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.
Crypto Corner #15 — Crypto Gaming 101
In this Crypto Corner episode, Nico Vereecke, Devin Becker and Ethan Levy join your host Maria Gillies to get back to basics on Crypto Games. We discuss: the distinction between Web3 vs crypto games vs blockchain games; different types of crypto integration in games; types of blockchains; fungibility & composability; governance tokens vs utility tokens vs NFTs; and staking.
If you’d like us to discuss any other gaming-related topics, do reach out at [email protected]. We’d love to hear your general thoughts and feedback too! You can find us on Spotify, Apple Podcasts, Google Podcasts, Youtube, or our website.
#1: Lessons from NFT Game Launches
This past weekend I spent some time digging through Square Enix’s earnings in part because they outperformed expectations on specifically mobile and MMO and in part because Square Enix has set new priorities around AI / cloud gaming and blockchain. I was curious about any new developments. Let’s start with their earnings recap, from gamesindustry.biz:
Nine-month sales up 8% year-on-year to $2.4 billion, profit up 117% to $346.9 million
MMO sales up 63% to $420.2 million thanks to rise in Final Fantasy 14 subscribers and Endwalker release
Full-year profit forecast increased from $209 million to $305 million
Perhaps the more interesting storyline for Square Enix stems from President Yosuke Matsuda’s New Year Letter in which he teased Square Enix’s 2022 focus on NFTs. He writes: “The basic and elemental technologies to enable blockchain games already exist, and there has been an increase in the societal literacy and acceptance of crypto assets in the past few years. We will keep a close eye on societal shifts in this space while listening to the many groups of users that populate it, and ramp up our efforts to develop a business accordingly, with an eye to potentially issuing our own tokens in the future.”
NFTs for a AAA publisher is a fraught proposition with so many interesting implications. On one hand, Square Enix, both as a licensor and publisher, has strong IP that resonates with a broad swath of gamers. It also has expertise in genres like MMOs that could flourish with marketplace activity, a primary use case of blockchain tech. However, gamers haven’t been as receptive to NFTs as AAA publishers would like – financialization and distrust around true ownership have been cited as primary reasons why gamers and NFTs have a tenuous relationship. This presents risk for Square Enix — IP to launch with, brand shift, restructuring existing teams, determining ROI, and more.
I think the fundamental tech, partnerships, and creativity around gaming NFTs has been developed well enough, but a crucial component, the launch of NFTs has been leading to increasing gamer distrust. We saw it with Ubisoft, and now we’re seeing it with Pixelmon and Jam City’s Champion Ascension, a AAA adventure game with P2E elements. The way the industry thinks about game releases today – a pre-game NFT launch, which for some reason has been normalized to generate community hype and raise funds – might not actually be the best path forward for many teams. For Square Enix, I think the big question for them is what the go-to-market will look like, but we can extend this strategy to other games looking to enter the space as well. Let’s start by looking at the recent NFT launch of Champion’s Ascension, what went right and what they could’ve done better:
What went right:
Jam City is a reputable publisher, so there’s likelihood this game will be released with a high degree of polish (unlike, for example, Pixelmon)
High volume community (but might need to transition to more quality community)
What could’ve been better:
Metadata leak on which champions were good vs. bad prior to launch
Lack of transparency in Discord, banning people who bought into the project
NFT price was too high for mass audience at ~$1.5K and dutch auction format was too long
Marketing and onboarding strategies are crucial for any game launch, and understanding best practices around what to do with NFTs is just as important. For Champion’s Ascension and any other upcoming game launch, a good purchase experience, easy onboarding, volume in subsequent secondary marketplace trading, etc, will build trust and excitement with the player base and community over time; secondarily, it will also set a high bar for other developers looking to enter the space. This will set the stage for a solid game release and community experience.
So, to bring this back to Square Enix, and the company’s probable upcoming NFT launch – what steps can they take to make sure the launch runs as smooth as possible?
Chat with BD teams at Layer 1’s / Layer 2’s to ensure that they’re picking the right infrastructure for their type of game. Additionally, connect with BD teams at NFT marketplaces like OpenSea or Fractal to develop a great launch and go-to-market strategy.
Other idea(s): partner with experts like Forte or Animoca, who work with a variety of studios across the blockchain ecosystem
Read this guide and learn from other great game NFT launches like Loot, Mythical Games, or Star Atlas. It’s also just as important to learn from launches that didn’t work — in the context of Ubisoft, finding the best place, time, and IP to start broaching NFTs with players is a key takeaway.
Don’t be hesitant to delay, to launch the NFTs with the game’s release (or closer to it to keep feedback cycles shorter), and to solicit community input / feedback. After all, the community wants the game to succeed.
Transparency: being super clear with players on what unique aspect the NFT enables for them (that ideally isn’t possible otherwise). This also includes discussions around trade-offs and imperfections, being transparent on improvements over time.
Build for actual utility of NFTs vs. empty promises
These are just a few ideas I’ve had from observing NFTs launches, but what I want to emphasize is that there’s no standardized way to do this. I’m of the opinion that every game, genre, and platform will work differently, so this will be a constant evolution that requires creativity. For Square Enix, the most important strategy will be one of inclusivity and utility for existing gamers, leveraging fandom and gameplay to have a successful launch.
These are just some short thoughts, but if you’d ever like to jam more on this in the context of esports, studios, NFT launches, etc, please feel free to reach out to myself or the broader Naavik team. (Written by Fawzi Itani)
#2: Premium Research - Deconstructing Splinterlands
Splinterlands is a blockchain-based trading card game in which players assemble opposing teams of creatures and then watch the battles resolve themselves automatically. Watch this video to see an example of deck-building and battling. Splinterlands is notable for being one of the older blockchain games with roots stretching back nearly 4 years to May 2018 when it was still called Steem Monsters; obviously, a lot has changed since then!
