Have said it in the past, will say that again. Blockchain is going to impact every industry. That’s the thing right. Disruption isn’t a function of your readiness. Sooner you adapt, faster you put yourself on the road to glory. On that note, today we are talking about gaming. Yes, a multi-billion dollar industry. Full disclosure: I am not a gamer. Yes I briefly played Blur by Activision and FIFA for about an year or so, but wasn’t specifically involved in the community.
So today, while we would scratch the surface of what is play to earn game by taking cues from the history, my apologies to the hardcore gamers in advance. Apart from that, this is not going to be a post on console wars or PC Vs Console Vs Mobile debacle. Nuff’ talking. Let’s hit dem nostalgic notes!
The Arcade Era:
As a kid, every neighbourhood had that one gaming parlour. Well, at least that’s what they called it. Often run by a grumpy dude and his son, it allowed kids to play games on those bulky gigantic arcades.
As a kid, I used to play WWF on it. For the Gen ‘Z’ kids reading this, no it’s not about wildlife. Back in the day, WWE (World Wrestling Entertainment) was called WWF (World Wrestling Federation). I still remember how once I told my parents that I was going for a tuition and then ended up playing video games on that parlour for hours.
We’ll not talk about how I was caught and then never looked at that shop again, but you get the idea.
The problems with this revenue model was very straight forward. The fixed cost involved was extremely high and the options, very limited, at best.
I still remember it costed about Rs. 10 to operate an arcade device for about 15 minutes. Enough to play 3-5 bouts of wrestling.
The In-Game Economics:
Very soon, someone realised that this needs to be automated. You cannot rely on a human to keep track of who is playing for how long on a notebook. It just isn’t scalable.
So, the OG tokens kicked in. These were metal/plastic coins which could be exchanged for life/time in a game. While a lot of things have changed since, but this little economy within the game has till date stayed with us. (More on it in a while)
In a nutshell, we used to ‘pay to play’ these games.
The PC Era:
In 2002, I purchased my first PC. Man, the flex of having a pentium 4 at home. Anyway, the gaming industry was just ripe to hit the masses with this development in the computing space. Now you could run a game from the comfort of your home. Apart from that, you were also bound to be spoilt for choices.
This time around CDs or compact discs took charge of the distribution of these games. Well, coming from a small town of India, I had the option of pirating the games I loved and hence using them for free.
Road Rash, Tomb Raider, Prince etc. became household names at that time. However, the revenue model for gaming companies was still very similar. You create a game and ask the user to pay upfront for it. That’s all.
The Console Wars:
It all started with the like of Atari and then Nintendo which came up with their consoles back in the day. Soon, Sony and Microsoft jumped the bandwagon and gave us two most popular consoles till date: Xbox and PlayStation.
During this time, internet revolution was underway in many countries. From a luxury, internet was soon becoming a necessity.
The gaming companies at that point decided to stop putting in money for packaging and distribution of CDs and chipsets. The idea was to cut the middleman (retailer) and reach directly to the customer. Therefore, now games could be distributed directly as an .exe file to the customer.
And they were successful too. To highlight the disruption of this digital shift, in 2009, digital sales made up only 20% of overall video game sales in the US; in 2019, it made up over 80% of all US game sales.
Micro transaction Model of Revenue:
When the companies realised the potential of reaching direct to the customer, it opened so many doors for them. In my opinion, that also happened because piracy became simpler with games just being a downloadable file.
So gaming companies came up with multiple models of generating revenue. For the first time, from ‘pay to play’ we saw a switch to ‘free to play, pay to win’.
During this time, upfront cost of playing a game kept going down to a point where it is now free to play some biggest titles in the industry.
How do they make money then? Well, we’re coming to that:
DLC stands for downloadable content. Think of it like in-game assets of sorts which would boost your growth or level so to say, faster. For example that shiny sword that is capable of slicing your enemies faster. May be that armor that’s going to protect you from certain kind of attacks. Or simply something that has a high flex value within the game. Again, a non gamer noob(ish) statement. But, whatever!
B. Season Pass
This was an extension of DLC model. In this model, all the ‘premium’ features of the game were made free in return of a lump sum cost. This meant that gamers had to pay only once to unlock the full potential. For gaming companies, it meant that they could get all the money in a single shot.
The Developer Community:
An interesting revenue model that popped up lately was to create a community of developers. Brands like Activision came up with battle.net, EA came up with Origin etc.
In this model, developers could come up with a game and use Activision, EAs massive following to generate adoption. Gaming companies took a 30% share of the revenue in return.
While every piece of the puzzle seemed to be falling in place, but blockchain came up with a different genesis altogether. There is a wave of democratization of wealth and taking power from the central authorities. So one obvious missing key was the people who spent endless hours playing these games.
The Blockchain Era: What is Play to Earn Game?
Play to earn games started catching hype in 2020 big time. The first proof of concept of P2E game was done in 2017 with crypto kitties which choked Ethereum network at one point leading to surfacing of scalability issues.
But how does it work? And why blockchain? That’s exactly what we’re going to talk about:
These in-game assets we just talked about were earned by players by winning quests or loots within in the game. But never could they be redeemed for real life cash. Play to earn games changes this completely. Now you could sell your character’s shoes, bracelet and what not for money.
This is made possible with the help of blockchain’s immutability and proof of ownership. Say now you not only own these assets within the game but can also prove it’s ownership via records stored in blockchain. This opens up a whole new world of possibilities to trade it with other players in a trustless manner.
The popular play-to-earn game Axie Infinity, for example, allows players to purchase, battle and breed virtual creatures (called “Axies”) minted exclusively on the Ethereum blockchain. Because each Axie is represented by an NFT, they can be bought and sold peer-to-peer using cryptocurrency.
This also opens the possibility of a non-gamer like me to hold on to the native token of Axie Infinity (AXS) and benefit from it’s growth. As more people start playing Axie infinity, the demand of AXS would bump up and thus increasing the price. You can buy AXS from CoinDCX if need be. (DYOR)
There has been a lot of noise around P2E model. However, time will test the the real sustainability of this new age way to game. Being a blockchain enthusiast, I am rooting for it’s success though. What about you? Have you ever played a P2E game in the past?
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Until next time..
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