Although nonfungible tokens, or NFTs, have a small presence in the video game industry, some players find that to be too much. Quick and ferocious backlash over the prospect of any well-known gaming company using digital tokens has forced some developers to quickly abandon ambitious plans.
Gamers have historically resisted what they perceive to be exploitative content intended to take money out of their wallets. The games industry is constantly looking for new and inventive ways to monetize products, from downloadable content, or DLC, to loot boxes. NFTs in video games, like DLC, are expected to remain despite opposition from players, according to experts, as they have the potential to generate significant revenue for major game publishers.
There are many similarities between the early stages of DLC and NFTs today. An especially infamous piece of media signaled the start of a new era in video game revenue generation.
Initially, there was a horse.
With the release of the first DLC for the PC real-time strategy game Total Annihilation in the late 1990s, content that could be downloaded became more widely available. New units, maps, and other in-game items would be created by developers and made available to PC players for no charge.
When Bethesda Game Studios released the infamous Horse Armor Pack for The Elder Scrolls IV: Oblivion in April 2006, everything drastically changed. The Horse Armor Pack, which cost 250 Marketplace points, or approximately $2.50, was the brunt of jokes for years after it was made available. It was a precursor to in-game skins, which are now common in games like Fortnite but served no function other than cosmetics.
Microtransactions, or in-game purchases at a low cost, were a component of Microsoft’s new business strategy for the Xbox 360 when it was introduced in 2005. Today, we take microtransactions for granted, but back then, the response was prompt. Dramatic, too.
The criticism of the Horse Armor Pack quickly spread across online discussion forums. Many were concerned that a precedent would be set.
The DLC was a big seller for Bethesda despite the criticism.
According to Todd Howard, director of the game and executive producer for Bethesda Game Studios, “[Horse Armor] was one of the most popular [DLC packs] we’ve done, believe it or not,” in 2016. It’s ironic that while we abandoned horse armor, the rest of the sector has turned to it.
Since then, microtransactions have grown to be a significant revenue generator for game developers, generating more profit than the games themselves.
According to the analytics company SuperData, the video game market was worth more than $92 billion in 2020. Comparatively, full-game purchases totaled close to $12 billion.
It’s the same old thing again
NFTs have a slightly different function in the context of video games than conventional downloadable content like Horse Armor. NFTs are electronic tokens used primarily for digital assets. This digital asset could be anything from a pixelated picture of a bird to a JPEG image of a “bored ape.”
Axie Infinity’s tradeable Pokemon-like creatures and Ghost Recon Breakpoint’s virtual goods are two examples of NFTs in gaming. The latter failed, earning reportedly $400 when it was released in December. While the latter has been a significant source of income for some—one player was able to purchase two homes with his winnings last year—the value of the Axie Infinity NFTs has been declining for the majority of 2022, in part because of a hack of the company’s blockchain that resulted in the loss of more than $600 million in cryptocurrency.
The strategies for NFTs are still being worked out by game companies. So far, they’ve chosen to proceed cautiously.
According to Wedbush Securities analyst Michael Pachter, “Initially, they were presented by publishers as tokens that represent things that were already being sold in games, like weapons in shooter games.” “Gamers reacted as though this was just a money-grabbing scheme by the few publishers who floated the idea, saying that calling in-app items that were for sale “NFTs” didn’t change what they were. Those publishers moved away very quickly.”
Since then, Ghost Recon Breakpoint’s publisher, Ubisoft, has reduced its use of NFTs. