Hi Everyone. Welcome back to another issue of Master the Meta. Last Sunday's most popular links included: Pixowl's studio Presentation, SuperJump's piece on Sony's history of supporting developers, and The Wall Street Journal's interview with Xbox head Phil Spencer. With that, let's jump into Wednesday's issue.

Blockchain Trading Card Games (Ft. Gods Unchained)

Trading Card Games lend themselves well to Blockchain Technology. Digital Trading cards are an easy concept to grasp, as they are already in-use and reflect characteristics of scarcity similar to their physical counterparts.

In this Metacast Crypto Corner episode, Chris Clay - Game Director for Gods Unchained at Immutable and Devin "Mzo" Becker - Games Commentator & Researcher, join your host Nico to take a deep dive into Blockchain-Based Trading Card Games. They discuss:

  • The Current State of Blockchain TCGs

  • Gods Unchained & Immutable X

  • Gods Unchained Token Design

  • Balancing an NFT TCG Ecosystem

  • The Future of Gods Unchained

If you would like us to discuss any other blockchain gaming-related topics, do reach out at [email protected]. We’d love to hear your general thoughts and feedback too! As always, you can find us on Spotify, Apple Podcasts, Google Podcasts, our website, or anywhere else you listen to podcasts.

#1: Analyzing 30 Years of Consolidation in Video Games

acquisitions games

Source: SuperJoost

With three record acquisitions in the games industry in the starting weeks of January, the tone is set for 2022.

First, Take-Two acquired Zynga for $13 billion to expand its footprint in mobile and to gain access to a more casual audience. And, maybe CEO Zelnick is assembling a springboard into media mogul-dom. Next, Microsoft acquired Activision Blizzard for $69 billion to bolster its digital service offerings like xCloud and Game Pass and instantly redefined the boundaries of the global games market. Someone should check in on Stadia and Luna, provided they still live at the same address. And, as for Sony, it has been on an acquisition spree to bolster its digital offering and compete with Microsoft’s Game Pass service.

According to its most recent earnings, PlayStation relies on services for two-thirds of its income. Accordingly, the Bungie acquisition sets the company up for a strong offering when it launches its revamped gaming subscription in March, and insulates it from current supply chain issues that have made it virtually impossible for average consumers to get their hands on a PS5.

Earlier in my career, I spent most of a decade gathering data and analyzing ownership trends in media and entertainment industries. In fact, I still am, as a co-applicant for the Global Media and Internet Concentration Project. So whenever big mergers take place, I get really excited.

It is also no secret that I’m swooning over the appointment of Lina Khan as chair to the FTC. Her work on reframing antitrust policy in the context of digital platforms is brilliant, for one. Historically, much of the conversation around media concentration focuses on Rupert Murdoch-type moguls that accumulate a variety of media outlets, limit consumer choice, and drive up prices. Economies of scale are a common media strategy, of course, and much of the current media landscape is pretty clumpy.

Khan’s work focuses on more contemporary issues. Specifically, she seeks to tackle the challenge of how to appropriately regulate multi-sided platforms (e.g., Amazon) that can give away services in a content market (e.g., video) by subsidizing it with increased prices elsewhere (e.g., online retail). Anyway, her recent hiring of a former colleague, Olivier Sylvain, tells me she means business. Big tech beware.

Innovation Through Acquisition

So, how, exactly, does the string of mergers impact the games industry? Elsewhere I’ve already laid out the reasoning why Microsoft would shell out $69 billion, and what Take-Two is planning. But what are the implications of all this consolidation?

The short answer is that consolidation threatens innovation. And that claim, at least in the video games industry, has merit.

According to a 2017 study by my buddy Joost Rietveld and his colleague Masakazu Ishihara, acquisitions have a two-fold effect. On the one hand, product quality improves. When a publisher acquires a studio, the most common justification is the target studio’s ability to execute. Combined with the deeper pockets and stronger ties to industry reviewers and tastemakers of the new parent company, their output receives more favorable ratings. In turn, this has a positive impact on sales. Large publishers are capable of pushing content to the foreground, expanding visibility, and selling more.

On the other hand, innovation suffers. Buying another company often serves as a replacement for internal innovation. According to Rietveld and Ishihara, indies release more novel intellectual property than acquired studios. Independent creatives can and generally do take more risks. Conversely, acquired companies are less likely to release innovative video games.

