Interview: David Simmonds on the Business of Entropia Universe

The last time I played Entropia Universe, John Kerry was looking like the next President of the United States, and the game was still going by the moniker of Project Entropia.

At the time, I felt that while it certainly had some very novel ideas going for it, I didn’t think that what seemingly amounted to an RMT system with a game thinly layered over the top could long survive.

Obviously, they have proven me wrong.

I will admit to not having followed the game much since then… so, this interview was as much for my own edification as anyone else’s. As such, I would like to apologize in advance to any hardcore Entropia players who have come here expecting me to inquire about whatever the great burning issues of the day are. There’s always next time.

When I arrived at the MindArk booth on the floor of E for All, I was informed that I had my choice of two interview subjects: Someone from Marketing, or Jon “NEVERDIE” Jacobs, who made the news awhile back after spending $100,000 on a virtual asteroid.

I glanced over at NEVERDIE, who presently was gesticulating enthusiastically towards a news camera, his mohawk bobbing rhythmically up and down, the reporter holding the microphone looking on in slack-jawed bewilderment.

At that moment I came to the conclusion that, while I was sure NEVERDIE was a very pleasant fellow and all, I couldn’t quite see what pearls of wisdom there were to be gleaned by interviewing him.

I opted for Marketing.

Unfortunately, we chose a somewhat high-traffic area within earshot of the horrid crooning at MTV’s Rock Band display as the site for our discussion. As a result, the audio quality of the interview came out too poor to post, and only the transcript is available.

The MMO Gamer: Let us begin with my standard interview starter: For those among our readers who may be unfamiliar, tell us a little bit about yourself, and what it is you do for Entropia Universe.

David Simmonds: My name is David Simmonds, and I’m the Business Development Director. My job is to talk to the different partners that are interested in coming in and joining Entropia Universe, whether they’re a full partner or some kind of affiliate, to really look at the different companies who want to come in and join.

There are actually a lot of companies which we’re contacting at the moment, but we’ve been very, very selective on what companies come in. The companies we’re choosing are the ones which have full, exciting content, and services and products which are of use to our users.

We don’t want a three-dimensional website. We don’t want to be that.

The MMO Gamer: Also for those among our readers who may be unfamiliar with the basic concept of Entropia Universe, could you please explain it for us?

David Simmonds: Sure. MindArk, which is the company, develops and maintains a virtual world which is called Entropia Universe. This universe is based on a real cash economy, which means that we’re using real cash inside this world.

It’s very much like when you go abroad. What do you do? You take your American Dollars, and you go abroad and change them into say, English Pounds, and you entertain yourself, have fun, maybe do business, and maybe even make some money. And then what do you do? You change it back into American Dollars. It’s very much similar to that.

So you take your money, put it into Entropia Universe, have fun, entertain yourself, play the game, maybe be an entrepreneur or make money—and we have many entrepreneurs making money inside our world. And then you can take it out by either bank transfer, or, shortly we’ll have a electronic MasterCard which works at ATM machines as well.

So you can go in, kill some monsters, make some money, then go down and get yourself a pizza.

The MMO Gamer: So is this actually a game-type MMO, not a quote-unquote “virtual world” on the level of Second Life?

David Simmonds: When you really look at two of the most well-known games, World of Warcraft is really at one end of the spectrum: It’s just gaming. It’s a great game, and the only people who go there are gamers.

Then you’ve got the other side of the spectrum, which is Second Life. And Second Life is a three-dimensional website. That’s what it is. It’s a three-dimensional website, and a lot of businesses come in there to try and promote their business.

We’re really in the middle of that. We have that gaming, you can come in, you can go and kill your monsters, you can manufacture, and you can do things like that.

So there’s the whole spectrum. People can come in and do every type of activity they can do in all these other types of virtual worlds or games.

The MMO Gamer: On the game side of things, you gave an example earlier of people shooting mobs to obtain the virtual currency. What does someone who is, say, a socializer do to get money out of the system?

David Simmonds: Well, it seems like “get money out of the system,” this is a virtual world, so it’s really up to you what you do. There are many things you can do, there’s many professions you can be; a hairdresser, a plastic surgeon… for the people who actually want to come in and do social and just meet their friends inside the world, maybe they want some cool clothes or things like that.

And, if you don’t want to deposit money you don’t have to. It’s free to download, there’s no monthly subscription charges… But, there are things you can do inside this world that can earn you money.

