The last years have seen an increased commercialisation and socialisation of gaming with new business models emerging from gaming studios, most remarkably going from the legacy gaming model called pay-to-play, where a license is sold for a one-time cost, towards the free-to-play model. The latter capitalises on maximising the number of players accessing a free game and generating in-game revenues from advertising, a marketplace or a required monthly subscription. But a new model called play-to-earn has emerged, disrupting the gaming world once again.
What are play-to-earn games and how do they work?
Play-to-earn or also called blockchain gaming is the incorporation of blockchain into gaming, most often through the use of NFTs in gameplay. Digitising in-game items such as NFTs makes them verified digital assets which gives further motivation for gamers to earn them and collect them, as it provides more transparency and promotes official marketplaces.
Historically, gamers could only monetise their playing time and earned items by farming (i.e. advancing the game for other users against a fee, often as a way to outsource repetitive in-game tasks) or by using parallel and unverified marketplaces. This is evident in card collecting games which recently introduced NFTs such as Sorare, a French fantasy football game using digital players or NBA Top Shot, a platform to collect digital “moments” of the NBA.
Play-to-earn games bring a new dimension to gaming: there are multiple benefits for gamers stemming from the decentralized system, including safer and transparent exchanges of verified in-game items, and rewards for the time spent playing. Play-to-earn games reinforce the appeal of playing and collecting in-game items: the longer players spend time in game, the better the items earned (by winning battles, completing tournaments and side-quests or by crafting new creatures) and the more rewards received, which are now convertible into cryptocurrencies, such as Ethereum. This has widely been regarded as a way to give gamers back control as they can directly earn financial rewards from their input.
One of the most popular play-to-earn game is Axie Infinity, a Pokemon-like online game developed in Vietnam where players develop, improve and combat collectible creatures called Axies. As of today, Axie Infinity claims to have 2.8m daily active users; and recorded a total trading volume of $3.8bn on its marketplace, with the most expensive item selling for as much as $820,000. Its incredible popularity has gained such importance in the Philippines and Indonesia that some have begun playing the game as a full-time job.
However, the play-to-earn model has limitations. Firstly, there is a necessary upfront cost to use the play-to-earn facilities, gamers need to inject money initially (in Axies Infinity this amounts to 3 Axies or c.$600), which leads to people lending their NFTs in exchange for a percentage of the future earnings.
Secondly, combined with the number of gamers in developing countries who are using play-to-earn as a main source of income, the new model has raised a fair share of critics. Some say that excessive commercialisation diverts games from their initial purpose: far from a rewarding mechanism for the best players, it has become a means of subsistence or of speculation.
Thirdly, in December 2021, South Korea limited play-to-earn games from having rewards exceeding a few dollars. The government has likened this new model to a form of gambling, stating that “It is reasonable to keep play-to-earn games from getting age ratings under the current law because cash rewards in games can be considered prizes.” The possibility of governmental regulations being introduced further adds to ambiguity for the new monetisation model.
Will the play-to-earn model be widely adopted?
At the moment, the adoption of blockchain seems mostly secluded from the major franchises who are either sceptical or have not determined a viable business model for it. Indeed, the largest gaming studios such as EA or Ubisoft remain hesitant at implementing NFTs while Xbox Gaming studios’ CEO expressed that NFT gaming “feels more exploitive than about entertainment”. Valve, the developer of the popular video game distribution platform Steam, went so far as to prohibit games which allow the exchange of NFTs or cryptocurrencies in October.
This raises the question whether play-to-earn is merely a continuation of existing developments in gaming or if the model will be here to stay. The increasing commercialisation of video games and the popularity of cryptocurrencies point towards a favourable direction. However, much will depend on the wider gaming community and their willingness to adopt this new model.
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