September 13, 2022
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9
Min Read

Blockchain Trailblazers : How The Gaming Industry is Unlocking The Future of Ownership

The games industry has always been one of the most disruptive and trendsetting: what insights can it offer us about the wider spread adoption of blockchain based ownership?
Peter Jonas
CEO
Matt Lorenzen
COO
Gaming

We don’t have to tell you how important ownership is. It’s one of the driving forces behind web3 and, as usual, gaming is blazing a trail, pioneering innovations that will have a significant impact on the wider world. To truly understand gaming’s relationship with ownership and how it will shape the future, we have to first take a look into the past. ‍

End of an era

In the beginning, things were simple. You purchased physical media containing games, and devices that could read them. But, as with most things in the modern world, the arrival of digitization massively changed the ownership landscape. 

In the modern day, your content no longer truly belong to you. Every title, DLC, accomplishment and unlock is locked to your account. Your collection of CDs, floppy disks and cartridges has long since been replaced by a library of digital media, ready to download. Instead of owning a physical item, you instead agree to and pay for a license to access a game and a service provider then grants you the relevant permissions to use their product. 

When you talk about ownership in gaming, this is where many people tend to go. You’ll hear them gripe about distribution platforms, advocate for solutions like GOG, and quite often complain about DRM (digital rights management). 

And gamers are right to feel frustrated, the deterioration of ownership has been happening for years and when looked at cumulatively, it represents a sizeable shift. Most people reading this have probably experienced a less than spectacular moment where some form of always-online DRM has stopped them accessing content they’ve paid for because of internet issues or problems with the game’s own servers. 

A brave new world

However, the shift to digital downloads also came with incredible new opportunities for developers and gamers alike. As it turns out, this was just our first step through the gateway into realms of possibility that were far, far greater. A whole new world of digital add-ons, expansions and sub-products. The very concept of what a game is and can be has fundamentally shifted, revolutionizing not just the way that we play, but also the relationship between gamers and developers. 

Many games no longer exist as self contained releases. DLC and patching mean that a game’s launch is now often just the start of a long, long journey. Take Clash of Clans. Despite being released over a decade ago, it still ranks in the top 10 mobile games for both active users and downloads and in 2021 it still grossed $489 million. Why? Because it’s still being actively worked on.. 

Which completely flips the models for both ownership and development on their head. Additional content and development, fueled by passionate communities and a desire to see games, has become one of the most prevalent and profitable methodologies. 

Some companies, like Paradox Interactive, have utilized this in the form of a core game release that’s supplemented by a considerable mix of additional expansions, DLCs and cosmetic upgrades. Many others have turned to a completely different model: Free 2 Play. 

F2P is an undeniable juggernaut in the industry. Offering a core product for free with a number of paid extras has proven to be an extremely powerful monetization strategy: 4 out of every 5 dollars earned by games now comes from the F2P model. Titans like Fortnite make billions in revenue every year, despite the game costing $0 to play. They’re the latest in the long line of innovation that has come from digitization, and their success has the industry wondering? 

What’s next? 

The ownership revolution

The answer is, as always, both completely groundbreaking and deceptively simple. Gamers are already showing massive passion, commitment and enthusiasm for their hobby. There’s a proven track record of creating communities and sustaining them over years or even decades, if the product is right. 

Granting gamers property rights and voting on the blockchain will forever alter the relationship between gamers and developers, and between gamers and the games themselves.

Their emotional connection with the games they invest their time into will naturally increase. We have seen the passion gamers pour into the games they love, wait until they have a direct stake! 

Giving gamers ownership gives them real stake in the game. As the ecosystem evolves it seems obvious the community will be more invested than ever. Invested both in their passion and the dollars they are willing to spend. In a world of true ownership, more gamers will take out their figurative wallet, spend more money and stay engaged with the game for longer. The community is literally more invested in seeing the game and the community thrive.

Add to the powerful dynamic of ownership the opportunity for participation in appreciation and tradability for those with the vision to engage early with a project or invest in unique game assets, and we have a recipe for massive economic expansion in the gaming ecosystem.

Proven Potential

Take a look at Valve’s Marketplace. It’s a powerhouse of commerce, where customers collect, trade and even invest in virtual items for a variety of different reasons. Some just want the coolest cosmetics for their in-game characters. Some collect the rarest items, either for clout or for a sense of completionism. Some want to play the markets and see if they can win big. If Loot Boxes are the casinos of gaming, marketplaces are its Wall Street.

And that’s all within the confines of Valve’s ecosystem. Imagine a world free from the centralized control or the excessive platform tax on every transaction, a world where games are able to tap into the power of decentralized economies. The potential of these token lead systems is vast and we’ve barely begun to even scratch the surface..

What a lot of people get wrong about the ownership economy is that they think that it will be the primary driver in customers’ motivations. That their emotional investment is entirely tied to their financial interest.
This is, just simply, wrong. Ownership is an incredible accelerant, but it is not what will fuel success in the gaming ecosystem.  It’s an important piece of a much more complex puzzle. It cannot and should not be viewed in isolation, nor should it be prioritized over everything else. 

