Anyone who hasn’t lived under a rock will probably realize that the gaming industry was in a state of utter rupture. It is one of the industries that has benefited the most from the COVID-19 pandemic.
However, the average investor may not be aware of the following growth numbers:
- The global gaming market is currently worth $180 billion – the world’s fastest growing form of entertainment. For reference, the global movie industry is worth $100 billion and all North American sports combined are $73 billion in annual revenue.
- Experts predict that the number of online streams of online games will rise to one billion by 2025 – one in nine people today.
- Three of the top four most watched sporting events in the United States in 2018 weren’t just traditional sporting events. They were electronic sports events. For example, the League of Legends tournament has garnered 30 million more views than the AFC Championship and 45 million more views than the NCAA Football Championship.
- Travis Scott performed live on the popular gaming platform Fortnite last April. It has received over 12.3 million views and grossed Scott over $20 million per TechCrunch and GamesIndustry.biz.
So what is going on here and where is this growth coming from?
We can attribute a lot of this simply to the advent of technology and exponential growth. Technology continues to change the way we communicate, how we collect, how we create and consume information, how we convey value and how we form online communities.
Howard Schultz, former CEO of Starbucks, popularized the idea of a “third physical space” with his café concept. He believed that humans needed a “third space” to gather outside the office and home. Starbucks was the answer.
We see this same concept playing out today among younger generations. Except for the new shared space is digital and called the metaverse. This is where kids are increasingly hanging out these days. They go there to socialize with their friends. Listen to music or play video games. We can think of this as the next iteration of digital communities: AOL chat rooms, then Myspace. Facebook and finally the metaverse.
We have concerts in metaverse now. Burning Man is numbered. We have just started.
The first video games appeared in the late 1950s – a simple tennis game similar to a game of pong. Later, Atari was invented in 1977. Nintendo started releasing popular games starting in the early 80s with Mario Bros., The Legend of Zelda, Donkey Kong, etc.
It is important to note that the business model has changed significantly over the years. We used to pay $60 for a game, say, GameStop, and set off. It was a one time cost with unlimited play. The games were released in a similar way to how Hollywood movies are promoted and released. 90% of the revenue will come in the first two weeks.
This form is out now. Freemium model is available. Users play for free and are encouraged to make in-game purchases to upgrade skills, decorate avatars, buy weapons, improve animations, etc. We see this today on Roblox, Fortnite, and other popular games.
This is a more profitable model for game makers, as it keeps users engaged and always promotes them to compete with their friends. We are moving into a world where social cues occur between younger generations in the metaverse via their in-game avatar, weapon they use, and skins they possess. Welcome to the future.
Why will games move to blockchains
- Games happen today on confined data networks. This means that users cannot own their in-game assets (skins, avatars, abilities, etc.). The platform owns them. Axie Infinity disables this model because users own their assets as non-fungible tokens (NFTs) on Axie and can sell them in a free market/game economy for profit. Here is a view of the revenue that Axie Infinity users have earned since May of this year:
Annual revenue is eliminated for each Token Terminal for $2.7 billion In the open and unauthorized pay-to-play blockchain game. Important Note: Blockchain technology is the tool by which users can own their assets within the game. This is not possible in the technology used today.
- Blockchains allow gaming economies to be organically shaped. Users can be paid to play. Once again, Axie Infinity leads the charge here. Axie users make investments to get NFT tokens from Axie and AXS to start playing. From there, they can earn SLP tokens through play/competition, where the earned tokens can then be exchanged for other crypto assets or fiat, etc. Many users in the Philippines are earning several times their usual monthly salary simply by playing Axie Infinity, all during the economic hardship caused by COVID-19, which is pretty cool. Let me ask you this: If you could get paid to play a game on a blockchain versus not get paid to play a non-blockchain game, which would you choose? As Charlie Munger says, “Show me the incentives and I’ll show you the result.”
- Public blockchains are open to everyone and without permission. Do you have a mobile phone and internet connection? Awesome, you are welcome to share. This is not how you work in today’s closed data structure, especially if you live outside the US. You can not only participate in the blockchain, but also earn income. As the use of smartphones continues to spread with the growth of 4G and 5G technology in emerging markets, we should expect more and more users to access crypto and blockchain-based games in the near future.
- Open protocols collapse and put pressure on the cost of existing technologies. Public blockchains are open protocols. Ethereum is an open protocol. Anyone can build games on Ethereum. By doing this, one is essentially outsourcing a lot of their operating costs and capital to the blockchain for the Ethereum base layer, which means it is much easier to start a game for entrepreneurs. Low barriers to entry increase competition. This ultimately benefits the end users. We’ve seen this repeat over and over in history. Blockchain is simply the next iteration of open source technology.
- decentralization. Since blockchains are open and unauthorized, anyone can build on them. This means that we should anticipate a future where there are blockchain games built on top of the first layer blockchain, for example, Ethereum, Solana, Cosmos, etc. Users will be able to switch games easily, and they will be able to bring their assets such as NFTs in the form of skins, avatars or weapons with them. This is not possible today. Furthermore, users will be able to trade their NFT assets for profit if they so choose, or perhaps they wish to build an NFT? Go ahead – you don’t have to own a gaming platform to do this.
Gaming economics is the future, and it will happen on the blockchain.
The opinions and opinions expressed here are solely those of the author and do not necessarily reflect the views of Cointelegraph.com. Every investment and trading move involves risks, you should do your own research when making a decision.