As an example of the many different things you can do… one which I think is quite funny: All of the animals in Entropia Universe leave dung. And you can go around and collect this dung. And you think, well, “What’s that going to be useful for?”

But, there are other people who come in, entrepreneurs, who buy land, and if you were a land owner, what do you want to do? You want to attract people to your land, because you’re going to be taxing them on their hunting, and mining, and activities they do. So, you need to make your land fertile. What’s fertilizer? It’s dung. So they can sell that and make a small amount of money by doing that.

The MMO Gamer: Some of this, say, killing mobs and hoping they drop something so you can get your money back, sounds a bit like playing a slot machine. Do you have to deal with any online gambling regulations with Entropia?

David Simmonds: No. We’re under the regulations of Sweden, and we’re not classed as gambling.

Every avatar inside Entropia Universe is a very skill-based system. We have over two hundred skills which make up an avatar, and this makes every avatar inside Entropia Universe unique. There’s not one avatar with the same skills as another. And, depending on what skills you have, what equipment you use, what things you want to do, whether you’re hunting or mining, will depend on what kind of return you get.

If you’re frivolous and just go out there and shoot your gun in the air, of course you’re going to lose money, the same in the real world. But, if you’re a smart businessman, a smart hunter, or a smart gamer in the real world, there’s a very good chance you’re going to be a smart businessman, gamer, hunter in our world.

The MMO Gamer: Well, I hope everyone isn’t a smart player, or you’ll be out of business.

David Simmonds: The business plan is catered to—we want people to be smart. People come in to Entropia Universe, and whether they’re a dedicated gamer, or somebody comes in for the weekend instead of going off down to the pub and wants to have some fun.

We’ve got a GMP—a turnover each day—of over 1.2, 1.3 million dollars per day. So, there’s a very big turnover, and when you think transactions, one cent here, two cents there, one dollar there, ten dollars there, that’s a lot of transactions.

The MMO Gamer: Morbid curiosity on my part: Could you give a rough percentage of the people who play for free, versus the ones who opt to convert currency?

David Simmonds: When people come in to Entropia Universe, to understand the business model, for us as a company, whether people deposit money or not makes no difference.

Let’s say you deposit a hundred dollars inside Entropia Universe. You can leave that in your in-game wallet for six months, it’s still a hundred dollars, and then you can take that money out. That has earned nothing to MindArk, that’s your money.

The only way we make money is through the deterioration of items. So, where somebody comes in and doesn’t deposit any money, maybe they work really hard for somebody else, and collects dung, and does all these things, but they’re actually doing more activities inside the virtual world. So when they’re using items, and once they’ve maybe got some money and start doing activities, that’s where we as a company make money.

If you compare us to somebody with a subscription base—as in, World of Warcraft, great game, we love it—their best customer is somebody who pays that money and never plays. They’re not taking up bandwidth, they’re not taking up space. That type of person we make no money. It’s free to download, and there are no monthly subscription charges. We only make money when people are inside our world doing activities.

The MMO Gamer: Going back to something you said a moment ago, you allow players to purchase land in the game and then charge people for access to it?

David Simmonds: That’s right. This is really part of the entrepreneur side. There are many land lots that have been sold inside of Entropia Universe. They range—actually quite expensive now—they’re up to between $10,000 and $40,000. And this is real money, real American Dollars.

But, they’re actually making revenue from this land. They’re drawing people in, they’re advertising, much the same as in the real world. If you’ve got some land in the real world which is a hunting area, what do you do? You have to advertise it, you have to make it fertile, you have to look after this land, and then obviously you’re charging people to go on it. It’s much the same here.

In 2004, we had a treasure island which was put out on the internal auction for a starting bid of one dollar. The final sale price was $26,500. The guy made his money back after eleven months. So, a very good business plan he had. And now he’s making money every month out of that land.

He was actually in the 2004 Guinness Book of World Records for the most expensive virtual item. A year and a half ago, we had a virtual asteroid which goes around the planet, and it was put on the internal auction for one dollar, and the final sale price was $100,000.

The person made it into a virtual entertainment area with hunting and mining, with a big social part. His name is Jon “NEVERDIE” Jacobs, and you can go and listen to cool music and see great videos and things like that, and go out hunting as well. He made his money back in eight months. He reports this himself, and we know that he’s making between $15,000 and $20,000 per month.

