Are NFTs coming to your favorite video games soon?

In 1996, when the Nintendo 64 was first launched in the United States, 1.6 million units ($200 each) were sold in the first quarter. The closest competitor for the holidays was a $30 Tickle Me Elmo doll, which: sold about a million units in the same window. More than 20 years later, when Nintendo’s $300 Switch sold 1.5 million units in its first week, there was a lot more competition, and not just for the holidays.

The business of gaming has changed dramatically since its early days. From basic monetization through the sale of physical and digital copies of games to monetization in games through microtransactions, the widespread adoption of the Internet has led to a marked shift in the gaming landscape. While the video game studios of the last millennium depended on revenue from the sale of games and gaming hardware, today’s goliaths don’t expect you to buy their games.

The business of gaming

Nintendo is a relatively rare example of a major game studio that hasn’t delved too deeply into microtransaction waters. Fortnite rakes in about $5 billion a year for Epic Games, and with numbers like that, you can bet most game companies are at least exploring the free-to-play model. However, this shift in consumer mindsets from deep dislike to moderate acceptance of microtransactions has been a long and arduous process.

Fortnite was far from the first game to introduce microtransactions, but it was one of the first mainstream examples of a live service game that relied purely on in-game purchases. This came at a time when the concept of microtransactions invoked images of toxic lootbox economies and luck-based purchases as games turned into pay-to-win ecosystems and consumers grew increasingly frustrated with game publishers.

Fortnite has flipped the script and pushed microtransactions as a way to differentiate yourself in the game while supporting the developers. They didn’t affect the gameplay, prevented deeper pockets from dominating the games, and served as an excellent way for those with money and appreciation to show it – a sort of vanity fueled charity. Sounds familiar?

Fortnite treasure chest. Source: Fortnite Wiki

Will it mix?

Nonfungible tokens (NFTs) would undoubtedly find their way into gaming ecosystems. From early implementations like CryptoKitties to today’s Axie Infinity, digital tokens seem destined to be tied to games.

Some of the biggest names in the video game industry are embracing NFTs, and it’s no real surprise. Gaming has never been more accessible than it is today, evolving from a niche consumer base to establishing global pop culture trends. For decades, game collectibles have been sold for obscene prices – why should their digital cousins ​​be any different?

From Ubisoft to Square Enix, what really intrigues the industry is figuring out the best approach. Some have simply started selling digital items as NFTs, allowing buyers to resell them to other more avid enthusiasts. Others are trying to adopt the play-to-earn (P2E) model used by Axie Infinity.

Earlier this year, US video game retailer GameStop announced plans to partner with an Australian crypto firm to develop a $100 million fund for NFT creators, content and technology. In his New Year’s letter, Square Enix president Yosuke Matsuda indicated that the company would like to include blockchain/NFTs in future releases, but did not provide any details.

Recently, Ubisoft has attempted to release a limited-edition collection of NFTs alongside the Ghost Recon Breakpoint game. In a perfect world, this would have been a celebratory moment – ​​one of the world’s largest and most prized gaming mammoths had declared the adoption of blockchain technology. As you may already know, this announcement didn’t quite go according to plan.

Adventurous Capitalism

According to a report by DappRadar, game-related NFTs generated revenue of nearly $5 billion last year and accounted for about one-fifth of all NFT sales in 2021. Ubisoft unveiled an NFT project on December 7 — a move that received a 96% dislike in its announcement video on YouTube — and two weeks later it reportedly only had sold 15 NFTs, collectively worth less than $1,800.

“The traditional game industry will not adopt NFTs in their current state,” Wade Rosen, the CEO of legendary video game company Atari, told Coin-Crypto. According to Rosen, while blockchain gaming will continue to evolve, there is currently not enough tangible utility for players to consider adoption.

“NFTs – how they’re produced, what value they provide to individual players and communities of players that form around individual titles – will have to evolve quite significantly before you see widespread adoption within the industry. [traditional gaming] industry. We see a lot of potential for NFTs and blockchain technology within video games, but not until the definition of an NFT evolves significantly beyond where it stands today.”

