Battling Hubris
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The Game Awards showered familiar favorites with hardware, but the industry is still looking to get through a difficult year. From AI threats and web3 vulnerabilities to massive layoffs developers and producers had a lot on their plate:
- SAG-AFTRA tries to call attention to AI issues
- Thirdweb signals vulnerabilities for drops
- The Sandbox moving to Ronin
- Pudgy Penguins unveil their digital world
- Mad Mushroom will publish its first game
- Amazon expanding its web3 footprint
Let’s dive in!
Potential Strike Hangs Over Gaming
The gaming industry had a tough year, and was rocked by widespread layoffs and studio shutdowns. Company executives have been trying to reduce cost and increase profit margins, but the industry continues to consolidate and play defense.
The evolution of AI technology can be seen both as a solution and something that exacerbates the problem. On one hand, it offers tremendous optimization potential for production pipelines and UGC, on the other hand it threatens the jobs of many creatives in the gaming industry.
Not long ago, the writers ended their strike and received protections against AI overuse, and gaming professionals are looking for similar safeguards. However, no agreement has been reached to this point, which creates the possibility of a strike in 2024.
Thirdweb Discovers a Vulnerability
Thirdweb disclosed that some of its pre-built smart contracts are at risk due to a discovered vulnerability. The post that sent ripples across the NFT space offered few details to prevent potential exploits while migrations take place.
The vulnerability highlights the lack of attention to security the web3 space shows in the gaming sector. A multitude of tools have been created to help abstract web3 away from game development teams, audits are rare, and the attack surfaces are undefined.
This does not include algorithmic attack vectors, which games with open economies are vulnerable too. Studios need to look at security more seriously and take greater ownership of the web3 components of their technology stack.
The Sandbox is Moving to Ronin
While nothing has been confirmed, this would be a major coup for Sky Mavis. The Sandbox is one of the early virtual world projects and a staple of the Polygon ecosystem, with many partnerships, so a move would be a vote of confidence for the Ronin technology stack.
This would also raise major concerns for Polygon. While the ecosystem has been touting itself (perhaps in coalition with ImmutableX) as the premier gaming ecosystem, there have been grumblings across the web3 space, that these days it is more talk than substance.
Ronin has been attracting more and more IP over the past few months and has also been incorporating infrastructure for onboarding, reputation and the like, to make the gaming experience smoother for players. Yet, somehow, Ronin’s ecosystem still seems overlooked.
Pudgy Penguins Enter Gaming
Pudgy Penguins have been giving a masterclass in IP development to the entire web3 space. In a year when NFT interest has dried up along with liquidity, the brand has grown aiming for mass adoption through toys, brand appeal and now games.
Pudgy World Alpha was unveiled at Art Basel, and the early reactions have been positive. However, the excitement is more representative of the company’s IP development efforts than the game. The early build is not too impressive yet, but it may not need to be.
Pudgy toys come with a unique certificate that allows the owner to claim unique traits for their digital ‘Forever Pudgy’ inside Pudgy World. This initiative serves to connect a broader audience to Web3.
Mad Mushroom is Ready to Publish
The publishing company started by OTK Network will start publishing Atomic Picnic this month. This is a traditional title , but it may have a ripple effect across the entire gaming space. Publishing has been dominated by just a few gatekeepers, and OTK is looking to change that.
Mad Mushroom is looking to leverage OTK’s creator network to go with a direct to consumer distribution method and circumvent the big publishers that have dominated the industry. If successful, it may catalyze the creation of many new creator-led publishing companies.
Distribution has been a big challenge for studios working with web3 technologies, as big publishers have been hesitant to work with them. If the creator led approach works, it may validate the streamer/esports approach that many are counting on for distribution.
Amazon is Quietly Expanding Its Web3 Footprint
Champions Ascension becomes the latest web3 enabled game to make its way into the Amazon Prime ecosystem. It appears that Amazon is testing the acceptance of web3 enabled games on its user base in a low key, but methodical way.
Amazon has been expanding both the number of titles and the genre coverage, perhaps trying to find what resonates best with its user base. The resultant data could be one of the best sources for metrics for games trying to target a traditional audience.
With that being said, early signs are not too encouraging, or we would have heard studios boasting about DAU/MAU numbers all over CT. Perhaps the builds are simply too early-stage for a mainstream audience.
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.
