Gaming: will the Web3 war actually happen?

👉 You could, for example, use an item bought in God of War with one of your characters on... Call of Duty.

While this prospect isn't just around the corner, it does show the plate movement that's at work in the games industry. Sony isn't the only studio to be looking (very) closely at blockchain and NFTs 👀.

The flagship 🇫🇷 Ubisoft has been working on these issues for a few years.

Another French company, Voodoo, which is none other than the world leader in mobile games (6.4 billion downloads) has, for its part, outright announced a blockchain-based games platform. As we revealed earlier this year, there will also be a cryptocurrency. In short, things are moving!"

The reasons for this craze are fairly obvious.

The video game industry is certainly growing steadily, but the number of gamers is not infinite, either in France or on a global scale. According to a Médiametrie study for the Syndicat des Éditeurs de Logiciels de Loisirs (SELL), there are already 37.4 million French people who consider themselves gamers.

Or to continue to develop and grow its revenues, the industry needs to find new perspectives, and the whole world of cryptos provides an ideal playground.

"The ability to own digital objects opens up a new market. Gamers are not just going to pay for games, but also for digital assets that they will own and be able to trade or give away," explains Jean-Christophe Liaubet (*), Managing Partner of EY Fabernovel.

How much does this new market represent? 🤔

It's hard to say. According to Accenture, the video game industry is worth just over 300 billion dollars a year worldwide.

The figures vary, but purchases of objects and other items in games, for their part, represent between 50 and 100 billion dollars. This gives an idea of the market potential of NFTs 💰 in the sector.

"Every innovation creates new business models"

It was also to explore this potential that Ubisoft embarked on the adventure in 2018 with a dedicated team. "The aim was to understand the technology and develop applications," explains Nicolas Pouard, director of Ubisoft's innovation lab and co-founder of the Blockchain Game Alliance.

The French studio, known for successful franchises such as Assassin's Creed, has a web3 incubator and regularly launches experiments such as Rabbids in The Sandbox.

A sign that things are far from simple, however 😑 last year Ubisoft halted the Quartz project, a platform dedicated to the publisher's NFTs with Ghost Recon Breakpoint as its first big licence.

"Video games have always been among the first sectors to transform. Every innovation creates new business models, even if it's not necessarily easy to set up," explains Nicolas Pouard. From purchase (of the game itself or additional features) to freemium via advertising or subscription, video games are now monetised in very different ways.

Web3 games can generate revenue from primary NFT transactions (during mint) or secondary (on resale).

The NFT-based game Sorare, for example, generated more than $300 million in transaction volume in 2021, 40 times more than in 2020. Despite the drop in markets, the French unicorn, which saw its volumes fall in 2022, would nevertheless have managed to maintain them well above those of 2020.

Better relationship with players

NFTs are also an opportunity for studios to review their relationship with players, which has sometimes been damaged by the recent surmounting of games.

Some explain that the aim with NFTs is not to sell more, but to sell better and differently.

"Gamers feel they are being taken for cash cows. The key is to properly communicate the benefits of blockchain and reassure them that they will be able to continue playing as before", assures Yoni Lasry, Head of blockchain investment & ecosystem lead at Voodoo.

We remember, for example, the outcry caused by the launch of NFTs in Ghost Recon by Ubisoft in 2021. The studio had to backtrack in the face of criticism from its community, who thought that the NFTs on offer were paid for, which wasn't even the case... 🙃

NFTs also allow gamers to be more involved in game development and reward them for their personal investment. Jérôme de Tychey, founder and CEO of the blockchain game Cometh, is proud of this community dynamic: "We involved our players right from the design stage of Cometh Battle. Players become stakeholders and co-creators of the game".

Thus, players' efforts could enable them to earn revenue from their victories.

At Voodoo, the web3 managers are counting on this approach to convince the few sceptics: "Thanks to NFTs, we can better share the revenue generated between the studio and the players, which has a negative impact in the short term, but a positive one in the long term as they will stay longer. It's a win-win situation," explains Yoni Lasri.

Finally, it's above all an opportunity to personalise the gaming experience for gamers: "By scanning a wallet, we can get an idea of a player's profile without siphoning off their data and offer them a tailor-made experience," assures Jérôme de Tychey.

Changes in gaming players

In the long term, the entire video game market could be turned upside down if companies switch to web3 with the possibility of relying on players such as The Sandbox. The French metaverse has already done so with partner brands such as AXA, Gucci and Snoop Dogg.

Finally, hybrid players are emerging like Blackpool founded by Julien Bouteloup: "We are a hedge fund, an e-sports team and DeFi (decentralised finance) consultants all rolled into one."

The fund invests massively in blockchain games by buying assets, which are then used by e-sport teams dedicated to the game (a guild). The players are supported by a team of analysts who draw on data from the blockchain or the real world to detect opportunities in the game.

👉 This business model is highly lucrative, with Blackpool doubling its stake from €9 million by investing in Sorare cards 🚀.

Besides the business advantages, traditional players are also positioning themselves because pure web3 players are steadily gaining momentum.

The figures are still modest, but more than $4 billion has been invested in blockchain gaming players by 2022, enabling some players such as The Sandbox, Axie Infinity or Immortal Game to act as a scarecrow for part of the traditional industry.

"Right now we're still in the seed phase, but things are going to accelerate. In less than five years, some traditional studios are going to be obsolete," explains an investor in the sector.

Technical limits of blockchain

In the meantime, the barriers are still a little high for web3 specialists.

Despite advances in the scalability of blockchain, "we're still going to have to wait a while before we see games hosting hundreds of thousands of players", explains Benjamin Charbit who, before co-creating Web3 Life Beyond Studios, spent several years at... Ubisoft.

But not everyone is of the same opinion. "Blockchain is now mature enough to operate on a larger scale: a decentralised server can now host up to 4,000 players at the same time," explains Jérôme de Tychey.

The average (or even mediocre) quality of today's blockchain games and the relative difficulty of using wallets will, however, continue to penalise web3 players for some time to come. Not to mention the fact that "Play to Earn" games come up against an ideological barrier: for the first time in the history of video games, franchises are mixing financial products with gameplay. But not everyone subscribes to this philosophy. Quite the opposite in fact 😅!"

Last but not least: opposition from the traditional players. "Even if traditional studios launch crypto initiatives, they don't go all in because they know full well that pushing the experiment further would threaten their business model," assures Julien Bouteloup.

Is this why some players are so fervently advocating regulating the sector? "The studios aren't stupid," adds Julien Bouteloup, "it's a battle. Eventually there should be takeovers among the web3 studios because it's the only way for the incumbents to really build up their expertise in blockchain."

The incumbent studios know that they are in the best position to talk to the legislator: "It's necessary to offer an experience to the general public. When you mix finance and leisure, players must have no doubts about their experience. They need to feel protected," says Yoni Lasry. It's a position that is prompting Voodoo to talk to French regulators, as well as Apple's App Store and Google's Play Store.

"Sorare's arrival on the scene was a jolt for the video game world: the demand for crypto-gaming is there, that's a fact. The incumbent players are not going to let this happen, they are just preparing their weapons ⚔️", stresses Julien Bouteloup.

(*) Jean-Christophe Liaubet is an individual minority shareholder in The Big Whale