There’s different extremes… entrepreneurship inside Entropia Universe is a very big thing, we’re talking about real money. Being an entrepreneur you don’t have to be in that kind of bracket. The person picking up dung and making fifty cents, a dollar a day, that’s an entrepreneur as well.

The MMO Gamer: I’ve read recently that you’ve issued the first license for a “virtual bank” inside of Entropia Universe. How are you planning to manage that?

David Simmonds: That was great. We put five banking licenses out on the internal auction, and they all had a starting bid of one dollar. The total sale price was over $400,000 for the five banking licenses.

You can see that it’s not the price which we put on the banks, it’s what our users have decided what they’re worth. Now these banks have come out and are live, they were bought by one real-life bank, and Anshe Chung, who is a celebrity in Second Life and is moving over into Entropia Universe as well, one of our celebrities who is John “NEVERDIE” Jacobs, a Russian payment provider which wanted to get involved, and another entrepreneur.

Now these banks are up and running, the same as everything as Entropia Universe, we start off introducing certain services, and there’ll be a lot more services in the future. So we think this will be very good for the future of Entropia Universe, and the future of entrepreneurship inside our world.

The MMO Gamer: On the subject of entrepreneurship, you speak of buying land, and opening banks, among other things, as “investments.” Do you issue a prospectus for the game?

David Simmonds: No, not for those. We put the items out with a starting bid of one dollar. It’s down to our users who are bidding against each other to work out what the market value is.

We’ve been talking about the things inside Entropia Universe which are big things. But, the average gamer doesn’t have a hundred thousand dollars to put into a game, or thirty or forty thousand dollars. You can come in to Entropia Universe, and most of our users are coming in, starting for free, looking around, deciding they like it, and then they say well, “What would I normally do for a game? I’d go and spend forty or fifty dollars.”

So, they put that in, get themselves kitted out, and then carry on and put in ten, fifteen, twenty dollars a month. And you can have a great time inside Entropia Universe. And, because there’s no subscription charges, you can take a break for a month, two months, doesn’t matter, you can always come back and all of your stuff is still there. It really is open to everybody.

The MMO Gamer: Where does, for instance, the IRS come into this equation? Do people pay taxes on any income made in the game, or report their losses?

David Simmonds: No. In our EULA, though, it states that everybody is required, themselves, to state to their individual country what their earnings are. We’re very much like any other internet business, you have to do that.

We’ve got customers from over 220 countries, so it’s very hard for us to know the tax laws in each country. But, we’ve been talking to the IRS, we’ve been talking to the FBI, we’ve been meeting them in Washington, we’re very interested in keeping in close negotiations with them and having them knowing what’s going on.

We’re talking to the Swedish—maybe you don’t know, but MindArk is a Swedish company—and the Swedish tax authorities have been with us, and they’re very interested in giving information to our users, whether they’re from Sweden or not on aspects of tax.

The MMO Gamer: The last time we had a chance to speak to MindArk, you were planning on a large-scale expansion into China. How has that been going?

David Simmonds: That’s been going great. With the expansion going into China we’re incorporating the CryTek 2 engine. You can go on the website, entropiauniverse.com, and see the Flash. It’s amazing. The new graphic engine is so realistic.

When we introduce the Chinese planets, and when we open up space, the CryTek engine will be include in that expansion, as well. This is expected to be middle to late of next year.

Another exciting thing which is happening, we’ve got game developers—which you would think would be competition to us, another game developer—but instead of them making their own platform, and making their own game or virtual world, they’ve chosen to come to our virtual world and use the Entropia Universe platform to build their own planet, which will have their own rich content.

We are a universe, we’re an open universe, so all of our users will be able to go and visit these planets. It’s going to be really exciting. This is just one of the partners we’re talking to, there are a lot of different companies that are interested in opening up their own presence inside Entropia Universe. But, as I said before, we’re very careful with who we take in. We’re not a three-dimensional website, but we want our users to be interested and want to come in.

The MMO Gamer: In terms of the Chinese expansion, is everyone playing on the same server, or do Eastern players have their own separate worlds from Western players?

David Simmonds: With the Chinese planets, because, maybe you’ve read, they’ve estimated that within two years they’re going to be having 150,000,000 accounts and 7,000,000 concurrent users. That’s very ambitious.

The MMO Gamer: Yes… it is.

