Anyone who hasn’t been living under a rock is probably aware that the gaming industry has been on an absolute tear. It’s one of the industries that
Anyone who hasn’t been living under a rock is probably aware that the gaming industry has been on an absolute tear. It’s one of the industries that has benefited from the COVID-19 pandemic in a big way.
That said, the average investor might not be aware of the following growth figures:
- The global gaming market is currently worth $180 billion — the fastest-growing form of entertainment globally. For reference, the global film industry is worth $100 billion and all North American sports combined are $73 billion in terms of annual revenues.
- Experts predict that the number of online streamers of online games will rise to one billion by 2025 — one in nine people today.
- Three of the top four most viewed United States sporting events in 2018 were not even traditional sporting events. They were e-sporting events. For example, the League of Legends championship had 30 million more views than the AFC Championship and 45 million more views than the NCAA Football Championship.
- Travis Scott did a live performance on the popular gaming platform Fortnite last April. It received over 12.3 million views and netted Scott over $20 million per TechCrunch and GamesIndustry.biz.
So what is going on here and where is this growth coming from?
We can attribute much of this simply to the rise of technology and exponential growth. Technology continues to transform how we communicate, how we assemble, how we create and consume information, how we transfer value and how we form online communities.
Howard Shultz, the former CEO of Starbucks, popularized the idea of a “third physical space” with his coffee shop concept. It was his belief that humans needed a “third space” to assemble outside of the office and at home. Starbucks was the answer.
We see this same concept playing out today among the younger generations. Except the new shared space is digital and it’s called the metaverse. This is where kids are increasingly hanging out these days. They go there to engage with their friends. listen to music, or play video games. We can think of this as the next iteration of digital communities: AOL chat rooms, then Myspace. Facebook and finally the metaverse.
We’ve got concerts in the metaverse now. Burning Man has been digitized. And we’re just getting started.
History of gaming
The first video games came out in the late 50’s — a simple tennis game similar to Pong. Later, Atari was invented in 1977. Nintendo started releasing popular games starting in the early ’80s with Mario Bros, The Legend of Zelda, Donkey Kong, etc.
It’s important to note that the business model has changed significantly over the years. We used to pay $60 for a game at, for example, GameStop, and off we went. It was a one-time cost with unlimited play. Games were released in a similar manner to how Hollywood flicks would be promoted and released. 90% of revenues would come in the first two weeks.
This model is out now. The freemium model is in. Users play for free and are induced to make in-game purchases to upgrade skills, dress up avatars, buy weapons, enhance animations, etc. We see this today on Roblox, Fortnite and other popular games.
This is a much more profitable model for game makers, as it keeps their users engaged and always upgrading to compete with their friends. We are moving to a world where social signaling occurs among younger generations in the metaverse via an in-game avatar, the weapon they wield and the skins they possess. Welcome to the future.
Why gaming will move to blockchains
- Gaming today happens on walled-off data networks. This means that users cannot own their in-game assets (skins, avatars, abilities, etc). The platform owns them. Axie Infinity is disrupting this model because users own their assets such as nonfungible tokens (NFTs) on Axie and are able to sell them in a free market/gaming economy for profit. Below is a view of the revenues earned by Axie Infinity users since May of this year:
Annualized revenues per Token Terminal shake out to $2.7 billion for this open and permissionless pay-to-play blockchain game. Important note: blockchain technology is the vehicle through which users can own their in-game assets. This is not possible on the tech used today.
- Blockchains allow for gaming economies to organically form. Users can be paid to play. Again, Axie Infinity is leading the charge here. Axie users make investments to acquire the Axie NFTs and the AXS native token to begin play. From there, they can earn the SLP token by playing/competing, as the tokens earned can then be exchanged for other crypto assets or fiat, etc. Many users in the Philippines are earning several times their usual monthly salary simply by playing Axie Infinity, all during the economic hardship brought on by COVID-19, which is pretty cool. Let me ask…
cointelegraph.com