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WAX ON: Are big video game companies ready to adopt blockchain technology?

Nov 12, 2019
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No.

Big video game companies are not ready to adopt blockchain technology. At least not yet.

What needs to change? According to WAX Co-founder William Quigley, it’s boils down to two reasons: one technological and one economic. It’s not that the big video game companies aren’t ready for blockchain, it’s that blockchain isn’t ready for them because the tech is immature. But the bigger problem is economic.

How so? Watch William’s latest episode of WAX ON to find out.

Jon Jordan, contributing editor at PocketGamer.Biz agrees but looks forward to new developments next year. “Currently, I think the risk-reward ratio for blockchain games remains too big for most established game companies to get involved, even if they were interested in or understood the technology. The global games industry is worth $140 billion a year so any new market that's sub-$1 billion of revenue is just not very exciting for these guys,” says Jon. “That's why we see most blockchain games being made by crypto enthusiasts, which in some ways is great, but they don't always have the experience to make great games. What is significant, however, is in 2020 we'll see some experienced teams releasing their first games, such as Mythical's Blankos and Pixowl's The Sandbox.”

"While a few big names from traditional games development companies -- like Ubisoft and Animoca Brands -- are experimenting with blockchain, we're yet to see the killer app that appeals to mainstream audiences and becomes the use case that convinces renowned developers and publishers to invest the time and money into it,” says Andriy Sharanevych,CEO and Founder of Crypto Games Conference. “The state of blockchain gaming reminds me of 2007, when the first iPhone was launched. Up until 2008, there wasn't even an AppStore available to its users. Instead, the Cydia app was created, allowing jailbroken phone users to install unofficial third-party apps onto their mobile devices. Only later, when the AppStore was introduced, could developers officially sell and distribute their apps and video games to end-users in a big way. Then it took years of hard work and experimentation to figure out which gameplay types and monetization models worked best on mobile and to perfect them. That's the stage when the big boys realized the value of mobile gaming and jumped in.”

"Comparing that evolution to blockchain games, I think we're somewhere between the pre-AppStore and early AppStore days,” continues Andriy. “The only difference is that there were millions of potential mobile gamers, even in 2007, which we don't yet see in blockchain gaming. So it's still too early for top tier video game companies to get involved."

“The larger industry trend doesn’t currently point to mass adoption, due to both technological barriers and the nature of games economics,” said Craig Russo, co-founder of Sludgefeed. “Essentially, centralized publishers benefit from the one-way capital flow that feeds into in-game currencies and items and it will likely require gamers to champion for true ownership for a sweeping change to occur. Therefore education is key to the mass adoption of blockchain gaming.”

If you want to learn more, WAX is issuing a whitepaper soon about the secondary markets for trading in-game items. You can sign up for it here and we'll email it to you when it's ready.

Subscribe to the WAX YouTube channel for more episodes of WAX ON with William Quigley each week.

Share your thoughts with the WAX community on Twitter and in the WAX Telegram channel, and sign up for the WAX newsletter below for updates straight to your inbox.

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Video Transcript:

Are big video game companies ready to adopt blockchain technology? The short answer. Not yet. And there are really two reasons. One technology, one economic.

So on the technology side, blockchain really isn't ready for big video games scale. I've talked about this in other videos but it's too slow today and it also lacks a lot of the tools that people building, let's say a big video game, would need to access. So the technology is immature. Now even if it was ready there's a bigger problem and that's the economic one.

Big video game companies are afraid of how blockchain might change their business model. There's an old business rule: don’t mess with what's working. And today, big video game companies sell a lot of virtual items. Their business model is working. They sell these virtual items with some perceived scarcity. Now there's no way to know how scarce those items really are because there's no digital ledger to track them. But people put value, attach value to these virtual items, big video game companies make money and they're happy.

So the worry that a lot of video game companies would have is if people can buy from each other by using blockchain to transfer items back and forth, why would they buy from the company? And that is scary.

So basically big video game companies know their existing business model, it's predictable, and they're happy with it. So to introduce a new technology would be to disrupt that and possibly have an unintended consequence. So for right now they're sitting on the sidelines. Could one company decide they're going to go forward and adopt it in let's say the next couple of years? Sure. But I think that would only come from either greed, they've discovered a way to really monetize using blockchain, or fear - maybe their business is starting to decline and they're going to try anything.

Now this doesn't mean that no one is going to build video games on blockchain in the short term. In fact it's already being done. But who's doing it? Well new entrants. What we call indie developers - independent game developers - and they're able to do that are willing to do that because frankly they either are just building a game out today or they have a small game very little installed technology, there's no big profitable enterprise, there's no big profitable franchise to protect. And so they're willing to experiment with the new technology even given the risks.

So big video game companies they're going to sit on the sidelines for a while. They're going to wait it out much like they did with mobile with mobile. With mobile they waited until the business model was proven, the technology was stable, and then they went in and started building lots of video games for mobile users. I think that's what's going to happen.

If you're interested in how blockchain and video games can come together, what new business models can come out of that, particularly in the secondary market, the trading market of those virtual items, we've prepared a white paper that you can access from the link below.

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