Saturday morning musings on secondary royalties.

I’ve been in games for 25 years. I have watched lots of mistakes and success. I vividly remember the earliest days of mobile gaming including the advent of ‘free to download’. This quickly became the definitive norm and made it virtually impossible to charge for creative work, instead forcing publishers to charge for gamified click bait transactions.

Perhaps had we not focused first on such a difficult, punishing revenue model, the focus would have been on quality and we could have avoided the god awful trappings of energy meters and micro transactions that led to so much disdain for mobile. Certainly it would have meant that game developers who wanted to focus on quality and art wouldn’t have had to be buried in musings on AARPU and how to convert even 10% of their customers to paying? To the point that, nowadays, it’s virtually impossible to publish a F2P game unless you have a big analytics team and game design has become secondary to the economy and the levers.

So here we are at the birth of web3 gaming…learning and experimenting.

Last year the focus was (IMO wrongly) on tokenomics and the abomination of a phrase which was “Play to Earn”. Gamers don’t play your game because they get paid to do it — they play because its fun. If you ‘can’ earn, great— but it shouldn’t ever be the point (I have no problems with Play *and* Earn).

This year, the dialogue has finally turned to fun, to digital ownership, to interoperability across chains and across games and experience. We are on the cusp of so much progress — true utility.

Web3 has the potential to revolutionize the game industry. It won’t happen immediately, but if we are smart, strategic, and careful — it will happen.

But for this to happen, consumers and creators need to have their incentives aligned and the funding needs to be there to support ongoing, meaningful content creation. What game developers call live support.

Along comes DeGods, and now along comes Magic Eden — tossing a literal grenade in the room. I get that we’re all experimenting but this is a terribly dangerous move — as we saw with the ‘free to download’ aspect of mobile. It’s a hard one to walk back from. And it’s something that should never have been a marketplace’s role to decide.

The industry is already wrestling with the roadmap of how to go beyond the genesis collection. 10K is a BIG collection in a bear market. But it’s nothing compared to the install base for even a failed game release. Make no mistake — if 10K people are the market for web3 games, this won’t go anywhere.

I’ll ask you this — what incentive does any creator have to support the floor price of an NFT or to provide any ongoing content without ANY financial incentive whatsoever? What’s the incentive, further, to not just flood the market with more NFTs?

This will surely lead to even more rug pulls and scams and broken promises.

Incentives need alignment — as a purchaser of an NFT, you are in many ways a franchiser (akin to opening a McDonalds). Our project will grant you sole license to your 1/1 pet. You can commercialise it, you can market it — we can’t do any of that, only you can. And in return, we earn an ongoing secondary royalty. That allows us to update the metadata as you bond with your pet, add new types of pets, add more utility apps and games, etc. It allow us to made good on our promises. And if we don’t follow through, we know you’ll sell it. And if a lot of people do that, the value of our NFTs tank. Aligned incentives.

Right now we need to be focused on delighting the world with all of the clever things you can do in web3 — interoperability, composability for example — this costs money.

That can come from

a) secondary royalties

b) ads, exploitive iAP systems, expensive subscriptions — basically what happened to mobile gaming — now, when really we should be focused on quality!

c) vc’s (they also want to know how we’ll make money…)

Make no mistake: We will not allow our NFTs to be traded on any marketplace that tries to jeopardize this critical, delicate time in the ecosystem and I call on and encourage other developers to do the same.

Marketplaces shouldn’t be the ones to make or break business models.