The global gaming market is approximately $160 billion (USD$) with 2.7 billion gamers and it’s estimated it will be over $200 billion by 2023. Some of this gaming growth is occurring on the blockchain (web3) and the current sales volume is quickly proving that web3 games can be profitable for gamers, developers, and investors. Web3 gaming is the next frontier for gaming development, investment, and future profit. Through web3 gaming assets and gaming DAOs, anyone will be able to invest in popular games or be rewarded for playing the game directly.
Before we dig into how and why, it’s important to understand that in the typical gaming model today: 1) players must purchase assets (the game itself, in-game avatars, game tokens, etc.) but the player does not own the right to sell any of the assets they’ve purchased to other players, and 2) everyday investors are closed off to investing in games directly, that is typically reserved for select VCs or Private Equity firms.
Today there are numerous games that have been widely successful - Fortnite, Roblox, and Call of Duty - to name a few. Of the global gaming market’s $149B revenue in 2019, Fortnite did $5.1 billion in total revenue in 2019. Fortnite makes revenue as players purchase in-game tokens to buy dances, avatars, and accessories for their avatars.
The in-game marketplace Epic Games (Fortnite creators) uses to generate revenue is seen in other games too, such as World of Warcraft and League of Legends. This in-game marketplace for game assets is a familiar concept for gamers and younger players. Additionally, Fornite’s success can also be attributed to the cross-platform technology, which gives Fortnite players the opportunity to play with friends on any gaming platform. This also opens up Fortnite’s gaming audience by being platform agnostic.
So how can web3 gaming possibly compete with a gaming giant like Epic Games? Web3 games, such as Axie Infinity, have two initial benefits: 1) a native marketplace where players and investors can purchase and own game assets to use or resell in the future, and 2) the web3 games are internet-based, which gives an initial audience or investment base of billions of people.
Most importantly, web3 games have challenged the old profit model with purposeful intent to reward the players and community for playing the game or for owning the games’ assets, while royalties are paid to the developers or creators. People will be drawn to web3 gaming because of this new reward structure and they will leverage their time and money on games that give them a chance to be profit-maximalists and earn money for participating. Now when a player or investor purchases a game asset they are investing in the success of the game and the community.
Axie Infinity is the most successful example of this community-owned and play-to-earn model and recently reached $1.1 billion (USD$) in sales; however, there are numerous examples of this type of player-owned game development going on (The Sandbox Game, Parallel, Loot, ZedRun, etc.).
The transaction sales data above highlights the early demand for play-to-earn games and game assets, especially in developing nations like the Philippines where many people can make a livable wage playing video games.
There are a couple of ways to get exposure to the nascent but growing web3 gaming world: investing directly in play-to-earn gaming assets or tokens, or investing in a portfolio of web3 games through a DAO, such as Yield Guild Games ($YGG).
By investing directly into a web3 game’s assets, one can purchase the asset on Opensea or mint from the game developer’s website (if one knows when the project is launching). This is the most direct exposure to web3 gaming, and also carries the highest risk.
Alternatively, an investor can get indirect exposure to web3 games through Yield Guild Games, a blockchain-gaming investment DAO that launched in July 2021. Currently, YGG is investing in Axie Infinity, The Sandbox, and League of Kingdoms. The YGG white paper goes into more detail about how YGG tokens are used and the overall DAO investment strategy and rewards. An investor can purchase $YGG tokens on Uniswap or Sushiswap.
In conclusion, I believe people will want ownership of their digital gaming assets. Individuals will look for more ways to leverage their time and money on gaming assets that are better stores of value than traditional gaming assets today. As the gaming market continues to grow and spill over into crypto, my prediction is that web3’s gaming market will continue to increase its percentage of global gaming market share. Over a longer time horizon (5-10 years), Millennials and Gen-Z generations will drive the standardization of play-to-earn games, and owning gaming assets will be the norm.
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