In 1996, when the Nintendo 64 was first released in the United States, it sold 1.6 million units (worth $200 each) in its first quarter. Its closest competitor for the holiday season was a $30 Tickle Me Elmo doll, which sold out about a million units in the same window. More than 20 years later, when Nintendo’s $300 Switch sold 1.5 million units in its first week, there was a lot more competition, and not just for the holiday season.
The gaming business has changed drastically since its inception. From basic monetization through the sale of physical and digital copies of games to in-game monetization through microtransactions, the widespread adoption of the Internet has brought about a pronounced change in the gaming landscape. While video game studios of the previous millennium relied on revenue from the sale of games and gaming hardware, today’s giants don’t expect you to buy their games at all.
the game business
Nintendo is a relatively rare example of a major game studio that hasn’t delved too deep into the microtransaction waters. Fortnite rakes in about $5 billion a year for Epic Games, and with numbers like that, you can bet most game companies are at least looking into the free-to-play model. However, this shift in consumer mindset from deep aversion to moderate acceptance of microtransactions has been a long and arduous process.
Fortnite was far from the first game to introduce microtransactions, but it was one of the first major examples of a live service game that relied solely on in-game purchases. This came at a time when the concept of microtransactions invoked Images of toxic economies of loot boxes and luck-based purchases that saw games transform into pay-to-win ecosystems and consumers increasingly frustrated with game publishers.
Fortnite flipped the script, pushing microtransactions as a way to distinguish yourself in the game while supporting developers. They didn’t affect the game, preventing deeper pockets from dominating games, and served as a great way for those with money and appreciation to show it off: a kind of vanity-fueled charity. Sounds familiar?
Will you mix?
Non-fungible tokens (NFTs) were bound to find their way into gaming ecosystems. From early implementations like CryptoKitties to today’s Axie Infinity, digital property tokens are seemingly meant to be bundled with games.
Some of the biggest names in the video game industry are embracing NFT, and it’s no real surprise. Gaming has never been more accessible than it is today, evolving from a niche consumer base to setting global pop culture trends. For decades, gaming collectibles have sold for obscene prices. Why should their digital cousins be any different?
From Ubisoft to Square Enix, what really intrigues the industry is finding the best approach. Some have simply started selling digital items as NFTs, allowing buyers to resell them to other, more enthusiastic enthusiasts. Others are trying to adopt the play to win (P2E) model used by Axie Infinity.
Earlier this year, US video game retailer GameStop announced plans to partner with an Australian crypto firm. to develop a $100 million fund for NFT, content and technology creators. In his New Year’s letter, Square Enix president Yosuke Matsuda indicated that the company would like to incorporate blockchain/NFT in his future releases, but did not mention any details.
Recently, Ubisoft tried launch a limited edition collection of NFT along with its Ghost Recon Breakpoint game. In a perfect world, this would have been a time for celebration: One of the world’s biggest and most valuable gaming mammoths had heralded the adoption of blockchain technology. As you may know, this announcement did not go as planned.
Introducing Ubisoft Quartz
We’re bringing the first low-power NFTs playable in an AAA game to Ghost Recon: Breakpoint!
Try it out in beta starting December 9 with three free cosmetic drops, and learn more here: https://t.co/ysEoYUI4HY pic.twitter.com/owSFE2ALuS
—Ubisoft (@Ubisoft) December 7, 2021
According to a report by DappRadar, gaming-related NFTs generated revenue worth nearly $5 billion last year and accounted for about a fifth of all NFT sales in 2021. Ubisoft unveiled an NFT project on December 7, a move that was met with a 96% dislike rate on your video ad on YouTube – and two weeks later, according to reports, there was only sold out 15 NFTs, which together are worth less than $1,800.
“The traditional gaming industry is not going to adopt NFTs in its current state,” Wade Rosen, CEO of legendary video game corporation Atari, told Cointelegraph. According to Rosen, while blockchain gaming will continue to evolve, there is currently not enough tangible utility for gamers to consider adoption yet.
