Tough Times And Tough Measures
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Not an easy week for those in gaming as layoffs once again shook the industry. Nevertheless, there was plenty of news to lift the spirits, as those who persevered continued to experiment and look for a new way forward:
- Layoffs and reorganizations hit gaming
- The writer strikes ended with restrictions on AI
- Studios got more aggressive fighting cheaters
- EA broke free from FIFA in FC 24 launch
- ImmutableX goes through a test of Passport
- PayPal may be building an NFT marketplace
Let’s dive in!
Layoffs Hit Hard Across Gaming
The big announcement of the week came from Epic Games. The company had to part ways with 830 employees, but it was far from being the only one having to make hard decisions. Activision’s Hearthstone team got smaller, and Sega’s Creative Assembly had to scrap Hyenas.
Restructuring has been the name of the game, as major studios consolidate their resources to pull through the tough times. Studios in web3 are facing challenges as well as, Splinterlands, for instance, is forced to do more layoffs.
First time and smaller studios are finding it hard to fundraise and are often shifting resources to freelancing work in order to survive. This likely means more delays for new titles and less risk taking in the short term.
Writers Win Protections Against AI
The writers strike appears to be over, and the tentative agreement guarantees a host of protections for writers against being replaced by AI, including against the use of writers’ work to train AI.
The latter is particularly interesting, as a group of authors including George R. R. Martin has filed a class action lawsuit against OpenAI for using their works to train models. With actors on strike and a voice actor strike possible in gaming the writers’ deal could serve as a blueprint.
In many anti-AI confrontations the sentiment seems to be that the technology can be useful, but it should not go unchecked such that it can harm creative professionals. Ultimately, a lot of it comes back to data attribution and properly structured data markets with which web3 can help.
Studios Are Getting More Aggressive With Anticheat Efforts
Cheating remains one of the biggest challenges building competitive gaming titles. Bigger studios are seen taking development inhouse and pushing those efforts to kernel level defenses. EA is the latest to follow this trend.
Also, studios have taken a more punishing approach with malicious actors. Valve most recently announced that “associates” of discovered cheaters will face loss of Profile Rank and CS Rating, which would make partying difficult in Premier.
This is an interesting approach to community monitoring that is perhaps aimed at isolating malicious actors. Cheating is a particular pain point in web3 due to open economies. As defenses become more expensive studios need to think creatively about protections for worlds.
EA Breaks Away from FIFA
In what can be considered one of the biggest rebranding undertakings in gaming history, EA launched FC 24. The release was also preempted by a sudden and unexpected delisting of FIFA 23, perhaps because the publisher wanted a clean break with the old brand.
While EA’s soccer franchise was one of the best known sports gaming properties, EA was willing to risk it because the price of using FIFA’s branding was an astronomical $150M. EA, however, was still able to get a large number of players signed to use their likeness in game.
The licensing hurdle has often been viewed as a barrier to entry for indie studios looking to get into sports games. However, we see a number of indie studios experimenting with developing their own IP and perhaps EA’s move will further embolden them.
ImmutableX Tests Out Passport
The company announced that it ran a 7000 account test, and showed initial conversion metrics for user onboarding through its highly anticipated system. The non-custodial wallet and authentication solution is expected to dramatically improve the user onboarding experience.
It has been an open secret that development and testing around Passport and surrounding infrastructure has been slower than expected. This has left a number of teams in limbo as they planned their web3 strategy around ImmutableX’s technology.
The recent announcement is hopefully a sign that teams can soon start integrating Passport. With Q4 ’23 and Q1‘ 24 being a key rollout period for many studios, the news could not come any sooner.
PayPal’s Patent Applications Spark Speculations
A string of recently published patent applications, by PayPal, has many speculating that the payment giant may be gearing up to develop its own NFT marketplace. This could be the next big product for the company after the unveiling of its stablecoin.
Despite a challenging market and questionable retail sentiment, ecommerce focused companies have continued their development efforts with respect to web3 technology. Amazon is one prime example of a company that has a diverse consumer focused blockchain strategy.
The consumer focus has rekindled interest in hybrid physical-digital items. Most recently, a16z led a $16.8M seed round for IYK. As web3 technology stack matures we see ideas from the previous cycles being given new opportunities.
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.