So does that mean we should be worried considering the size of the acquisitions?

Well, here’s what the data says about the degree of concentration in the games industry. The following builds on 30 years of market data collected across both privately-held and publicly-traded game companies. It is, in effect, a continuation of the work I did for my book One Up, which discusses concentration and consolidation trends in the games industry in greater detail (chapter 8). For my purposes here, I assumed the completion of all three proposed mergers and calculated market shares based on what is currently available (Microsoft already reported its 2021 revenue, for example, but others did not). It’s the first draft.

After a period of declining concentration on all three platforms, both PC and console markets are showing an increase in the total market share held by the largest four firms in their respective categories. For 2021E, the top four companies in console control an estimated 82 percent of the market; for PC that number is 57 percent, and for mobile 50 percent. The distinct U-shape indicates an increase in market concentration in recent years.

Looking only at the four largest firms doesn’t tell us anything about the relative size of the participating companies. For that reason, the Department of Justice uses something called the Herfindahl-Hirschman Index, which calculates concentration by squaring the market share of each firm competing in the market and then summing the resulting numbers. For the video games industry, we get the following numbers.

Since 2010 when all three categories were considered unconcentrated by the standards of the DoJ, there has been a notable increase in consolidation in the console market. Both PC and mobile have stayed well below the threshold and remain unconcentrated. In 2021E the HHI for the console business reaches an estimated 2,207 and is up considerably from its low of 1,328 in 2012.

Succinctly, the MSFT/ATVI acquisition really only endangers the console business. It is important to note that Zynga, which is largely a mobile game company, doesn’t share any overlap with Take-Two, which focuses on PC and console. Similarly, Bungie contributes only marginally to Sony’s market share, which is absent from mobile and only just starting to take root in PC. That leaves the MSFT/AVTI merger. Based on the data I’ve collected so far, the acquisition of Activision Blizzard only impacts the console market as evidenced by a pronounced U-shape for its overall concentration trend.

That’s not super-surprising. The games industry is hit-driven, for one. That makes it difficult for even the largest and wealthiest firms to maintain an iron grip on the market, even if they have abundant capital. Moreover, consumer spending on interactive entertainment as a whole has grown so quickly in recent years, even before the pandemic, that it is virtually impossible for a single firm to claim control over the market. Tencent, the world’s largest publisher today, barely made a billion dollars a decade ago. The combined globalization of gaming and the popularization of mobile has allowed the industry to quadruple in size, which makes it difficult for anyone to monopolize it.

The Wrath of Khan

The data tells us two things. First, despite the expectation of scrutiny, the FTC will probably leave the MSFT/ATVI merger alone. Even as concentration increases, the overall trend is relatively muted by the fact that the industry as a whole continues to grow, too. Concentration is higher, yes, but the spectacular growth of the overall games industry and its sub-segments mitigates any one firm’s ability to claim it for themselves. Consolidation has not reached the point yet where it, historically speaking, warrant the intervention from regulators, although that may change if, for example, its current momentum start to subside.

Furthermore, a platform buying a publisher is what is known as a vertical merger as two different value chain participants now operate under the same flag. Generally speaking, regulators are more worried about horizontal mergers. For instance, the much-publicized proposed acquisition of Arm by NVIDIA falls in this category. It was predictably scrutinized by UK regulators and NVIDIA has started to quietly abandon the whole idea.

Had Microsoft acquired Nintendo, which by the way currently has a market cap of $57 billion (!), or even Sony ($132 billion) it would severely reduce consumer choice and, by implication, allow Microsoft to raise prices. That, too, makes no sense. Microsoft has been pushing a strategy that focuses on the largest possible addressable audience, diversity, and financially accessible hardware and services.

Second, much of the debate around concentration in media and entertainment has to do with access to information in the context of democratic discourse. The underlying reasoning to regulate, for example, how many radio stations any one firm can own in a single market has to do with access to a broader set of ideas. Video games, remarkably, are generally not considered to contribute to the greater civic conversation.

