Running Out of Steam: Rethinking Digital Distribution
Video games have come a long way since the dawn of the digital age. From arcades to retail, while the industry has seen many ups and downs, the commercial endeavours of the brick and mortar economy once flourished under proud banners — Game Champ, Rhino Video Games, Egghead Software, FuncoLand. But these places can no longer be found.
Video games used to be physical products, sold in physical stores. With the advent of the Internet, however, retailers have vastly diversified, and gone increasingly digital. Branching out from the original handheld consoles to smartphones and PCs, with the use of the Internet as the avenue for the acquisition of games, the physical game economy has now become far less sustainable.
The competition now, simply put, has found a much better path to generate revenue.
Online retailers, such as Valve’s Steam, the Google Play Store, and Apple’s App Store launched with a huge advantage over traditional retailers. Not only did the platforms have much more capital to begin with, but they already had brand recognition, a tried and tested revenue model, and unlimited shelf space. Unsurprisingly, digital retail is flourishing all over the world and slowly eating away at its physical counterpart.
The Internet overthrew the brick and mortar economy, but unsurprisingly, online games and their corresponding platforms may soon become victims to the same fate. The times are again changing, and while the retail of old faced the mountainous competition of the Internet, a new concept called decentralization may pave the way towards the future of video games.
Change doesn’t necessarily kill the industry, but the players who do survive, are the ones that embrace change.
Decentralization is simply the usage of a network of individual computers connected with each other to perform, record, and verify digital transactions. The structural foundation of this is called a blockchain, and the primary mode of payment between transactions is called a cryptocurrency.
Decentralization is advantageous over centralized networks in several ways. The primary advantages are better privacy and significantly reduced risk of unauthorized access to information and data infringement. This is possible in part due to the cryptographic nature of the data, and in part due to the way the data is stored: not on a single server, but duplicated and spread out over all computers in a network.
Another advantage, and the most important of all, is the ability for a blockchain to sustain itself without a centralized authority. A common example of a platform utilizing such a structure is BitTorrent, a peer-to-peer file sharing protocol.
Most corporate giants today utilize a centralized approach to storing and exchanging data — Facebook, Google, Amazon — but for the sake of the subject at hand, let’s focus on one particularly successful centralized gaming platform — Steam.
Launched in 2003 by Valve Corporation, Steam has since grown to become a multi-billion dollar enterprise. But despite its massive success, the company may be falling into pitfalls of its own making. By undermining its clientele by allowing a massive, near-unregulated influx of competition without providing additional avenues by which they can promote, sell, and monetize their products, the typical outcome of the rich getting richer and the poor becoming poorer is all that is expected.
With the launch of Green Light and its successor, Steam Direct, the platform published games at the whims of a community vote, eventually changing that system to ultimately charge developers to publish on the platform.
As SteamSpy’s Sergey Galyonkin puts it: “It’s an interesting situation, really. Valve makes more money, the top devs are making roughly the same, but an average developer makes less.
“The overall number of releases grew 2.5X times compared to 2015 but total revenue went up only by 25%.
“It’s quite possible that a big share of new releases on Steam Direct was caused by shady publishers pushing ‘game-shaped objects’”.
Could blockchains offer a better solution?
An important step for the success of a decentralized monetization platform is establishing a blockchain-based ecosystem, or marketplace, where a cryptocurrency specifically designed for use on the platform may be utilized as the primary mode of payment. This would open up a universe of possibilities for developers and gamers alike.
In a blockchain-powered marketplace, gamers would more likely purchase items and digital assets with in-game, cryptocurrency-backed tokens. Apart from its value in fiat money, an item could also be given a corresponding crypto-value. This would allow gamers to liquefy their assets once they are done or are already bored with one game and want to transfer their currency to another.
An item purchased with fiat money could be easily converted into cryptocurrency, which, in turn, could be used to purchase other items within the marketplace. This would allow users greater flexibility on their gaming purchases and thereby provide the biggest incentive of them all to keep playing — the thought of literally investing one’s time and effort in exchange for profit.
A blockchain-based distribution model would not only perform better in terms of incentivizing sales, but also provide a source of revenue to all parties involves.
But that’s not all…
A blockchain-based economy could provide a solution for problematic grey markets, where developers lose a significant portion of their income on games and in-game assets due to illegal sales outside of the platform with fiat currency. With a decentralized marketplace, gamers can liquefy their assets conveniently and securely, appeasing themselves with the thought of “true ownership” which blockchains can provide.
Apart from the narrow path of beta-testing and winning big tournaments, while there are other lucrative options for a gamer to generate a regular stream of revenue such as generating blog traffic, creating walkthroughs/guides/tutorials, producing worthwhile content such as stream-worthy videos, they are almost always done external to gameplay.
This can be overturned with the integration of newer models for monetization. In-game progress can be monetized, achievements can be turned into tokens, rare items or assets can be sold, characters can be ‘farmed’ and customized, teammates can be hired, and entire gameplays can be liquefied — all in exchange for cryptographic gold to be converted into cold, hard cash at the whims of the user.
Additionally, even developers could profit greatly from the advent of these fluid transactions by levying transaction fees that provide an additional stream of revenue.
Eventually, the possible standard would be to completely alter the perception of gaming as a mere form of entertainment, while creating an entire economy rooted in blockchain-based gaming communities that is positively perceived as a prospective career choice.
What does the future look like?
The gaming ecosystem is already looking like a triangular interaction between gamers, developers, and platforms. The ideal future would see a more democratic and egalitarian approach towards gaming, one in which everyone involved may be able to reap the benefits. Even though the concept of blockchains is new and the feasibility of everything I’ve mentioned will take a lot of work to achieve, there are projects underway to implement decentralized strategies to current systems of distribution.
Hyperbridge Technology’s Blockhub is one such project that hopes to turn video games into a far more lucrative venture for developers and consumers alike. Blockhub is a digital marketplace and content delivery service that offers independent developers the ability to maximize the collective potential of its base of users. In other words, the decentralized approach allows developers new ways to fund, market, distribute and monetize their games.
A direct relationship (as distinct from the conventional approach offered by centralized channels) with their customers will allow developers to crowdsource funding as well as development through the same platform. Funding would be as simple as hitting the ‘Like’ button on Facebook, while marketing would be taken care of by algorithms developed by Blockhub (comparable to Youtube’s auto-suggestions) to direct users to the applications that are most relevant to their needs.
The decentralization of development could be seen in the areas of bug fixing, modding, testing, and more, in exchange for cryptocurrency. But these are just some of the possibilities that the platform offers. Only time will reveal the true breadth of the project. What is for certain, however, is that Blockhub will provide solutions far beyond mere distribution.
From the days of the classic arcades and the first video game vendors to our current demand for decentralization and a future that pays to play, the nature of distribution has been changing continuously, radically altering itself at every step of the way.
It’s easy to forget just how impossible and outlandish the technologies we use today might have been perceived only a decade ago, but unless we keep up with the pace of technological advancements, we are bound to be left behind.