David Simmonds: They will be hosting their own servers. But, as I said, Entropia Universe is an open platform, so you will be able to travel to these different planets. The Chinese system is really exciting, it’s not going to be one planet, they’re going to have education, ecommerce, gaming, of course, and there’s going to be a lot of different planets you can go and visit.

Some of them will be harder than others for a normal person to visit. That means it’ll probably cost more money to visit some planets than others. You’ll have to travel in space, exactly the same as you would in the real world—hopefully—in the future, we’ve got a lot of planets to go to, some are harder to get to and some are easier.

The MMO Gamer: So if the Eastern and Western worlds are linked together, will the PED [Project Entropia Dollar, the game’s unit of currency] hold the same value in both areas?

David Simmonds: Absolutely. As I’ve said before, Entropia Universe is an economic platform. Any partner which comes in and uses our platform will have to be under the umbrella of Entropia Universe.

The MMO Gamer: How do you anticipate that working out? Taking into consideration the income disparity, and the fact that the Yuan is currently trading at around 7:1 to the US Dollar?

David Simmonds: We’ve been talking to the Chinese, and as far as we can see there’s not going to be any problem with that. I’m not really sure—haven’t really thought of that—but, as I understand it there’s going to be no problem.

The MMO Gamer: In terms of some of the censorship requirements of the Chinese government, do you anticipate there being any problems on that front?

David Simmonds: No, we don’t. Every game, or real-world country has different types of censorship, America included. In our game we have certain things you can do, and you can’t. In the real world, we have to have rules and regulations so it doesn’t become anarchy and chaos, and we can see that is what happened in some virtual worlds, as well.

From what we can see, from some of the press releases coming out of China, they’re going to be using Entropia Universe as their platform to come out into the Western world.

The MMO Gamer: So, in other words you don’t anticipate any problems getting through the Great Firewall of China?

David Simmonds: Absolutely not. The company which we’re working with, CRD, is partly owned by the Chinese government. So we’ve got absolute confidence that there are no problems going forward. It’s really exciting for us.

The MMO Gamer: Ever since the game first launched you’ve had one of the most unusual business models in the industry: Giving the game away for free, and charging real currency for items and equipment, and then allowing people to later cash real currency back out.

The game has been around now since 2003, so you’ve had four years to evaluate the system. How has it been working for you?

David Simmonds: It’s been working out fantastic. We find it’s really what our users like. In the development stage which went from 2003, we wanted to grow Entropia Universe at the rate which we wanted to.

We feel now, with the CryTek engine, and China, and opening up space that we’re ready, really, to come out into the world and really show where we are, because a lot of people don’t know about Entropia Universe.

All you have to do is look at MindArk the company and see we’re very successful. The company’s been profitable for the last twelve quarters, and you’ll be seeing very shortly an announcement that we’re going to be—part of the company, obviously not all of it—is going to be floated on one of the main stock exchanges.

The MMO Gamer: Was there anything we didn’t discuss in this interview you would like to tell our readers before we go?

David Simmonds: I think there’s a great deal we didn’t discuss, but I don’t think we’ve got enough time to get through all of the exciting stuff with Entropia Universe.

The MMO Gamer: Pick the most exciting.

David Simmonds: The most exciting? Adrenaline. You don’t get any kind of adrenaline from any kind of game that you do from Entropia Universe. Any other game that’s subscription based, if you die one time, ten times, a hundred times, ten thousand times, it makes no difference. You’re still paying your fifteen dollars a month.

Inside Entropia Universe, it’s consequences. It’s your choices which decide what’s going to happen to you. And when you’re out there and you’re hunting and you get that big, big, hall of fame pot, it’s amazing, and you don’t get that adrenaline from any other game. Come in and have a go.

One more thing: Entropia Universe is hard. It’s a hard life in Entropia Universe. If you’re the kind of guy who wants to be top dog in half an hour, don’t even bother downloading it. It’s a hard life, it’s a long slog, but it’s going to be worth it in the end. There’s a lot of stuff inside to explore.

The MMO Gamer: And it’s a hard life here at E for All, too.

David Simmonds: Absolutely.

The MMO Gamer: Thank you very much for joining us, and we look forward to speaking with you more in the future.

David Simmonds: Nice talking to you as well, thanks very much.

You can find additional information about Entropia Universe at the game’s official website: http://www.entropiauniverse.com

Now, if you’ll excuse me, I’m off to collect dung.

Pages: 1 2