A Quiet Resurgence
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Gamescom is just around the corner and the gaming world is bubbling with excitement. Despite the challenging economic conditions that have been forcing waves of layoffs across the space, there are reasons for growing optimism:
- Investment in web3 gaming is picking up after a slow June
- HyperPlay is bridging the gap with traditional gaming
- RockStar acquisition Cfx.re shines a spotlight on modders
- Genies enhance celebrity avatars with AI
- DeLabs return Polygon grant to move y00ts to Ethereum
- China game licensing to affect mobile
Let’s dive in!
Web3 Gaming Investments Are Making a Comeback
After a slow month of June, the sector received $297M of investments in July. Given that crypto summers tend to be slow and we are in the midst of a painful bear market, a midsummer recovery may help to build momentum for the second half of the year.
Over the past few weeks I’ve highlighted a number of funds that have recently allocated capital to this sector. This is a growing trend. Most recently, Futureversere and Outlier Ventures are teaming up for a Base Camp program to support development in the metaverse.
The program is focusing on The Root Network ecosystem. Gaming seems to be reinvigorating the multi-chain thesis, as many launch their own chains in an effort to align economic incentives for developers, studios and gamers as well as optimize the technology stack.
HyperPlay Integrates Traditional Launchers
HyperPlay, one of the leading launchers for web3 games, enables gamers to link their Epics Games and GoG accounts, and play games available on those platforms from the comfort of the web3 enabled launcher.
The web3 gaming space has long discussed the unhealthy separation between web3 and traditional games. HyperPlay’s integrations are one of the first major steps to unite the two in the eyes of average gamers.
HyperPlay’s competitor, Elixir, doubled down on the web3 focus and partnered with Gala Games to bring over some of its titles on the platform. To be successful launchers will need to foster network efforts, which may be tough to do relying on web3 gamers exclusively.
RockStar Brings GTA RP Developers Under Its Roof
Rockstar acquisition of Cfx.re, brings one of the leaders of GTA RP modding under the studio’s roof. The role playing ecosystem is big, The FiveM mod alone was reported to have over 269K concurrent players at one point, outperforming the original over that timeframe.
I often hear from game industry veterans that web3 gaming lacks the modding culture found in traditional gaming. Afterall, many of the current industry darlings started out as mods. The modding approach allows for community builders and rapid iteration with gamer feedback.
Mods could be a healthy path for web3 adoption as well. It offers a direct path to a wide pool of gamers looking to try something a little different within a frame of a game they like. Moreover, big studios already experimenting with web3 may be more open to web3 enabled mods.
Genies Enhances Celebrity Avatars with AI
Genies enables creators to train personalized avatars for use within the ecosystem to enrich communications with their fanbases. This looks to be an early version of something I’ve been excited about for some time.
Actors and influencers have been rapidly making their way into the gaming ecosystem, giving them the ability to truly imbue characters with their personality may push virtual world experiences to another level.
I expect this to revolutionize the companion aspect of games. Characters will have pop-culture driven origins and evolutionary paths that will impact their characters, as they grow and learn based on who they play with. True ownership will then prove to be a valuable property.
DeLabs Choose Ethereum Over Polygon
DeLabs is moving one of its popular PFP collections y00ts over from Polygon to Ethereum. It will also be returning a $3M grant that they received from Polygon. This is not the first chain switch made by DeLabs, but this could be a warning signal for Polygon.
On the face of it DeLabs has nothing against Polygon, and the split appears to be amicable. However, given the state of the market, it is eye opening to see a team willing to return such a sizable grant in order to leave the ecosystem.
Polygon’s push into gaming and metaverse space has been driven by its business development. However, there have been periodic questions over its tech roadmaps and capabilities, and some teams have jumped ship. So, it is worth monitoring if this a sign of more exits to come.
China’s Licensing Policy Will Affect Mobile
The Chinese licensing policy proved a barrier to market entry for studios. The pause on approvals coupled with the need to find local partners has made things difficult for traditional studios. With the extension to mobile the market may become out of reach for web3 companies.
This is a major problem. According to Newzoo, the US and China account for 49% of consumer spending in the sector. The US has unclear regulations as far as web3 and is expensive to acquire users in. China’s regulatory environment is even tougher.
This makes LATAM and Europe critical for web3 studios. LATAM may be especially important given the significantly lower cost of acquisition for gamers. It will be important to monitor how studios from web3 second gaming wave approach the different gaming markets.
This wraps it up for this entry. As always, if you are working on something exciting in the web3 gaming space, or are a traditional gaming team looking to explore the possibilities, don’t hesitate to reach out to any of us at Sanctor Capital. Have a great rest of your week!
Ilya Abugov (@AbugovIlya)
Disclaimer: This commentary is not investment advice. It does not purport to include any recommendation as to any particular investment, transaction or investment strategy, or any recommendation to buy or sell any investment. It does not reflect any attempt to effect any transactions or render any investment advice.
This post is solely for informational and entertainment purposes. It is inherently limited and does not purport to be a complete discussion of the issues presented or the risks involved. Readers should seek their own independent legal, tax, accounting, and investment advice from professional advisors. The views reflected in this commentary are subject to change at any time without notice.
