Tony Pearce, co-founder of Reality Gaming Group explains how the model could be used for brand partnerships.
If I told you that people have been trading collectable virtual items between themselves for real money to the tune of $1.5 billion last year, you’d probably raise an eyebrow.
If I added that the advent of the blockchain means that the same business model in games will be worth infinitely more in terms of revenue for games publishers in just a few years, you might even let out a titter.
However, there’s a gamechanger on the horizon, and its name is the Non-Fungible ERC-20 or ERC 721 Token, or NFT for short. Unless you’re into cryptocurrency and the blockchain, you’ve probably never heard of one. It even sounds a bit, well, boring.
But it’s important. The market for virtual items and DLC is pretty much driving growth in the video games industry – the segment was worth upwards of $80 billion in 2017 according to IDG.
However, this ‘traditional’ market for in-game virtual items (we’ll call them Collectable Digital Assets, or DAs), such as weapons or clothes for a character, is very restrictive for end-users, with publishers and platform holders retaining ownership of the IP and keeping all monies generated by people buying or trading those DAs.
The blockchain, and the aforementioned NFT, turns the model on its head. DAs created using ERC-20/721 are by their very nature rare (and therefore inherently valuable), transparently ownable (via so-called smart contracts), incorruptable (ditto) and they exist regardless of whether the game they were bought in/for is still available.
Importantly, these blockchain-enabled ‘crypto collectables’ can be traded directly between players, independent of the game itself. Players get to keep any profits from the sale of their DA and, potentially, can use the item in other compatible games or even loan it to a friend.
Our mobile AR combat game, Reality Clash, has already deployed an NFT marketplace where players can trade in-game weapons – the day the store opened the value of our RCC Gold cryptocurrency increased by 380% and we’ve passed the 4,000 weapons sold milestone.
The important next step for us – and the wider industry – is to transition to this new crypto collectables model in a way that doesn’t compromise the core product. Probably the worst thing would be to try and ‘sideload’ the functionality into games in the hope of making a quick buck.
Perhaps the biggest potential is in the brand partnership possibilities. Wouldn’t it be amazing if the excitement and demand for limited edition trainers in the real world could be replicated virtually? We’re exploring the possibilities with brands and can’t wait to see where it takes us.
This feature originally appeared in the spring 2019 edition of Licensing Source Book. To read the full publication, click on this link.