It’s not that gamers don’t like the idea of ​​buying NFTs – it’s that they have been marketed as blatant money grabs. To boost NFT sales, Ubisoft made it absurdly difficult to earn free in-game items. Still, some of the most prominent players, from Zynga to EA Sports, are keeping a close eye on blockchain and how it could affect gaming business — an industry valued at around $80 billion.

“The response to the topic within the industry is binary and visceral, and unfortunately that’s just not a good environment for exploration,” added Rosen. “We expect most related innovation to take place within the narrower blockchain gaming space in the next 12 to 18 months.”

American gamers, with an average age of 35, have seen the middle ground shift from text-based to 2D to 3D to virtual reality multiplayer in about two decades.

During this time, the gaming industry has mainly benefited from the sale of entertainment products that offer nothing more than a game. But once you let money flow in and out of a game, you are essentially turning the economy into a stock market.

This has led many gamers to feel that – with NFTs and blockchain – studios and game publishers are more focused on creating markets than on engaging, unique, and above all, fun gaming experiences.

Make games fun again

There is a middle ground for gaming NFTs, one where publishers don’t obviously grab money and the tokens themselves don’t affect the game’s financial incentives. There are numerous factors to consider when examining why the adoption rate is low, but many are convinced that it is only a matter of time before the matter is resolved.

Elliot Hill, director of communications at Verasity — a blockchain-based advertising technology company — told Coin-Crypto that while NFTs are clearly innovative and useful, they lack infrastructure.

“With these rear-view hurdles, I believe that widespread adoption of NFT technology is now much more likely by major gaming companies,” he said.

On the surface, video game studios are like software companies: they both hire developers, designers, managers, and executives, along with sales and marketing teams, to build and sell a product. However, they serve a very different clientele.

The video game industry works some of the longest hours among software-based companies, filling a strange space between the extravagance of Hollywood and the fabric of Big Tech. However, with NFTs practically tackling the optional sidequests of video game financial services, the line between work and play is beginning to blur.

Gaming NFTs are at a crossroads between some of the fastest, most high-performance and high-performance environments in the world: technology, finance and entertainment. Each of these sectors is suited to a variety of market conditions and consumer behavior, and it will take time for them to understand the intricacies of the other sectors.

Sarah Austin, co-founder of NFT and metaverse gaming launchpad QGlobe, told Coin-Crypto that NFT games are in their early stages and haven’t evolved much beyond simple GameFi and P2E models.

“The move from AAA games to NFT games can be disappointing. However, if the motivation of the player is to earn rewards, then they are less concerned with the quality of the gameplay.”

According to research by Nielsen, consumers have issued more than $90 billion in microtransactions by 2021. The consumer gaming market likes to spend money in-game, but not at the expense of the game itself. The more useful and impact an NFT has in-game, the less important the actual game becomes.

“The GameFi/P2E arena is where the industry begins – not the final state,” said Atari’s Rosen. “Personally, I’m intrigued by the potential of NFTs to enable greater collaboration and interaction between games and between virtual worlds. Ultimately, NFTs can become building blocks that allow players and developers to create new, shared experiences.”

However, there are also cultural elements at play. While pay-to-win microtransaction economies in the West are shunned, gamers in the East seem to have adopted them wholeheartedly. The global hit Genshin Impact from Chinese game developer miHoYo essentially revolves around a luck-based loot-box economy, but managed to disgusting over $2 billion in the first year.

Genshin Impact title image. Source: GameRant.

As Square Enix President Yosuke Matsuda previously declared, not everyone plays games just to have fun. Some want to contribute to the games they play, and so far traditional gaming has not had any incentive models suitable for these consumers.

There is certainly a market large enough to justify the effort, but it seems that gaming NFTs, in their current form, are more focused on attracting casino gamblers than average gamers. NFTs are definitely coming to mainstream gaming – it’s just a matter of who can strike the right balance between the finances of gaming and the gamification of finances.

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