How healthy is the gaming industry? Fortnite gave a short answer to this question on June 16.
Before the long-awaited presentation of The Device, a live event on the game’s platform, the slots were full half an hour earlier when eager gamers wanted to experience the latest twist on Epic’s flagship game.
Was the number of participants limited? Twelve million players in the game. Another eight million had to be content to watch the program.
In the context of NFL Sunday Night Football on NBC – The top rated television show in the US attracts fewer viewers. And that also represents the recorded programs.
When Blizzard Entertainment released World of Warcraft (WoW) in 2004, few non-industry players could imagine switching from a real-time strategy to a massively multiplayer online role-playing game (MMORPG). it would result in over a hundred million accounts registered ten years later.
For 2017 eThe game had sales of nearly $ 10 billion. It had become one of the best-selling video games ever.
Activision’s Call of Duty: Black Ops was released in 2010 as the seventh installment in the series. Since then, the franchise has released a new version every year. C.When Black Ops was released, it set records in games, movies, and books, and raised more than $ 650 million in the first five days.
The dynamics of the industry do not seem to be waning. Last year, the games broke another record annual revenue of $ 143 billion. The music industry earned $ 24 billion, and television / video combined earned $ 290 billion. Games are expected to grow from 31 percent of the entertainment industry’s sales to 36 percent in 2023.
According to Microsoft, if everything from free mobile games to complex multiplayer games for PC or console is included, Players around the world exceed 2 billion. And this number is growing. The most complex publishers can deliver on multiple platforms. Fortnite from Epic Games, for example, offers a version for PC, Mac, Mobile, Playstation, XBox and Nintendo Switch.
And as blockchain technology begins to infiltrate the industry, the financial interest couldn’t be higher.
New financing models could change the dominance of large platforms. New game models could change the way we play. And new revenue models could change the way value accumulates in the industry.
All of this means that big investors They’re researching games and the potential impact of blockchain technology more closely than ever.
How a connected digital world has changed entertainment forever
Digital technologies changed the way that music and films were produced. The Internet changed the way they could be spread. For both forms of entertainment, technological changes made production cheaper and easier for independent artists to sell.
However, the same changes had the opposite effect on the gaming industry. With consumer demand for better graphics, audio quality, and internet-based multiplayer features, the cost of producing video games has skyrocketed.
Budgets for the development and marketing of so-called triple-A games – those with a large budget and great development. Activision’s Call of Duty: Modern Warfare 2 cost around $ 50 million and had a marketing budget of around $ 200 million.
The most expensive game ever created, Grand Theft Auto 5, developed by Rockstar North in 2013, was built for an unbelievable $ 137 million with just a little less marketing and start-up costs. At today’s prices, the total is just under $ 300 million.
In 2018, 18 games were developed for a total price of at least $ 100 million, and Rockstar, Activision, Microsoft Studios and Sony were at the top of this list of mainly franchise games.
High acquisition costs and long production lead times for games pose risks for game developersThis means that big developers and publishers have grown to dominate the industry, while startups are looking for investors to be competitive.
While high-profile games attract media attention, the industry should be seen as more bipolar: Standalone games and triple-a games. And it’s the standalone games that attract venture capital.
The blockchain has created a new financing model for games, with the possibility for developers to create tokens that work in all games. B.lock Bastards, the creators of the in-beta game BLOX, will use their QUDO token to fund development costs for 18 months and reward players. BLOX is run on the Telos network and, under a revenue sharing agreement, players and the game receive 90% of the generated Qudo tokens and the company and all founding partners 10%.
Diogo Abreu, Marketing Manager / Product Vangelist at Block Bastards, explains:
“QUDO is a blockchain-based game service that rewards players for their activity and performance with a currency called QUDO. These QUDO tokens are said to be widely used in the industry and to allow game developers and players to generate purchasing power. They are not In-game ads required and they get the tools they need to improve the visibility of their games. Blox uses QUDO like any other game. QUDO is … open to all game developers who want to incorporate this technology into their game . “
However, only a handful of independent blockchain game developers were able to attract venture capital. William Quigley of WAX, el Worldwide Asset eXchange, which closes the physical gap between “collectors and retailers, buyers and sellers, developers and players, retailers, dApp developers and game developers”. Add that:
“Industrial games are funded in the same way as other start-ups … through a combination of personal savings, friends and family, angel investors and rarely venture capital. The personal capital of the founders is by far the most important source of finance for video games.”
The failure rate of new games is high, which is why venture capital funds, like any other startup, strive for 10 times the return on video games. As Quigley emphasized:
“An investor needs to recognize this bullish potential to compensate for the high likelihood that the video game will not be successful.”
Venture capitalists are inherently risk takers. The bullish potential of the gaming sector, which is in double digits annually, is determined by its longevity. A popular game will live for several years and offer the opportunity to franchise new releases.
And it is precisely this function of games that makes intelligent money want to participate in the campaign. As Quigley emphasizes:
“Successful video games have two unusual features that make them very attractive to investors. Popular video games have incredibly long life cycles compared to other consumer categories.”
