Hi Everyone. As a reminder, we launched our first-ever essay contest! The contest will run from September 18th to October 17th, and we’ll feature the top three essays and any honorable mentions in the newsletter and on our website. Why participate? Well, our past and current writers have experienced the following upsides:
- Growing your personal brand by writing and learning in public
- Working with our team to level up your work, and reinvesting those learnings into your current job and future pieces of work
- Opening up more opportunities to get involved with Naavik, while creating new opportunities to accelerate your games industry career
Additionally, there are cash prizes: 1st place, $1000; 2nd place, $500; 3rd place, $250. And members of the Naavik team will not only act as judges, but will also provide the finalists hands-on support and feedback to get their essays ready for publishing. Submit your interest here and please be sure to check out the guidelines here.
This Week on The Metacast
Loot: One Year Later — On this week’s Crypto Corner, Loot builders Timshel, Threepwave and Loaf join your host Nico Vereecke to discuss the state of Lootverse - an infinitely expansive fantasy world that is creating an on-chain game and digital universe, where the items, maps, and more are built and owned by the community.
#1 Why AI Will Upend The Games Industry
You’ve undoubtedly seen it by now: the endless Twitter threads of AI-generated images from tools like DALL-E 2 or Midjourney; the award-winning AI art compositions; the all-to-predictable concerns of human obsolescence at the hand of robotic overlords. AI tools are increasingly being made available to everyday users, and it’s only a matter of time until they begin to impact the games industry. In fact, that impact has already begun.
Early bite-sized examples are already popping up, such as WORDALLE or Thinkwert’s choose-your-own-adventure Twitter games. Yet innovations around DALL-E-style 2D images are just the tip of the iceberg. It doesn’t take much imagination to consider the implications for gaming; in fact, it’s a topic we’ve already discussed at length on The Metacast.
Make no mistake about it: AI will revolutionize gaming and game development. Recent rounds of fundraising from Inworld AI (AI-driven virtual characters), Modulate (AI-powered player toxicity detection) and Regression Games (AI-enabled competitive gaming) are illustrative of this trend and may signal the start of a coming wave of investor interest in new ventures exploring this space.
While major publishers like Ubisoft, King, and Take-Two are already utilizing AI in a variety of ways, what’s noteworthy about this recent surge in activity is the increasing democratization of AI as a tool for smaller developers. To paraphrase Ben Thompson in a recent Stratechery piece, this new crop of AI tools are “example[s] of how imaginative humans and clever systems can work together to make new things, amplifying our creative potential.”
Personally, I’ve found the recent explosion of creativity to be incredibly inspiring — it certainly made this article a blast to research. Here is just a small sample of the incredible developments being enabled by AI:
- AI Dungeon: one of the earliest examples of AI-enabled games (Link)
- Shoon: a 2D side-scrolling shooter created with Midjourney (Link)
- Hekimu: a Japanese visual horror novel created with Midjourney (Link)
- Battleprompts: a Twitter-based text battle driven by GPT-3 (Link)
Ms. Tang Yu: an AI-powered virtual humanoid robot appointed as CEO of Chinese gaming company NetDragon Websoft (Link)
While these examples are unlikely to win over millions of players anytime soon, they are directionally indicative of the wide variety of games industry applications that might be enabled through the introduction of AI-assisted tooling. In the coming years, I expect AI to be utilized across the entirety of the game development pipeline, from writing code to generating 3D assets to iterating UA creatives and beyond — perhaps even creating entire game prototypes.
The spread of AI-enabled game development tools has the potential to dramatically reduce many of the costs associated with making games. The dreaded “content treadmill” faced by live service games could be de-risked tremendously, potentially freeing up developers to work on higher ROI activities. I also would not be surprised to see Unity or Unreal Engine seek to incorporate AI-enabled tools into their respective suites in the near future as a means of improving developer productivity and creativity.
Importantly, AI is unlikely to ever replace game developers entirely – at least, not in the near term. Rather, AI should be viewed as another tool in the development toolkit, improving and optimizing workflows rather than outsourcing them. This Twitter thread and accompanying video offer an excellent example of potential AI applications in the 3D art pipeline.
At the risk of sounding too buzzword-y, another area that I expect to see further development in is AI on the blockchain. If you believe in the value proposition of players owning their digital game assets, so too, then, should you recognize the value in having custody over game AIs. This is a topic I’ve covered previously for Naavik Digest, and after researching this piece I am even more convinced that this will be an area worth watching in the future.