In my opinion, games are excellent at conveying and negotiating a broad range of novel ideas. But beyond violence and gambling, most politicians don’t really care to look. Hell, even the largest firms in games themselves are disinterested. Hollywood and the music industry have maintained clear stances on their shared belief systems and the vocalization of those that need to be heard. Meanwhile, game execs struggle with the realization that for the words they chisel into their buildings to carry meaning, they must enact them in practice but don’t. As such it is most likely that after a stern conversation around access to content and consumer choice, regulators will simply move on from recent mergers.

As a final observation, consolidation tends to occur whenever the next generation of consumer technology draws near. Large organizations insulate themselves from imminent volatility by expanding their content catalogs. The push into cloud gaming and its subscription-based revenue model would certainly qualify as such a shift. Twenty years ago few felt there was room in the industry for a third console. Many ignored PC gaming for years. And mobile was an after-thought. If I had to guess, the current ebbing precedes a massive wave that will flood the market with abundant content for consumers and opportunities for creatives that will wash away any false sense of scarcity. (Written by Joost van Dreunen, originally published in the SuperJoost newsletter)

#2: Why Gamers Hate NFTs

acquisitions NFT

Source: The Verge

As I was browsing Reddit the other day, I came across this interesting NYT article through a post in r/gaming. A TLDR of both the article and the Reddit thread is that gamers are not happy about the current outlook of NFT in games and I believe they are certainly entitled to feel so.

We so often hear about the bullish perspective of why crypto might make sense for games, but often miss out on the critical player perspective. We also saw this happen with the backlash toward the Ubisoft announcement. So, as both a player and crypto enthusiast, I wanted to dedicate some space to consolidate a couple important threads I learned about reading through the Reddit comments.

Gamers have historically been on the short end of the stick when it comes to advancement in the monetization of games: from sketchy DLC models, FOMO pre-orders tactics, micro-transactions, and now NFTs. There is justified skepticism on their end and it’s worth digging into the concerns.

True Ownership of Game Items

It would be an understatement to say that Ubisoft’s recent announcement of their crypto project Quartz and the integration of NFTs in Ghost Recon generated massive controversy. One point that gamers have repeatedly honed in on (correctly) is a natural lack of decentralization of marketplaces and gameplay in games (a hallmark of web 2.0 walled garden systems), especially when it comes to incumbents like Ubisoft whose Quartz ecosystem is naturally closed off.

This defeats the point of having a blockchain. Game companies (especially incumbents of the industry) are naturally protective of their IP, the way they are implemented in-game, and how players interact with them. Item “ownership” is such a fragile topic when games companies talk about using them even though they still freely dictate how players can utilize their items and still can ban or blacklist accounts that deny ownership easily. There are also the whole host of issues around copyright and IP usage of the items players now technically “own” the assets of a games company.

Source: Reddit

Blockchain games that are built ground up with blockchain usage and an open mind to interoperability, these aforementioned ownership problems are more avoidable, but definitely not eliminated. It's not hard to spot the over-promises of ownership and interoperability with some of the games on a design level.


There are three main but interconnected facets of over-financialization that players worry about when it comes to NFTs.

  1. Adding NFT trading elements doesn’t add any significant benefit for the player and is just another way for companies to skim profits

  2. Creation of sketchy secondary markets that creates more issues than solutions for players

  3. Adding RMT (real money trading) changes the integrity/essence of gaming for the worse

First, players don’t want to be exploited by game companies, and they see NFTs as a new method for companies to take more fees off their players by creating even more artificial scarcity and FOMO. Games already work on the principle of artificial scarcity, but through blockchain, it has become increasingly financial with questionable gacha/ loot box systems that companies exploit. If this form of financialized artificial scarcity is all NFTs can and will offer to gaming, gamers will continue to avoid the category.

Second, many gamers have brought up that many games naturally don’t have a marketplace, and adding NFT to games essentially forces a marketplace into existence. I believe this has massive unintended consequences. An apt example would be Steam’s colorful history with CS:GO and the skin marketplace it developed. While it's undeniable that the marketplace adds an interesting element to the game, marketplace manipulation, scams, trouble with regulators, etc. are testament to how chaotic implementing a marketplace can be. It’s hard to argue that while CSGO can exist without the marketplace, vice versa can’t be true, and hence all the trouble it brings is perhaps unnecessary.

