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Are NFTs coming soon to your favorite video games?

Are NFTs coming soon to your favorite video games?

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. Her closest competitor for the holiday season was a $30 Tickle Me Elmo doll, which sold 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 industry has changed drastically since its beginnings. 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 caused a pronounced shift in the gaming landscape. As video game studios of the previous millennium depended on revenue from the sale of games and gaming hardware, today’s giants don’t expect you to buy their games at all.

The gambling business

Nintendo is a relatively rare example of a major game studio that hasn’t dipped too deep into microtransaction waters. fortnite rakes in around $5 billion a year for Epic Games, and with numbers like that, you can bet most game companies are at least looking at the free-to-play model. However, this shift in consumer mindset from deep dislike 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 mainstream examples of live play relying solely on in-game purchases. It came at a time when the concept of microtransactions invoked images of toxic loot box economies and luck-based purchases that transformed games into “pay-to-win” ecosystems and as consumers grew increasingly frustrated with game publishers.

Fortnite flipped the script, pushing microtransactions as a way to set yourself apart in-game while supporting developers on the side. They didn’t affect gameplay, preventing deeper pockets from dominating games, and were a great way for those with money and appreciation to show it off – a kind of vanity-fueled charity. . Sound familiar?

Fortnite treasure chest. Source: Fortnite Wiki

Will it mix?

Non-Fungible Tokens (NFTs) were meant to find their way into gaming ecosystems. From early implementations such as CryptoKitties to today’s Axie Infinity, digital tokens are seemingly meant to be paired with games.

Some of the biggest names in the gaming industry are embracing NFTs, and it’s hardly a surprise. Gaming has never been more accessible than it is today, growing 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-earn (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 creators, content and technology. In his New Year letter, Square Enix President Yosuke Matsuda indicated that the company would like to incorporate blockchain/NFT in future releases, but he didn’t mention any specifics.

Recently, Ubisoft attempted to release a limited-edition collection of NFTs alongside its Ghost Recon Breakpoint game. In a perfect world, it would have been a celebratory moment – ​​one of the world’s largest and most beloved gaming mammoths had proclaimed the adoption of blockchain technology. As you may already know, this announcement didn’t quite go to plan.

adventure capitalism

According to a report by DappRadar, NFTs related to games generated revenue worth nearly $5 billion last year and accounted for roughly a fifth of all NFT sales in 2021. Ubisoft unveiled an NFT project on Dec. 96% dislike on his announcement video on YouTube – and two weeks later he would only sold 15 NFTs, collectively worth less than $1,800.

“The traditional gaming industry will not embrace NFTs in their current state,” Wade Rosen, CEO of legendary video game company Atari, told Cointelegraph. According to Rosen, while blockchain gaming continues to evolve, there currently isn’t enough tangible utility for gamers to consider adopting it.

“NFTs – how they are produced, what value they bring to individual gamers and the gaming communities that form around individual titles – will have to evolve quite significantly before you can expect to see widespread adoption within the game. [traditional gaming] industry. We see a lot of potential for NFTs and blockchain technology in video games, but not until the definition of an NFT has evolved significantly beyond where it is today.

It’s not that gamers don’t like the idea of ​​buying NFTs – it’s that they’ve been marketed as blatant money grabs. To boost NFT sales, Ubisoft has made it absurdly difficult to get in-game items for free. Yet some of the most prominent players from Zynga to EA Sports are keeping a close eye on blockchain and its impact on the industry. games, an industry worth around $80 billion.

“The reaction to the subject within the industry is binary and visceral, and unfortunately it’s just not a good environment for exploration,” Rosen added. “We anticipate that most of the related innovation over the next 12-18 months will occur in the narrower blockchain gaming space.”

American gamers, with an average age of 35, have seen the average shift from text-based multiplayer to 2D to 3D to virtual reality multiplayer, all in about two decades.

During this time, the gaming industry has mainly profited from the sale of entertainment products that offer nothing more than a game. But as soon as you let the money flow in and out of a game, you effectively transform its economy into a stock market.

This has led many gamers to believe 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 games fun again

There is a middle ground for gaming NFTs, a ground where publishers do not make egregious cash grabs and the tokens themselves have no impact on the financial incentives of the game. There are countless factors to consider when investigating why adoption rates have been slow, but many believe that cracking the case is only a matter of time.

Elliot Hill, director of communications at Verasity – a blockchain-based advertising technology company – told Cointelegraph that while NFTs are clearly innovative and useful, they lack adequate infrastructure.

“With these hurdles in the rearview mirror, I think widespread adoption of NFT technology is now much more likely by large game companies,” he said.

On the surface, video game studios are like software companies: they both hire developers, designers, managers and executives, as well as sales and marketing teams, to create and sell a product. However, they serve an entirely different clientele.

The video game industry works some of the longest hours among software companies, filling a strange space between the extravagance of Hollywood and the structure of Big Tech. However, with NFTs practically tackling optional financial services side quests to video games, the line between work and play is starting to blur.

Gaming NFTs exist at the intersection of some of the fastest, most skilled, and most valuable environments in the world: technology, finance, and entertainment. Each of these sectors adapts to all sorts of market conditions and consumer behaviors, and it will take time for them to understand the intricacies of the others.

Sarah Austin, co-founder of NFT and metaverse game launcher QGlobe, told Cointelegraph that NFT games are in their infancy and haven’t evolved much beyond simple GameFi and P2E models.

“Switching from AAA games to NFT games may seem disappointing. However, if the player’s motivation is to earn rewards, he is less concerned about the quality of the gameplay.

According to a Nielsen study, consumers spent over $90 billion in microtransactions in 2021. The gaming consumer market is happy to spend money in gaming, but not at the expense of gaming itself. The more usefulness and impact an NFT has in the game, the less important the actual game becomes.

“The GameFi/P2E arena is the industry’s starting point – not the end state,” said Atari’s Rosen. “I personally am intrigued by the potential of NFTs to enable more collaboration and interaction between games and between virtual worlds. Eventually, NFTs could become building blocks for gamers and developers to create new shared experiences.

However, there are also cultural elements at play. While paid microtransaction economies are shunned in the West, gamers in the East seem to have embraced them wholeheartedly. Genshin Impact, the global hit from Chinese game developer miHoYo, basically runs on a luck-based loot-box economy, but has managed to raw over $2 billion in the first year.

Genshin Impact title image. Source: GameRant.

As Square Enix President Yosuke Matsuda previously declared, not everyone plays games just for fun. Some want to contribute to the games they play, and so far, traditional games don’t have incentivized models that cater to those consumers.

There is certainly a big enough market to warrant the effort, but it seems that gaming NFTs, in their current form, are geared more towards attracting casino gamers than average gamers. NFTs are most definitely coming to mainstream games – it’s just a matter of who can strike the right balance between game funding and finance gamification.