“We live in a time when the lifespan of products is measured in months. Your phone or fashion clothes will be out of date in a year or less. But video games are different. Once a video game reaches a certain threshold, games can take over a decade or consistently generate high returns on cash. Video games are also very well positioned to reach a global audience. Video game platforms can now easily use third-party telecommunications and computing infrastructure worldwide. This means that successful video games can quickly increase your audience and income. “
Monetization models are also changing
Monetization models have changed as games are increasingly being delivered online. Game as a Service (GaaS) models are designed to replace the simple one-time purchase model in advance. While some games still require a first purchase to play, others are free, but require the purchase of in-game assets such as weapons, power boosters, and alternative skins.
Square Enix, the developer of the Tomb Raider series, revealed in a presentation that:
“Titles that have recently become global hits are usually offered through the” Game as a Service “model, and we believe that this will be the main model for games in the future. We will develop future titles approach game design with the idea of generating recurring revenue streams. ”
Subscription and pay-per-play models remain, and in-game ads are not uncommon, especially with free or open access games. However, game makers are increasingly relying on the long-term and ongoing engagement of users.
This is another opportunity for blockchain technology to advance your case. ConsenSys’ Chris Gonsalves said in an article about Play2Earn’s emerging model for Cointelegraph Magazine this week: “Creating opportunities for gamers can, in addition to simply providing opportunities, help create more sustainable digital worlds with thriving homes, auctions and robust secondary markets . “
Increasing the number of players responsible for earning revenue and the number of players spending on a single game could have significant financial implications: Gonsalves points out that an increase in the number of players who spend money on games by one percent in the industry could bring in an additional $ 6.5 billion.
The crux of the question about the potential of blockchain is the theory that player loyalty increases when they are more interested in the game: When your digital assets can be transferred between games or platforms or traded in open markets, they invest more of your hard earned money. Leaving digital items on the table when they move away from a game contradicts investing time or money, the theory goes.
David Markley from Algorand Business Solutions Group told us:
“Blockchain enables people to act safely and transparently, and the adoption of this technology in games means a significant increase in the global markets that game makers can take advantage of.”
“Blockchain integration essentially enables community ownership of the entire gaming ecosystem, allowing game makers to monetize their model in a unique way, gain richer and deeper experiences, and add value to life – the assets they create.”
Algorand has attracted game developers who are looking for technology that “works with the speed and size that the gaming community expects”.
Blockchain-enabled games inspire investors for “the prospect of open economies within games,” says Gonsalves. He told Cointelegraph Magazine that:
“In most traditional games, developers strictly control the ecosystems of the walled gardens, and players are usually unable to trade the items. Furthermore, one digital skin is indistinguishable from another and there is no transparency in offering an item or inflation rate. Game items shown as NFT [tokens no fungibles]”A blockchain-based method of tagging time and tracking items enables developers to improve their in-game economics by creating a real digital deficiency and allowing players to own (and sell) the goods they collect. “
Video games as the next phase of social media
If there’s one thing we learned from the rise of social media, engagement is everything. And it’s the multiplayer skills initiated by Triple-A games that have driven the industry into a new paradigm. Facebook and Twitter are interactive real-time platforms that are driven by user interaction. This model has almost inadvertently reflected the gaming industry and attracted the attention of some of the largest technology investors.
Andreessen Horowitz has financed several video game companies. The venture capital firm led a $ 10 million fundraiser for Super Evil Megacorp late last year. The studio is working on a cross-platform game called Project Spellfire. Rob Pardo, the former chief designer of World of Warcraft, is now head of Bonfire Studios – another that enjoys the support of a16z and focuses on the aspect of user connectivity for the games:
“We want friends to connect through our games and share incredible experiences, tell stories and get closer.”
Precisely because of this trend – players who connect through games – Andreessen Horowitz is enthusiastic. The company supported Roblox, a game with 115 million monthly players that blurs the lines between players and developers.. At Roblox, “children and teenagers who play games learn to make their own games … making it easier for them to create and share worlds that everyone can play“”
The productive venture capital firm believes that games “become social media, multiply on platforms, and are increasingly generated by users.” The company notes Fortnite’s success and enthusiasm for its events and explains briefly and succinctly:
“Games are the next social network.”
Adventurer Boost VC by Adam Draper invested in TeleporterVR, which is said to be “the largest social platform for gamers”. And now blockchain-based gaming platforms are also attracting the interest of venture capital companies. DMarket, a platform where players can trade in-game assets, has just raised $ 6.5 million in a financing round led by Almaz Capital. It was the company’s first foray into the in-game trading model.
The platform uses blockchain technology to create a virtual economy with in-game assets like skins and weapons. The business model behind the platform, which helps fund free video games by buying and selling in-game assets, appears to be an obvious use case for blockchain technology.
As the walls between social media and games collapse, publishers, venture capital firms and Blockchain developers are looking for new ways to deliver ever more immersive experiences. And, as Garrison Breckenridge emphasized in another article for Cointelegraph Magazine, it’s no coincidence that blockchain-based DAOs (Decentralized Autonomous Organizations) overlap with both. Summoners, magicians, guards, mercenaries, tantrums. It is very obvious that DAOs are enthusiastic about the players’ lexicon. Although it clearly comes from overlapping nerd dom domains, the terminology offers a common language for new players who want to experiment. in blockchain games. “
The gaming industry sees no signs of slowing down. With new streaming and blockchain capabilities enabling developers to deliver new delivery modes and funding models, it’s no wonder that the rapidly growing consumer entertainment segment has caught the eye of venture capital.
This is a translation of an original article from Cointelegraph Magazine.