In terms of gameplay, as players win ranked battles, their ranking level improves and they become eligible to earn cryptocurrency and new cards as battle rewards. Progression through the ranks is gated not only by overall performance in battles against other ranked players but also by the overall “power level” of the players’ cards. As higher rewards are gated behind higher progression, players seeking to “play to earn” must acquire better and better cards through one means or another, which inevitably means putting money into the system. As evenly-matched ranked battles are a zero-sum game where one player advances in rank as another falls, the highest rewards are reserved for the elite.
In sharp contrast to games like Axie Infinity that require pricy NFT purchases to get started, Splinterlands is much more accessible. Not only can players play the game directly in a browser, but the initial cost to play is just $10, and players can pay with fiat as well as crypto. Furthermore, if progression gets blocked by not having good enough cards, players can rent cards for pennies a day rather than having to take on the personal relationship of a “scholar” loaning assets from a manager.
What’s interesting is that even though daily sign-ups have significantly decelerated from the peaks of last fall (as seen in the chart below)…
… daily active users have held fairly steady:
Obviously growth is better than stagnation; however, early data depicts a game that is fundamentally sustainable and not overly dependent on the pace of user acquisition, which is notable because many popular blockchain games are still the opposite. Not all players expect to walk away with a profit, and players are also (at least partially) sticking around out of enjoyment. Despite the game’s imperfections, it’s an early example of what play and earn could look like.
Of course, Splinterlands has seen its economy take a bit of a tumble in the wake of recent crypto volatility, but it is generally more resilient than Axie Infinity as its base game offers more variety, features cheaper and easier on-ramps, has a number of basic economic features aimed at absorbing short-term shocks, and frankly is just a better designed project overall. That said, it is somewhat cumbersome and over-complicated in parts, spreading various tokens and NFTs over as many as four different blockchains. It has a robust and lively community, but it’s difficult to evaluate how organic that community enthusiasm is given that it all originates from SplinterTalk and the HIVE blockchain, a “social blockchain” whose key feature is on-chain social networks that financially reward content creators with cryptocurrency in direct proportion to how popular their posts are.
The greatest criticism one could make of Splinterlands is that even though it is marketed as “play to earn,” at first blush it feels “pay-to-win” or “pay-to-play-to-earn”, with many levels of layered progress gates requiring progressively larger investments of both time and money to unlock. This is combined with a zero-sum ranking system in which one player going up in overall earning potential means another player losing it. That said, this doesn’t make the game all that different from any number of popular non-crypto mobile and F2P games that do much the same thing, and an innovative rental system reduces the barrier to entry. Another way to look at it is that the “pay-to-win” aspects provide a source of ongoing money that subsidizes “play-to-earn” players, keeping the game from unraveling the way the more pure “play-to-earn” games do.
In short, Splinterlands is a unique project with plenty to appreciate compared to other blockchain games but still has room to improve. In this essay we’ll dig deeper into the nuance here. How did the game get to where it is today? What makes the game design unique? How does money flow through the system, and how do the various tokens and incentives work across blockchains? Is Splinterlands’ in-game rental system a threat to yield-seeking guilds? What’s next for the game, and will it succeed at a greater scale?
This research essay was originally posted on Naavik Pro - the #1 research portal for blockchain and F2P games! We serve both investors and developers with our premium research. Make us your remote games research department today!
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Budgeting to Build Your Community (Victoria Tran): "It’s common for people to combine marketing, customer service, community management, social media management, content creation, production, and press relations into one role. They’re all separate specializations, and it’s akin to hiring an artist that you expect to do animation, marketing art, 2D, concept, graphic design, and UI all in one. It’s possible you can find someone who does that at least vaguely, but that’s a lot of demand for one person. To better map it in our minds, below is the most common form of marketing for indies — digital marketing. In this, you’d categorise your activities into 3 pools: earned, owned, and paid. Community management lives within this and focuses on the “Earned” and “Owned” circles below.” Link
The Fundamental Obstacle To Netflix's Games Strategy Is One Of Its Own Making (GameDeveloper): “Is it just me, or does Netflix’s games offering feel like Spotify’s failed first foray into video? Data from Omdia and its research partners about the streaming video giant’s mobile games and interactive video titles presents a mixed picture. Spotify introduced video to its platform in 2015, licensing shows from Comedy Central, Vice News, and others and commissioning original series. The move was the result of a secret pet project founder Daniel Ek had been nursing since 2011, according to the book Spotify Untold. Yet the company abandoned its video strategy less than two and a half years later in 2017. Could the same fate await Netflix’s games strategy?” Link
The Complete Guide To Mobile Game Gachas in 2022 (GameRefinery): “Gachas are dominating the mobile game market at the moment, and the popularity of both gacha games and gacha features in traditional mobile games continues to grow year on year. 66% of top-grossing 100 mobile games in the US market feature a shop with gacha mechanics or refreshing wares, while 45% feature five or more gacha types. In Japan, where gacha games are even more popular, these figures jump to 92% and 54%, respectively. The reason behind these booming figures? The gacha system is one of the most effective ways developers can monetize their mobile games, especially as many gacha games are free-to-play, which incentivizes downloads. The loop-based mechanics and randomness of gacha rewards – where players pull the gacha in return for an in-game asset, whether that’s a character, item or currency – keep players hooked. And as mobile game developers continue to innovate, new types of gacha implementation are popping up all of the time. In fact, there are so many different types of gachas that we thought it would be useful to round all of them up and explain why one of the mobile gaming market’s most popular features is only going to grow stronger in 2022 and beyond.” Link
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