One of the greatest potential benefits to players of AI-enabled games (web3 or otherwise) is the opportunity to deeply personalize the in-game experience based on inputs from the player, rather than create illusions of choice in games that are otherwise largely deterministic. The interoperability of blockchain assets allows for personalized creations to travel from one context to another alongside the player, learning and adapting along the way. Imagine an NPC sidekick with memories of your previous adventures together that then influence its behavior in games yet to come. To quote Ben Thompson once more (emphasis added throughout):
“GPT and DALL-E and other similar models generate new content from content, at zero marginal cost. This is how the economics of the metaverse will ultimately make sense: virtual worlds needs virtual content created at virtually zero cost, fully customizable to the individual.”
This is, of course, largely theoretical at this point, but the seeds of this future can be seen in companies like Altered State Machine and others mentioned above.
If you’re still not convinced that AI is going to be a massive sea change for our industry (and frankly, countless others), look no further than legendary game developer and co-founder of id Software, John Carmack, who recently raised $20M to pursue artificial general intelligence (AGI) — the dream (or nightmare, depending on your point of view) outcome of AI research.
It’s clear that artificial intelligence is an area of extreme interest and great opportunity for the games industry — and that it will soon be impacting our lives as gamers and game developers in a variety of ways both expected and unforeseen. Will AI-enabled games be able to deliver true personalization at the individual user level? (Written by Matt Dion)
#2 Game Deconstruction: Sorare — Moneyball On-chain
Sorare, which is based in France and was developed in 2018 by Nicolas Julia and Adrien Montfort, is an Ethereum-based fantasy sports game in which players buy, sell, trade, and manage a virtual team with digital player cards. Sorare started off with fantasy football (or soccer for the Americans reading this) but has recently added baseball as well. Also, just recently it announced a collaboration with the NBA for a basketball title as well.
Fantasy sports games been huge for a long time. What raised a few eyebrows, though, was when Softbank led a $680M Series B round that valued the company at $4.3B in September 2021. This valuation can surely be questioned today, considering the ongoing crypto winter and broader sell-off in financial markets, but the high valuation was an indicator that Sorare was potentially pioneering something big. Overall, according to Crunchbase, the company has raised $739.2M in 4 rounds to date.
In a statement following the latest funding round, Sorare co-founder and CEO Nicolas Julia said, “We saw the immense potential that blockchain and NFTs brought to unlock a new way for football clubs, footballers, and their fans to experience a deeper connection with each other. We are thrilled by the success we have seen so far, but this is just the beginning. We believe this is a huge opportunity to create the next sports entertainment giant, bringing Sorare to more football fans and organizations, and to introduce the same proven model to other sports and sports fans worldwide.”
Before diving too deep into Sorare, let’s first take a step back to better understand the context in which it operates — the fantasy sports market. It might sound a couple steps removed from gaming as we normally think about it, but Sorare’s success is worth learning from given its success relative to most other blockchain games.
Fantasy sports can be defined as sports engagement platforms based on real-life matches, where users build virtual teams with proxies of actual athletes participating in an upcoming match (or match-day) and compete according to the real-world statistical performances of these athletes. This allows users to emulate the role of a manager of a team with the power to drop, recruit, or trade athletes of their choice. Before a match kicks off, the teams are frozen, and the changes are locked. For some, playing fantasy sports is all about engaging more deeply with their favorite sport (often with friends), while for others, it is about the competition and the strategy that it involves. Some of the key players in the space are Dream Sports, DraftKings, Fantacalcio, Fanduel (Flutter Entertainment), Rotoworld, FantasyPros, Rotowire, Fantrax, Sportech Inc., and NFL Fantasy.
According to Allied Market Research, the fantasy sports market size was valued at $18.6B in 2019, and is expected to reach $48.6B by 2027, registering an annual growth rate of 13.9% from 2021 to 2027. Though we don't endorse the specific estimate, the trajectory seems right. The football segment was leading in terms of the fantasy sports market share in 2019 and is expected to retain its dominance throughout the forecast period.