Fun is (still) the killer feature    

Ownership has to be integrated into what we already know and love about the relationships between customer and product. 

First and foremost, people play games to have fun: joy is what drives 90% of gamers in the US. No matter how much behavioral psychology is worked into a game the fundamental driver behind the customer’s choice is still their desire to play a great game.

Ownership is not going to fundamentally alter this paradigm, nor should it attempt to. Instead, the most successful projects will be the ones that combine fun and ownership in new, challenging and disruptive ways.

Quite simply, if your game is boring and unoriginal, if it feels unfair or broken or unrewarding, people just aren’t going to keep playing it.  And if people don’t like your game, ownership is not a magical band-aid that can somehow fix fundamentally bad experiences.

What it can do however, is elevate an already engaging experience into a phenomenon, strengthening and supporting the investment that players already feel towards it. 

Ownership empowers passion

In that way, one of ownership's greatest potentials is the way it allows passionate and vocal fanbases to have a more direct impact on the games that they love. 

This passion is already something that we recognise the importance of, just in a more indirect form. There’s a reason why game studios hire community reps to go out onto forums, Reddit and social media to communicate directly with their customers. There’s a reason why the developers like Riot or Wizards of the Coast will now often provide rationales with their patch notes, explicitly showing that they’re willing to both listen and talk to their players. 

The ownership economy is the natural continuation of this shift, a radical change that recognizes the true relationship between the modern developers and customers: a symbiotic one. Devs need engaged, passionate gamers who are willing to spend their time, money and energy on the product. In return, gamers want and demand games where their feedback is actually incorporated into the product. 

With ownership, players will finally have the ability to influence the game's development and community management. Community nominated moderators and committees will collectively decide where the game's development funds are spent, and they will be empowered to take whatever actions they deem in the best interest of the community as a whole. 

This new dynamic removes a lot of the antagonism that often comes from having highly engaged fanbases. Ownership empowers gamers with the agency and control they’re sorely lacking right now. The tools to affect change are now within their own reach, and as a result they won’t need to organize boycotts, brigade reviews or spam their grievances over every channel they can find.

There’s also a lot of potential and currently unanswered questions that will be raised with true ownership. How will we set up governance, what will be the qualifying factors? Will a popular vote among stakeholders be the primary method of decision making? Will stakeholders all hold an equal vote, or will some have more than others. And how will this drive customer-passion towards? 

We can already see the intricacies that can quickly develop once gamers are sufficiently emotionally and financially invested through games like EVE Online, whose complex web of internal politics, allegiances and power players makes House of Cards look like childs’ play. 

Gaming’s One Way Door

Things are about to change in gaming, and once they do we’ll never be able to go back. Nor will we ever want to. The addition of true ownership to gaming is a win-win for everyone involved. 

Gamers will be granted influence, economic stake, and participation in the success of a product they are passionate about. 

Meanwhile developers will benefit immensely from increased community engagement, an organic and consumer fueled boost to their marketing engine, and substantially expanded economic outcome. The equation is simple: more players, increased spending, longer life spans.

It's not a matter of if emergent tech changes the face of gaming, but when. Disruptive models and platforms are already entering the final stage of development. Whether we’re ready to recognise and acknowledge it or not, the next generation has arrived

That’s what makes these such exciting times for the industry. This is a chance to win big, to experiment, pivoting and get creative to find solutions that truly work for the world of today and tomorrow. 

Adding both a governance structure and a dynamic economy isn’t an easy task. We’ve already seen that with some of the mistakes that have been made in the first iteration of Blockchain Games. There will be more testing, more learning and, of course, more failure, just as it has done throughout the entire history of gaming. 

 But we know that, just like back then, this isn’t a flash in the pan. Instead, it will drive teams to adaptability and creativity, just as it did with consoles, PCs, and mobile gaming. And once they will find that perfect combination that defies what we would have ever thought possible. 

This will be followed by the usual explosion of growth, not just with early crypto native adopters and within the gaming industry, but well into the mainstream.

Forging forward

Right now, we’re gazing into the future.

Blockchain is predicted to reach over 1 billion users by 2030; the adoption and successful utilization of blockchain empowered ownership here will send ripples into the wider world. 

Gaming has always been a leading force for consumer tech, and it's clear that's no different with this latest wave of innovation. Gaming will be the engine that accelerates the explosive journey to a billion users, and will define the use cases at the forefront of the wider web3 movement. 

Author
Peter Jonas
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Thirdwave's CEO, Peter Jonas is an innovative veteran of the tech and gaming industries. His expertise drove Compass through its hyper-growth, expanding from a few offices in California to a profitable team of over 13k people in 150+ offices across the United States and generating billions in revenue. Prior to that, he launched the Games and Mobile Apps business at Facebook and helped grow it into a global multibillion-dollar business unit, as well as spearheading multiple emerging initiatives at Uber.

Author
Matt Lorenzen
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Matt Lorenzen is an experienced executive, startup advisor, and global team builder working in Silicon Valley. As a founding member of Facebook's Mobile App Install team, Matt played a key role in transitioning Facebook's business from desktop to mobile. Matt has been an active cryptocurrency investor, builder, and advisor since 2013.

Gaming
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