Jeff Sue is GM Americas at Mintegral.
Today the gaming market represents a $176 billion industry, with the potential to reach $398 billion by 2026.
We can distribute the gaming market in a few segments; console/PC, and mobile.
But it was not always like that, we have come a long way since the 1950s when video games were first introduced for commercial distribution.
The industry has grown so massively that 42% of Americans are gamers and four out of five US households have a console.
Today there is no more distinction between gamers, they can be as young as 5 years old, and as old as 80. If you don’t believe us, just ask your mom, dad, or grandparents if they know what Angry Birds or Candy Crush is.
The first big evolution of gaming was the introduction of gaming consoles such as the Atari, but the real technological advances came once the Sega Dreamcast was released, the first game console with true internet capabilities, giving birth to an entirely new spectrum of gaming.
The very first idea of gaming consoles was to get friends and families together for a fun time. But with the introduction of online gaming players could compete against each other from across the globe for hours at a time, increasing the level of competition, and with that, some of the first esports leagues were born.
Even with the creation of online gaming, there are still limitations to this genre, people still have to purchase consoles and games in order to join, and let us not forget that some games are only compatible with certain consoles, like the Halo franchise only launched for Microsoft’s Xbox.
In Play-to-Earn games, players can earn money by playing games thanks to the use of blockchain.
Today the console video game market is expected to grow from $41 billion in 2020 to $42 billion in 2021. The largest driving force behind this growth is the increase in the number of gamers around the world due to the pandemic.
Many people turned to gaming as a method of entertainment and hobby due to social distancing. There were 2.2 billion gamers worldwide and the number is expected to reach 2.7 billion by 2021. Esports viewers will also contribute considerably to the growth of the console games business, with an anticipated 557 million people watching esports in 2021.
With the introduction of smartphones, the console and PC gaming industry took a severe tumble.
The convenience of using a mobile phone for most of our everyday life tasks has resulted in the widespread use of mobile phones for gaming without a need to sit in front of a television or monitor, as one would do with a console or PC.
The mobile technology boom has revolutionized the industry; mobile gaming in 2021 will account for 52% of the global gaming market.
With the revolution, new forms of gameplay, business models, and a spectrum of gamers were born. There are those who play mobile games during their commute to work, lunch break, multitasking at home, traveling, or any spare time they have throughout their day, we call them hypercasual gamers.
They are not what gamers used to be. Today a third of gamers are over 45 years old and 55% are women. They opt to play hypercasual free-to-play games, these are simple with very minimalistic user interface games that can be played for an infinite amount of time, leading to their addictive nature.
This type of player does not spend any money to play these games, most of their reward comes from time spent playing the game or via watching reward ads within the game.
Next, there is the casual gamer. They show some of the same characteristics as hypercasuals, killing time during an office break or while commuting.
They also opt to play free-to-play games and aren't concerned with the genre as long as they are entertained. A basic puzzle game might do well one day, while a complicated strategic game might do well the next.
The main difference between the two could be that casual players might spend some of their money in order to progress within the game with in-app purchases.
And that brings us to hardcore gamers, these are players that take their gaming very seriously. They play much more complex games, with better design and graphics. Most of the titles these players tend to play have a higher cost of playing, they might have to pay to download the game, or purchase in-game items, upgrades for their equipment, and more.
Companies like Yield Guild Games offer scholarships to new players, essentially allowing them to rent YGG’s Axies and play the game.
Even though all the previously mentioned models have many differences, there is one thing they have in common. They are all played for the fun and joy they bring to their user. Lately, we have seen a new concept of gaming, one that might not be played for the “fun” of gaming but for the financial benefits it might bring.
Play-to-Earn; the next step
This brings us to the latest iteration in gaming, Play-to-Earn games, which combine gaming and blockchain.
In this model, players can earn money by playing games. This is in stark contrast to what many parents say to their kids - why are you wasting so much time playing video games?
The leading example of this is Axie Infinity. The game itself relies on raising, breeding, training, and battling digital pets, called Axies. Each of the Axies, the main creatures in the game, possesses combinations of genes and rarity, which ultimately create uniqueness and value.
Users earn in-game currencies like Smooth Love Potions (SLP) and Axie Infinity Shards (AXS) as well as the Axies themselves, which are non-fungible tokens (NFTs).
Selling in-game items, however, is not a new concept. Previous games like World of Warcraft allowed users to sell their in-game items on a marketplace.
The difference here is that the three main parts of Axie Infinity’s economy - Axies, SLP, and AXS - can accrue (and have accrued) in value and can be traded on the open market. This creates more liquidity for the Axie community and what makes playing Axie for a living sustainable - at least for now.
A great example of the upside of this new lens is what has happened in the Philippines. If a company tried to monetize free-to-play games via ads or in-app purchases there they wouldn’t have much success.
However, around 40% of Axie’s Infinity’s players are now based in the Philippines, due to its earn-to-play model, the game itself has helped many that were hit hard by COVID find a way to rebound and even flourish.
Players are making 2-3x the minimum wage by playing Axie Infinity. At the time of writing, the current market cap of Axie Infinity is over $7.6 billion ($34 billion fully diluted), very impressive for a company whose market cap was $30 million at the start of 2021.
There will certainly be more companies who look at Axie Infinity and apply their AAA game-making skills as well as their IP onto this play-to-earn model.
With that said there are some barriers to entry. Firstly, players will need to buy three Axies, which at the time of this writing, the lowest price Axie for the marketplace was $132.
If you have the money and believe the return on investment will be there, you’ll also need to navigate a long process for getting started - buying ETH, signing up for MetaMask, signing up for the Ronin wallet, transferring ETH, buying Axies on the marketplace, etc.
The financial and technical barrier can be quite high for some and that is why there are companies like Yield Guild Games (YGG) offer scholarships to new players, essentially allowing them to rent YGG’s Axies and play the game.
In addition to this, the economy relies on new players joining the community to sustain the marketplace and the game itself. Axie Infinity currently has over 2 million DAU and looks to continue growth by providing more value on its roadmap.
The company intends to do a mainstream release of Axie Infinity on iOS/Android by the end of 2021, beginning 2022.
So will we see a mad rush of major gaming studios looking to dip their toes into play to earn?
There will certainly be more companies who look at Axie Infinity and apply their AAA game-making skills as well as their IP onto this play-to-earn model. It’s fair to think that crypto-native companies will have the advantage and the Innovator’s Dilemma may come into play for existing gaming giants.
There is room for all types of gaming models and any transition to play to earn will provide enough time for many companies to participate.
The gaming market is always evolving and will continue to develop new technologies, business models, and economies.
Play-to-Earn is new to most and is showing very positive signs with the success of Axie Infinity.
Many games already have online communities, but play-to-earn can create a very passionate and engaged community that is incentivized to see the continued growth of the game.