As for the last point, at what point does a game become a second job? Every player has a different threshold to what is an acceptable amount of effort to put in to get their enjoyment. This could range from the 15 minutes a casual Genshin Impact player spends for daily rewards to a whole day a guild leader uses organizing multiple Mythic Runs in WoW. Regardless of the amount of time spent, players get the “fun” they desire and both give a sense of escapism. The satisfying sense of ‘losing-track-of-time’ escapism and distraction is what I believe makes a game great.

However, with P2E (which I argue is essentially sanctioned RMTing) the majority of players will be focused on earning rather than playing since their time is now quantifiable. Players will be hyper-aware of how they spend their effort and time since now they have something obvious to lose, which will create min-maxing behavior. Min-maxing behaviors and dominant metas already suck the fun out of games that exist. What would happen if sanctioned RMT became normalized?

As much as I love the possibilities of NFT games, I don't want to live in a dystopian world where digital serfdom is the norm, and everyone min-maxes the game in the same way in order to earn the most money. As a player, the Reddit thread and the subsequent comments resonated with me. I’m hoping for a future where games are designed with the player in mind and are able to address the problems I outlined above. I’m optimistic because, after all, this is the ethos of web3 broadly. (Written by Ray Lam)

📚 Content Worth Consuming

2022 Predictions #2: Why Going Cross-Platform is Mandatory for Mid-Core Games (DoF): “We can’t talk about Mid-core games without diving deep into the largest genre and the largest sub-genre on mobile. Strategy games continued to grow bringing in $6.5B, out of which $4B was generated by 4X games alone. What’s even more impressive is that this already behemoth of a sub-genre is that the revenue outpaced the overall market pace delivering a 21% increase year of the year with a decline in downloads of only 4%, which is significantly less than what mid-core games saw their downloads drop on average. To put the Strategy genre in proportion, it generates a whole Billion more than all Puzzle games combined. Though several puzzle genres do boast significant ad revenue streams, which bridge the gap in net revenue between the genres. The biggest acquisition in the sub-genre happened last year, with Applovin acquiring Machine Zone — the company that made some of the most iconic top-grossing 4X games of all time (Game of War, Modern Strike, Final Fantasy: New Empire).” Link

Deep Wordle (Raw Data Studies): “Much of the attention of the “Wordle Analytics” crowd is around finding a “best” first guess. My theory is that the first guess is not so important as long as the second guess is optimized. Before going too far we have to admit that “best” has many definitions. For the shallow analyses, best usually means either the coverage of the most common letters or the elimination of the most words as possible solutions. FiveThirtyEight has a medium-depth analysis where best means the highest chance of finishing in three guesses. Even for a deep analysis, there best-ness choices such as the maximum number and the average number of guesses. What is a deep analysis? Ideally, it would examine every possible tree of guesses and determine the tree that is quickest to arrive at all the possible solutions. Link

Gaming The Smile Curve (Stratechery): “When it comes to mobile gaming, the dominant Aggregators on the top right side of the curve are Apple and Google and their respective App Stores; the most cynical interpretation of ATT is that Facebook was superseding both to become the most important way in which people discovered apps, and Apple, thanks to its OS-level control, cut them off at the knees, pushing Facebook down to the middle. The response from content makers, then, has been to consolidate and increase the leverage that comes from differentiated content. Xbox Game Pass, meanwhile, is an attempt to build a position as an Aggregator; the initiative will be successful to the extent that gamers play games because they are in Game Pass, and increasingly shun games that have to be purchased individually (incentivizing holdouts to join Microsoft’s subscription). Microsoft is kick-starting this effort by buying its own differentiated content and overlaying their long-term incentives over any individual game studio’s incentives to maximize their short-term revenue by selling a game individually.” Link

Play And Win — Why Choice Matters (Metanomic): “In our view, the difference between play to earn and play and earn systems is the difference between rent-seeking dead-loss markets, which transfer value from one person to another on the one hand; and productive open trade that increases net value for all the players involved. Furthermore, it is critical to understand that “value” is not only monetary, value, in its truest sense, can be (indeed, in a gaming context has to be!) intrinsic too. The intrinsic value in a gaming environment comes from the fun players have from playing the game itself. Indeed, the value that players would happily pay for, in terms of their time, and in terms of “real” money; not the resources players often feel forced to spend to win, but the resources they would commit purely for the joy of playing.” Link

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