between us

and even the second best team is so, like high,

that we really shouldn't even draw up a map here.

Alex: "Counter-Strike" is a game that's been around for as long

as most of these players have been alive.

But the latest version of the game only recently adopted

a new free-to-play model, where instead of paying for the game,

players are encourage to buy and sell their skins in it,

by using a marketplace inside the game.

( "Ride of the Valkyries" plays )

- ( character screams ) - Emcee: Well, okay,

Osee making his expense, knows where the remaining two players are.

He's going to force the issue. He's going for this.

If he pops one more head-- this is so deadly--there it is!

Osee can win this. The one-v-one--oh, he gets it! Osee!

Whoo!

So Osee just got a four-kill clutch play.

Basically he just killed the entire other team that was still alive, by himself.

- Alex: Oh. My. God. - Whoo!

So this is an AK-47 in the game.

And you've actually put stickers on it as well,

so that's like, Rosie the Riveter.

One player has an AK-47 that's got, like, gold foil on it.

Another player has a gun that looks like a water gun.

These are all different skins that you can get in the game.

Within the first two years of adding skins to the game,

the "Counter-Strike" player base jumped by 1500%.

I actually spend a lot of money on skins.

I spent like, 2,000.

- Like, dollars? Wow. - Yep.

And it just helps me stay motivated, I guess?

- Do those help you play better in the game? - ( laughs ) No.

- So, what's the point of it? - Uh, just to look cool.

- Okay. - You can always resell 'em.

It's not like an asset that you're not able to

invest into and then sell.

And, uh, if you do it correctly,

the price market fluctuates in a way, where like,

you can buy it at a low point and sell it at a high point.

If you're smart about it, at least.

So what that "Counter-Strike" player was talking about

was buying and selling items in "Counter-Strike" to make a profit.

Players have always found a way to make money.

And early versions of online trades date back to at least the late '90s.

Hello. Markee Dragon. Also known as Marcus Eikenberry in real life.

I got into business, buying, selling, and trading

of intangible goods.

I saw somebody that had like a sword for sale for $20 on eBay.

And I'm like, "Holy ( bleep ), I can do that?"

Then actually developed the website, Markee Dragon.

- Essentially operating as a broker. - Correct.

Most of the game companies didn't want it legal.

Four of the different game companies started getting involved, and then

you know, things went south.

Alex: After game developers worked to end third-party marketplaces

like Markee Dragon's, they began creating their own.

They formalized the exchange of real money

with virtual goods in currency and games.

But these developer-run marketplaces brought out a key concern

with these virtual economies, and that's risk.

I'm not sure if you're familiar with the "Diablo III" auction house.

Oh, my God, yes.

It was the wrong time to do it.

And everybody and their mother said,

"Oh, my God! I'm going to make some money playing a video game!"

But it imploded on them.

So this auction house represents the game "Diablo III's" auction house.

The only difference between this game and other games like it,

Blizzard, the creator of the game, decided that they wanted to experiment

with making the auction house connected to real money.

Now I'm going to give you some coins.

These are so cool! ( laughs )

- That's your face on a... - ( laughs )

...Glad You Asked penny. This is the greatest prop we've ever made!

So, Cleo, you've got 20 gold. Buy whatever you want.

- Let's get this started. - All right.

- I probably want a shield-- - Ooh.

for 10 gold.

And I really like curvy red one.

Ah, the scimitar. Great choice.

Now you're out of money. But you were only able to buy two items,

and that's really not enough.

But imagine for a second if somebody found out a way to create their own gold.

- I'd want to know how they did that. - Hey, Joss?

- Yes? - Alex: Yeah, come on in.

What's up?

- Money? - Yes. And pretty soon

- you're gonna have a ton of it. - Awesome.

- So in this case, Joss is a cheater... - ( laughs )

...who found a way to duplicate this gold.

And she's going to be able to buy everything she wants.

- How do I duplicate this? - So there was a bug in the auction house

that allowed their players to duplicate their gold.

And that's exactly what happened on May 7th, 2013.

You have all the gold you want, so you can buy whatever you want now.

I'm just gonna take it all. I mean, that's what you do, right?

And I'll leave two swords, how about that?

Okay. Since you just bought out everything of value,

even the middle quality items were highly sought after.

So, eventually, what happened was hyperinflation,

and those prices changed because people could spend anything on it.

The dollar values are just dropping so rapidly.

One area of it spins out of control, the whole thing collapses.