Although the overarching trend looks promising, the space isn't without its challenges. Fantasy sports are often confused with illegal sports betting, and sports betting in general remains in legal scrutiny in various corners of the world. The absence of any specialized regulatory bodies, ambiguous laws, and inconsistent rulings remain a major challenge for many companies in the fantasy sports industry. As a result of an ever-fluctuating industry, operators must have high transparency, fair policies, and clear regulations along with secure payment gateways to build consumer confidence.
Let’s also briefly make the comparison to NBA Top Shot. It’s not a fantasy sports game — rather an NFT collection of top player moments — but both Sorare and NBA Top Shot share the commonalities of being on-chain, being sports related, and being collectible-based. With the caveat that football is more popular than basketball on a global scale, it’s worth noting how interest in these two projects (at least according to Google Trends) has changed over time.
Another comparison that can be made is to NBA Top Shot. Although Top Shot is not a fantasy sports game (perhaps yet), both Sorare and NBA Top Shot share commonalities in being on-chain, sports card, collectible-based offerings. Even though football is more popular than basketball on a global scale, it’s worth exploring how interest in these projects has progressed over time. As you can see in the chart below, Top Shot rolled through the typical hype cycle seen by many crypto projects and remains well below its highs, while Sorare has seen steadier growth since its launch.
Looking at the past 30 days of secondary market sales volumes (as of mid-August when the numbers were pulled) among NFT projects, Sorare is ranked #2 with $36.5M while NBA Top Shot stands at #15 with $9.2M. Of the top 15, it also has the highest number of buyers, which points to a relatively healthy ecosystem.
Sorare differs from most other fantasy sports products, because users need to purchase cards of football players in order to play the game at a high level. Other fantasy sports usually gate the entry to the game through a dollar-based tournament entry cost or may simply be F2P with ads as part of a larger ecosystem. Sorare has a fixed number of player cards to sell in a given year, and that's where it generates almost all of its revenue.
Since Sorare is a F2P game (free to start with the ability to buy or win better player cards), it has approximately 500K total users who play the game. Sorare has 150K cumulative on-chain card holders out of which 30K transact in a month. As per the chart above, the total monthly transaction size was $36.5M, and we suspect (although could be wrong) that approximately 20% of that is revenue from new card sales. Situated in France, Sorare now has 170 employees, over 50 job openings, and clear expansion plans with baseball (via the MLB) and basketball (via the NBA).
This article will focus in on the football experience, and we aim to answer the following questions:
- How did Sorare use its deep understanding of football fans to make a successful free-to-play game?
- What is the business model, is it sustainable, and what can other gaming teams learn from the project?
- How do Sorare and its users utilize blockchain technology to generate revenue streams and create parallel business models?
Content Worth Consuming
Biggest Buys In Gaming for n00bs (SuperJoost Playlist): “In February this year, I did an analysis of how recent acquisitions would impact the games industry. At the time, I concluded that Microsoft’s proposed purchase of Activision Blizzard would not be detrimental to the distribution of market power and need not warrant intervention from regulators. The data I’ve collected since provides no reason for me to change my mind. What is interesting, however, has been the panicked reactions to all this consolidation news. The steady stream of announcements leaves the impression to many that something is awry.” Link
Sony Carves Its Own Path For PSVR2 (GI.biz): “Sony's VR headset is a category all of its own, occupying unique territory within the market – which doesn't necessarily make Sony a winner in this contest, but certainly makes it very interesting. The unique position of PSVR was reinforced this week by the flood of articles gushing about Sony's new headset, PSVR 2, which people were finally able to go hands-on with a few days ago.” Link
Roguelike Elements in Mobile Games in China (GameRefinery): “Roguelike” was definitely a buzzword among game developers last year in China, and the shockwaves made by the boom can still be felt today – for example, still in May 2022, we spotted three new games that claimed to be “roguelike” entering the Chinese iOS top-grossing top 200 list. However, a closer inspection revealed that only one of them could perhaps be called a roguelike by some definition, another one seemed to be utilizing just some roguelike elements, and the third one had nothing to do with roguelike at all. This kind of unwarranted use of the term in-game descriptions and media articles has been rife lately – it seems that pretty much any kind of random element in gameplay is described as “roguelike” nowadays. Therefore, to correct this terrible misuse of the term, we will look at what “roguelike” or “roguelite” or even “Rogue” actually mean, as well as diving into some concrete examples of how roguelike elements and mechanics have been used in mobile games in China lately. Link
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