Gearing Up
The authors or their affiliates have ownership or other economic interests or intend to have interests in BTC, ETH, SOL, Sec3, and may have ownership or other economic interests or intend to have interests in other organizations and/or crypto assets discussed as well as other crypto assets not referenced.
Gamescom was a lot of fun! As challenging as the past year has been, the conference showed that the industry is very much alive. Web3 is still looking to find its place in the heart of gamers and developers, and there remains a lot of work to be done there:
- Studios in web3 continue to debate about the target audience
- NFL Rivals unveils in-app NFT purchases
- Netflix is entering the gaming space
- Epic Games launches a program to attracts exclusive titles
- Hackers behind leaks face legal ramifications
- Blizzard takes a hard stance against UI add-ons
Who is The Target Audience
For studios utilizing web3 an important theme during Gamescom was target audience. Infrastructure and platform teams are actively deemphasized web3, and studios highlighted abstracted account creation and sign-in flows.
The degen camp argued that the budgets needed to compete for an audience in gaming are not available in web3. GameDiscoveryCo analysis showed that gamer activity accumulates around a few top games. However, focusing on degen mechanics may isolate the ecosystem.
The internal lack of consensus may be sending a mixed message to the traditional gaming world. Some see web3 as a business model, while some see it as a technological evolution. The web3 space needs to do a better job of articulating its version internally and externally.
Buying NFTs as IAP
NFL Rivals has enabled gamers to purchase NFTs through its in-game marketplace for non-cryptocurrency credits. This is not the first application to do so, but with Google Play becoming NFT friendly, hopefully this is a sign of things to come.
Web based stores outside native applications have created UX frictions, and friend.tech’s home screen approach can hardly be considered a go-to solution. The in-app marketplace offers a better gamer experience. Now we must wait to see if, when and how p2p trading is enabled.
The approach chosen by NFL Rivals addresses Apple and Google fees, but raises token utility questions if taken as a model. If in-app purchases are completed without the use of native game cryptocurrency it may drastically diminish the perceived value of many gaming tokens.
Netflix Jumps Into Gaming
Netflix has been one of the leading platforms when it comes to streaming, but has faced pressure when it comes to growth, competition, and pressure to continue to deliver expensive original content. Gaming may be the answer, as the company looks to expand its footprint.
Earlier this month, Netflix released a game controller application, and announced testing for Oxenfree and Molehew’s Mining adventure, which will be available across multiple devices. Now it’s been announced that Super Evil Megacorp is making a Rebel Moon based game for Netflix.
Netflix has been working on gaming for quite some time, but the efforts have recently picked up steam. The track would open new monetisation channels for the platform and given the wealth of IP at its disposal it could become a serious competitor to the likes of Epic Games.
Epic Games First For Exclusive Content With Epic First Run
The Epic First Run program offers third party developers an increased revenue split for six months in exchange for releasing on Epic Games Store and not using other channels outside of their own storefronts and Epic’s keyless redemption format during the time frame.
Similarly, to what is seen in video streaming, video games platforms need to consistently offer original content in order to maintain user interest. This is a time consuming, expensive exercise. So, Epic Games is looking to incentivize third party developers to fill the demand for content.
The content arms race creates a concerning dynamic for web3 platforms. Top web3-enabled titles want to list on Steam and Epics Games store and so don’t offer exclusivity. As web3 tooling becomes easier to integrate, web3 platforms may struggle to attract gamers.
Perpetrators of Leaks Face Legal Action
The persons behind the GTA 6 and Starfield leak are facing legal actions. However, it is unclear whether the case of the individual involved in the Starfield leak is connected to the act. The high profile leaks serve as a reminder for how vulnerable gaming ecosystems can be.
Hacks and cheats are a commonplace in the gaming industry, with studios struggling to mitigate their impact on the gaming experience. This is troublesome for games with an open economy, as assailants have an economic incentive to attack that grows with the ecosystem.
The attacks can range from bot farming to revealing information on the changing meta ahead of schedule. Studios need to expect attacks and find ways to mitigate impact. I expect auditing and active monitoring, something our portfolio team Sec3 does, to become more prevalent.
Blizzard Opposes Third Party Add-Ons
Gamers playing World of Warcraft have discovered how to use Advanced Combat Log to create useful UI add-ons to enrich their gaming experience. However, Blizzard is looking to prevent such third party tooling from being utilized, and so will be adjusting the Log.
This is not the first time a big studio looked unkindly on third party tooling. However, it should be noted how easily Blizzard is able to cut off developers by restricting access to certain gaming data.
This is why web3 offers so much more than optimized asset trading. Among other things it has the power to give gaming data back to the users, unlocking ecosystem growth through the development of third party tooling and services.
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.
