New Business Models for Gaming, Collaboration, Creativity

Key takeaways

The transition to free-to-play models significantly increased the number of gamers globally, shifting the industry dynamics.
Developers face challenges in maintaining balance between paying players and non-paying players, affecting player engagement over time.
Blockchain technology presents an opportunity to reformulate economic relationships in gaming, fostering better player-developer alignment.
New economic models driven by blockchain can empower players and enhance community engagement, potentially creating new revenue streams for developers.
The move towards a decentralized, player-centric gaming ecosystem could dramatically reshape how games are developed, monetized, and experienced.

Summary

The Rise of Free-to-Play and Its Impact on Gaming

The episode begins with Kevin Chou discussing his journey from an early gamer to the CEO of Kabam and now Forte. He explains how the gaming industry shifted from traditional pay-to-play models to free-to-play, which allowed a global surge of players due to the elimination of upfront costs. This model encouraged multiplayer interactions and cloud computing, thereby revolutionizing the player base and engagement in games.

Challenges of the Free-to-Play Model

Chou also discusses the inherent challenges of the free-to-play model, which necessitates balancing the interests of players, some of whom are spending significantly to enhance their gaming experience. The 'whales', or heavy spenders, can skew the economic balance, often leading to a decline in less-engaged players, which complicates game sustainment over time. This creates a disconnect between player satisfaction and the revenue-generating mechanics of the game.

The Future Landscape: Blockchain and Gaming Economies

The conversation shifts towards the incorporation of blockchain technology in gaming. Chou highlights how blockchain can restructure the economic relationships in gaming. By creating a transparent, peer-to-peer economy, developers can foster communities that are more aligned with player interests. This could lead to more sustainable monetization strategies and empower players to trade assets, enhancing both engagement and revenue for the games.

Innovative Economic Models Through Blockchain

Exploring potential blockchain applications, Chou suggests that elements like loyalty systems could be implemented via tokens that players earn and utilize in-game. This not only enhances player retention but also allows developers to share in the financial ecosystem created by secondary transactions, thereby realigning incentives within the gaming world.

The Vision of a Player-Centric Gaming Ecosystem

The episode concludes with reflections on what a future powered by blockchain could look like. Chou envisions a gaming ecosystem where players are not only participants but also stakeholders in a richly interconnected economy, similar to a robust city, rather than a controlled theme park. As games increasingly become community-driven rather than solely developer-controlled, this could signal a new era for gaming.

Show notes

The combination of cloud, social, and mobile took gaming beyond a small base of just console- and PC-gamers to a massive player base. But the underlying business model -- the concept of "free-to-play", built on top of games-as-a-service -- may have been the real innovation that led us to the global gaming phenomenons we have today.

Unfortunately, observes gaming veteran Kevin Chou -- who's seen it all when it comes to tech platform shifts and gaming as a longtime gamer, founding CEO of Kabam, and now founder and CEO of Forte -- there is "a dark side" to free-to-play: Game developers have to balance the gamers who aren't paying with those who are, and especially those who are paying a helluva lot more (the whales) in order to make money and keep the game going. This balance becomes incredibly challenging over time; it is, quite frankly, a lopsided economy. The players will leave: The incentives between game publishers and players are simply not aligned.

Yet what if we could re-align those incentives -- really, the economic relationships -- between game publishers/developers; players and guilds and clans; those who create on top of games (like on Roblox and Minecraft); those who trade and otherwise transact both inside and outside games (it's already happening in secondary markets and gold farms). We could do this in a more balanced way, thanks to blockchain technology and cryptoeconomic business models -- leading to thriving gaming economies with better monetization and deeper engagement, as well as new forms of collaboration, community, and creativity.

But smart contracts, cryptoeconomies, security, etc. is hard for gamers who just want to focus on designing the best game, so how do we get here? Chou shares his thoughts in this episode of the a16z Podcast with Sonal Chokshi and general partner Chris Dixon. In gaming (and in fact, with other tech trends too), innovation happens when there's a combination of new devices, new technology platforms, and new delivery mechanisms... but it's the business-model innovations, argues Dixon, that tend to create the most startup opportunities.

image: battle scene from Eve Online, a game with an economy (via Forte.io)

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