Thinking Outside The Box
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The week was full of big announcements, with studios and investors trying to shake things up. Gaming is a very competitive and very top heavy sector, so everyone is looking for an edge. Last week had a few interesting examples of companies trying something different:
- Baldur’s Gate 3 brought shock and awe with NSFW content
- Yuga Labs went hardcore with Wreck League
- a16z and Gem Capital allocated capital for games
- GameStop taking a step back from web3
- Kickstarter unveiled an AI policy
- Zora updated its revenue sharing model
Let’s dive in!
NSFW Content in Baldur’s Gate 3 Captures Attention
Gamers have been flocking to Baldur’s Gate 3 since its release discovering more and more NSFW surprises. Some streamers got caught off guard early at the character creation point of the new title.
The druid sex scene has already garnered a lot of media attention, but it appears as though there are a lot more romantic plot lines for gamers to discover as they progress through. Even though romantic relationships are popular features in many games Baldur is making waves.
Even though you can find NSFW in big games like The Witcher or Cyberpunk 2077 it does not usually capture so much media attention. Perhaps studios are probing the waters for audience’s acceptance for more adult content.
Yuga Labs Opts for Hardcore
No, we are not about to see NSFW content in the Otherside, at least I don’t have any information to suggest so. However, the collaboration with Animoca’s Wreck League will see the company deviate from a typically casual / hyper casual usage for its IP.
While Yuga Labs IP will only be used for seasonal content within the mech fighting game, this may be the first steps to broadening the uses and reach for its selectively popular characters and APE currency with a focus on hardcore gamers.
Otherside recently hosted a closed session, but it is still unclear when the world will be open to a broader audience. The collaboration with nWay and Animoca may be a test to see what time of content Yuga Labs should integrate into its universe.
a16z, Gem Capital and Google Search For New Gaming Deals
a16z is allocating up to $75M towards the second season of its Gaming Speedrun accelerator. The investment giant had a big focus on AI in gaming in the past. Given gaming’s hit and miss nature the early stage approach is both brave and much needed in the industry.
Gem Capital strategy for its next $50M deployment is focusing on the Eastern European region. The region is attractive because of tremendous tech and art talent that comes at a fraction of the cost in western countries.
Google is following a similar approach looking for gems in emerging markets, but is focusing on the LATAM region. Given the rapid growth of tech talent and the enormous size of the gamer base, the region could be the next growth center for gaming.
GameStop is Pulling Back from Web3
GameStop is dropping support for its web3 wallet because of the regulatory uncertainty surrounding the space. The move comes at an odd time given the recent victory for XRP and Google changing its Play Store policy to accommodate NFTs.
Amazon has also not shied away from web3. Most recently its partnership with Mojo Melee will see Prime Members have the opportunity to receive cool perks. It doesn’t look like Amazon is too concerned about the regulatory uncertainty.
I have a feeling that what happened with GameStop is a delayed reaction to things that happened earlier in the year. Big bureaucratic machines can be slow to move and react to rapidly changing landscapes and we may see GameStop reverse course after some time.
Kickstarter Unveiled an AI Policy
The new policy aims to bring some transparency to projects involving the rapidly evolving technology. The new disclosure standards kind of remind me of blockchain disclosures for games on the Epic Games Store.
Curiously, it requires companies developing AI technology to disclose things about the database and data utilized, but that is not a requirement for projects using AI tooling. Given the wave of recent controversies in gaming surrounding AI that may be a shortsighted approach.
Currently, of the primary concerns around AI usage is attribution of creator rights and royalties. The way the policy is constructed, those issues may not be addressed. Nevertheless, it is great to see a major platform start to formulate a position on AI use.
Zora Will Share More Revenue With Creators
Zora will allocate 42% of earning from free mints and 100% from paid mints to creators. Zora’s minting fee model generates revenue even on free mints and now creators will be able to benefit from it.
Given the raging writers’ and actors’ strikes and revenue sharing tug of war between Twitch and Kick, it is clear that creators want to be properly rewarded, and as such it may become a competitive feature for companies attracting creators to their platforms.
However, it is important for the industry to find a balance. Otherwise what may occur is a race to the bottom in terms of platform revenue as competitors reduce margins in effort to build an 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.
