Blockchain won’t disrupt the gaming industry, it will complement it
Over the past several months there have been countless Twitter threads, blogs, and podcasts, detailing the intrinsic value that blockchain will bring to gaming. For those of us inside the space, we are generally aligned on its potential benefits to the industry such as:
- Digital asset ownership
- Interoperability
- Governance
- Enhanced alignment between gamers and developers
- Unlocking higher monetization
Unfortunately, outside the echo chamber, the tone is much more hostile. Traditional gamers point to P2E players’ fixation on cashing out as quickly as possible. Others criticize the high barrier to entry which often requires hundreds of dollars of investment just to play the game.
On the blockchain side, the public discussion is no better. We arrogantly lead with blockchain “disrupting monolithic web2 gaming organizations and giving power back to the players” rather than “how the technology will be additive to the gaming industry.” It is in the latter where we all win.
It’s time for the blockchain gaming industry to change the nature of the conversation. Yes, the market is still in its infancy but it can play a complementary role within the entire gaming ecosystem rather than a disruptive one. In other words, we need to stop framing the conversation as “blockchain vs. non-blockchain” and focus simply on gaming. It’s more a communication / PR problem than a fundamental one.
In this post we will attempt to make two points:
- Blockchain game players will eventually be additive to the total gaming market
- Gamers as a whole will eventually care less about what’s underneath the hood and focus on entertaining games that are fun
We aim to open that conversation through a lens of reason and publicly available data rather than passion or self-interest (a problem that often pervades the space).
But first, let’s establish a few things.
How big is blockchain gaming in the context of the gaming industry?
According to Newzoo, the total gaming industry is forecasted to surpass $200 billion dollars in 2022.
In contrast, or hopefully in addition to, the most recent blockchain gaming report from DappRadar, the total revenue (excluding money raised via VCs) generated to date through transactions comes to a total of $857 million dollars. To put it in perspective, this is more or less one third (35%) of the revenue forecasted by Newzoo specifically for Browser PC Games in 2022. Meanwhile, cloud gaming, a technology that was initially released in 2019, is projected to surpass $1 billion dollars in 2022.
It’s hard to say if the enhanced accessibility provided by browser games and cloud gaming has added net new players to the gaming market, or if they have really only provided new distribution channels for the exact same established base. Xbox Cloud Gaming reported 10 million people around the world have streamed games through their platform since launching in 2020, but our hypothesis is that cloud capability has generally just extended the play time of existing players.
Much like we’ve seen in cloud gaming, we believe it will take time for blockchain gaming to gain meaningful adoption. Both technologies struggle from technological limitations that inhibit user experience. For cloud gaming it’s problematic latency and input lag, while blockchain gaming currently comes with a poor user experience due to the complexity of onboarding and transacting.
However, despite the current constraints, blockchain technology could very easily become one of the most compelling ways to onboard players that wouldn’t otherwise consider gaming (and even less call themselves “gamers”) as their main form of entertainment. Regardless of the many challenges that Axie may have faced and/or is currently facing, it’s only fair to mention them as a success story even strictly from the point of view of expanding awareness and adding new players to the pie. Sure, it’s factually true that a lot of things converged to contribute to the rise of play-to-earn (COVID-19 pandemic, global economic circumstances, local market tailwinds, etc.), but there’s no denying the fact that they proved that it is entirely possible to bring new players, albeit only temporarily up to this point.
Our prediction is that it will take a few more years (not just crypto cycles) to see the real potential of blockchain gaming to onboard a completely new cohort/generation of players.
So now let’s quickly discuss player behaviors.
What makes players have a deeper interest in a specific game?
Another interesting discussion we’ve seen come up is the different perspectives on where blockchain could fit within the different categories of the gaming industry; does it belong next to game genres like First-Person Shooters (FPS), Real-Time Strategy (RTS), etc; or is it merely an underlying technology that can be embedded into any style of game?
We believe it is a technology that powers an entire spectrum of gaming (and other vertical) experiences. Now, one thing is certain, we do think we’ll see new sub-genres being created and powered by blockchain (great topic for another post, huh?) like Dark Forest.
And now, think about how you experience games. What is the first thing that draws your attention? For most of us, it’s typically a combination of:
- Trailer
- Genre
- Studio/Team
- Device/Platform
- Launch Date
As a player, we don’t recall a time in which we were attracted to a game just because it was built on a specific game engine (UE, Unity), if it was powered by cloud gaming, or even if it was available with cross-play. Yes, we as individuals tend to focus on the “shiny” things and rarely find ourselves reading through the game’s Steam page or website to understand the specifics. Our decision tree definitely starts with: “does the game look cool and fun?”
To help support this, Facebook Gaming released a report that covers the factors that influence mobile gamers to try a new game. While the report only considers mobile games, it’s a good framework for blockchain and/or traditional gaming studios to follow:
We’d venture to say that a significant portion of the 3 billion playersout there follow a similar path to decide if they want to spend their precious playtime hours in a given game. After all, the value of gaming has historically been solely focused on entertainment. The concept of value extraction through video games is still novel (and up to now rather problematic).
And so, using the above as a point of reference, it’s hard to imagine a world in the short-term where players will choose to play a game merely because it is powered by the blockchain, regardless of the blockchain. Similar to how the average player doesn’t care if Apex Legends runs on a specific database provider, if their data is stored using whatever flavor-of-the-month standard is being used, or if they’ve implemented the latest texture pack. They simply play because they enjoy it.
We really just want to play great games that are fun, that fit our interests, hopefully built by teams that are trustworthy, and on the device or platform of our choice.
And so to close, our ideal scenario then is that sometime soon (launch dates matter, remember?), when we find ourselves fully immersed in this really awesome game trying to beat that unforgiving boss, and we suddenly have the urge to check the steam page, the game box, the website, the whitepaper (please don’t), we then realize it is in fact built on the blockchain and comes with a variety of player-focused values we can leverage.
That, to us, is success.
