One of my favorite answers to the question, "What is a game?" is "An activity you can either win or lose." The key definition here is the ability to lose. Under this definition, Farmville is not a game, nor are most PVE-MMOs. In those games, you may win or lose at individual actions, but there is a steady progression upwards, there is no losing - only if you quit. PVP-MMOs allow wins and losses, but in the general scheme of most of these, no ground is lost, and the same battlegrounds will be there for everyone tomorrow. In a large sense, PVP-MMOs are not games, they are activities. In a PVP game where wins and losses mattered, and the game's virtual battlefront was shaped by the individual results of thousands of battles, you would have a better case to say that is a game (i.e. Eve-Online).
An activity is something like knitting, coloring, or doing a crossword -
there is no chance of losing, and you are just passing the time.You may or may not get something after you are done, such as a pair of socks, or a high-level virtual farm; but there are always more levels to get, or a new pair of socks to knit. The value of the socks is probably higher than a virtual good, but nowadays, you never know what people will pay for the time other people spend.
With the "games needs loss" theory applied to most pen-and-paper games, you can say most RPGs are truly games, with a couple notable exceptions. It all depends on the definition of "loss" in these games. In most, loss equals the death of your character, and thus the loss of the time invested in that character. Some RPGs discourage player death (the original Marvel Super Heroes), or even make it very hard to die in (D&D4), so these move more towards the "activity" than the "game" deifinition. Of course, a lot depends on how the referee runs things, even a super deadly RPG can be run "soft" and be considered an "activity" like a Farmville.
If we define loss softer, and rule it a reset or setback, you could still fall within the game definition. You are still losing something, be it time, in-game resources, or some other variable. The lowest common denominator is that you lose time, and thus can't keep up well with others, or have to replay a section to get back to where you were. This is a valid loss, and fits the "game" definition. Now, the magnitude of this loss matters too, if it is just a one-minute setback, you could argue the loss is so small that the "game" definition is more like an "activity" and be correct in your analysis.
Is this definition important? I feel it is, for something to be considered a game, you need to be able to lose. Otherwise, there is no risk or outcome - good or bad. The line needs to be drawn clearly, as many so-called game companies are merely pushing virtual activities, and the line starts to blur when these theories are applied to pen-and-paper games. Yes, you can consider pen-and-paper RPGs activities, but there is always that chance you lose your character, and the weeks or months put into that creation are lost - thus, you are playing a game.
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