A long time ago, video game companies made money by selling their games as products. The total return for a particular game depends entirely on the number of physical units sold. Larger licensed games may bring in additional merchandise or similar revenue streams, but for most people, once a game is released, their fate depends on sales.
Then came a new mode that included downloadables (DLC) and microtransactions. This is often referred to as the Web 2.0 model, and its ongoing revenue stream may be new characters and activities, or in-game currency or accessories. Player responses to this model vary, but many games have found a balance between in-game purchase appreciation and actual cost.
This new revenue stream is also driving the growth of free-to-play games. In this case, a developer can create an essentially free game that makes its basic features available to everyone, but provides multiple ways for players to choose to expand and monetize the game. This has proven appealing to many players. They can access the game for free without any risk, and if the game suits them, they can choose any extras to enhance the experience.
However, there is a small problem here. Despite the popularity of this genre, only 2.2% of F2P players spend money on these platforms. Still, in 2018 alone, the free-to-play segment generated $88 billion in global revenue, and that number is likely to rise. But it also begs the question: what else could be possible if more players started getting involved?
Fortunately, a newer profit model is emerging. In recent years, the rise of the so-called Web 3.0 has begun to change the landscape of the Internet, and now the game. Web 3.0 introduced blockchains, cryptocurrencies and NFTs.
The blockchain acts as an immutable ledger, cryptographically recording all transactions on the network, and in the process, allows the generation of NFTs. In its most basic form, the data represented by an NFT can be verified as unique from all other data, and can be tied to just about anything — including in-game items.
Likewise, every piece of clothing, character, plot of virtual land, or anything else in the game can be created as an NFT, meaning they will be unique, tangible, and retain their value. They can span multiple games and even be resold to other players on the secondary market. This makes all these transactions less like throwing money into a black hole and more like an investment.
Metaverse and web3 games