“NFTs, how they are produced, what value they provide to individual gamers, and the gaming communities that form around individual titles, will need to evolve quite significantly before you can expect to see widespread adoption within the market. [traditional gaming] industry. We see a lot of potential for NFTs and blockchain technology within video games, but not until the definition of an NFT evolves significantly beyond where it is now.”
It’s not that players don’t like the idea of buying NFTs, it’s that they’ve been marketed as brazen cash grabs. To boost NFT sales, Ubisoft made it absurdly difficult to get free in-game items. Even so, some of the most prominent players in Zynga for A.E. Sports they are keeping an eye on blockchain and how it could affect the gaming business, an industry worth around $80 billion.
“The reaction to the issue within the industry is binary and visceral, and unfortunately that’s not a good environment for exploration,” Rosen added. “We expect most of the related innovation over the next 12 to 18 months to occur within the narrower blockchain gaming space.”
American gamers, with an average age of 35, have seen the average shift from text-based to 2D, 3D, and VR multiplayer, all in roughly two decades.
During this time, the gaming industry has mainly benefited from the sale of entertainment products that offer nothing more than a game. But as soon as you let money in and out of a game, you effectively turn its economy into a stock market.
This has led many gamers to feel that with NFTs and blockchain, game studios and publishers are more focused on creating markets than engaging, unique, and most importantly fun gaming experiences.
Make gaming fun again
There is a happy medium for gaming NFTs, one in which publishers do not execute brazen cash heists and the tokens themselves have no impact on the financial incentives of the game. There are myriad factors to consider when investigating why adoption rates have been slow, but many are convinced that solving the case is only a matter of time.
Elliot Hill, communications director at Verasity, a blockchain-based ad technology company, told Cointelegraph that while NFTs are clearly innovative and useful, they lack the proper infrastructure.
“With these hurdles in the rearview mirror, widespread adoption of NFT technology is now much more likely by major gaming companies in my opinion,” he said.
At first glance, video game studios are like software companies: Both hire developers, designers, managers, and executives, along with sales and marketing teams, to create and sell a product. However, they cater to a completely different clientele.
The video game industry works some of the longest hours among software-based companies, filling a strange gap between Hollywood extravagance and Big Tech structure. Yet with NFTs all but adding optional financial services to video games, the line between work and play begins to blur.
Gaming NFTs exist at an intersection between some of the world’s fastest, high-skill, high-value environments: technology, finance, and entertainment. Each of these sectors adapts to all kinds of market conditions and consumer behaviors, and it will take time for them to understand the complexities of the others.
Sarah Austin, co-founder of NFT and metaverse gaming launch platform QGlobe, told Cointelegraph that NFT gaming is in its early stages and hasn’t evolved much beyond the simple GameFi and P2E models.
“Going from AAA games to NFT games can be disappointing. However, if the player’s motivation is to earn rewards, then they are less concerned about the quality of the game.”
According to Nielsen research, consumers spent over $90 billion in microtransactions in 2021. The gaming consumer market is happy to spend money on the game, but not at the expense of the game itself. The more utility and impact an NFT has on the game, the less important the actual game becomes.
“The GameFi/P2E field is the starting point of the industry, not the end state,” said Atari’s Rosen. “Personally, I am intrigued by the potential of NFTs to enable greater collaboration and interaction between games and between virtual worlds. Eventually, NFTs may become building blocks that allow players and developers to create new shared experiences.”
However, there are also cultural elements at play. While pay-to-win microtransaction economies are shunned in the West, gamers in the East seem to have embraced them wholeheartedly. Genshin Impact, the global smash hit from Chinese game developer miHoYo, is essentially based on a luck-based loot box economy, but it managed to stupid over $2 billion in its first year.
As president of Square Enix, Yosuke Matsuda formerly set, not everyone plays just for fun. Some want to contribute to the games they play, and so far, traditional games don’t have incentive models that cater to these consumers.
Certainly, there is a large enough market to justify the effort, but it seems that gaming NFTs, in their current form, are geared more towards attracting casino players than the average player. NFTs are certainly making their way into the gaming mainstream; it’s just a matter of who can find the right balance between gaming finances and gamification of finances.