Art and profile picture NFTs brought a few hundred thousand people to web3. NBA Top Shot and Sorare sports collectibles added another million. The next huge leap will come from video gaming. Over 2.5 Bn people worldwide play some type of video game today, that is nearly 1 in every 3 people on planet Earth. Some are playing shooter or sports games on consoles like Xbox or PlayStation. Others are playing strategy or role-playing games on PC. Many more are playing casual mobile phone games. Video games span all genders, age groups, and nationalities. The opportunity to integrate blockchain assets to gaming is enormous.
In this prior post, I went into the history of gaming, from the 1990s when games were sold as cartridges, to the mobile phone games in 2010s, to the free-to-play games on PC and console. As each of these new modalities emerged, a savvy game developer figured out a few types of game that would succeed and then they were quickly followed by dozens or even hundreds of copycats.
The hyper successful Call of Duty franchise can trace its roots back to the early Wolfenstein games of the 1990s, with Halo and lots of others in the family tree. Games like Grand Theft Auto took the shooter concept and expanded it with game story in ways that expanded the genre and made way for huge franchises like Assassin’s Creed and many more. These games made their money through an upfront sale of a cartridge, then a CD, and then a paid download.
Zynga’s FarmVille game launched in 2009, and it opened up a whole new genre of casual games. Zynga defined another genre with the social puzzle game Words with Friends in 2010. These two games spawned hundreds or maybe thousands of knockoffs. They showed other game developers new ways to monetize players via micro purchases and advertisements. Angry Birds emerged around this same time in 2009 with its new monetization model of charging players to unlock new challenges. This type of device is still employed by thousands of new games today.
Battle royal games had existed for a dozen years when Fortnite and PUBG: Battlegrounds hit the scene in 2017. These two games expanded the genre to tens of millions of players, and they figured out a new monetization model with the sale of cosmetic skins for players to express themselves. This has led to the sale of skins in a huge number of games. The concept has even backfilled into the shooter games, with Call of Duty and others now selling skins to supplement their revenue from selling the game access.
No one has yet figured out the model for NFT gaming, but it is coming soon. The first big hit in blockchain gaming was Axie Infinity, which exploded to 400K+ players in Asia in 2021. While the game did billions of dollars in sales, their unstable economic model and insecure blockchain has left a lot to be desired. Others have tried to copy some of their Play 2 Earn mechanics, but this hasn’t led to successful fast followers like FarmVille or Angry Birds.
For NFT gaming to reach the next level, it’s going to take a hit game that makes it big in the U.S. I would suspect for this to work that the game developer will have to lean into the example of NBA Top Shot and push the blockchain aspects to the background. Many Top Shot users probably didn’t know that NFTs or Crypto wallets were involved. They used a credit card to make their purchases and probably just thought this was an updated version of collecting trading cards. Top Shot used a methodology called progressive decentralization, where something starts off controlled by the creator and overtime incorporates more decentralized aspects. When Top Shot started, you couldn’t buy with Crypto or take your collection off platform, but you can now. I think the first big hit NFT game will work in much the same way.
Another big issue with Axie Infinity’s model is that the initial NFT purchases to play the game became too expensive, peaking around $600. The most expensive console games are 10% of that purchase price, it just can’t work. When we see a hit NFT game, it will have a low entry price to play. It might even be fully free-to-play with the NFT purchase completely optional. It could still be built such that individual game assets could reach very high valuations, but these will likely be cosmetic skins and not powerful game items. They will be optional for the player.
Why I am so confident this new gaming genre is coming soon? Huge money is funneling into the blockchain gaming space with leaders from the prior genres helming new game developers. Gala Games is led by Zynga cofounder Eric Schiermeyer. Gala is cutting deals for big time intellectual property and just announced a new NFT shooter game coming to the Epic Games Store. Epic is the creator of Fortnite, this is serious stuff. Mythical Games has raised $260MM from A16Z, Michael Jordan, and the NFL. The company is led by John Linden, who held senior roles at Niantic (Pokemon Go) and Activision (Call of Duty). The list of other experienced players in the industry who have left successful game developers to launch in the blockchain gaming space is long. It’s easy to believe that one or more of this crowd will produce a hit game soon.
Where are the big game developers on blockchain gaming? Proceeding with caution. They are struggling with the Innovator’s Dilemma. Do they disrupt their own highly profitable business models or wait to see what emerges from the startup competitors first? Could a game like Fortnite progressively decentralize? Maybe they will start an exchange to let people freely sell their skins. Maybe they will eventually put those skins on the blockchain and let them be bought and sold on open platforms like OpenSea. Even further out, maybe they turn their V-Bucks money into a Cryptocurrency onchain. Or maybe not. Time will tell.
Another big question for the large game developers is interoperability. Right now when you buy a gaming asset, it only works in one game. Eventually, you might be able to walk around the Sandbox as Spiderman, then use that skin to battle in Fortnite, and then use a Spiderman skinned gun in Call of Duty. How will the economics of this work? I’ve got no clue. Somehow the value will have to accrue to both Marvel for the IP and all the games you use the skin in. The blockchain makes this technically possible, but the economics are hard.
We’ve bet on several blockchain games at Beyond The Game Network. Artie, GreenPark, SportsIcon, Fan Controlled Football, Atlas Reality, and DanceFight all offer NFTs that can be used in video games or metaverse worlds. One of these games or one of the many other competitor studios out there is going to bring the next million people into the NFT universe. It’s going to be exciting to watch.
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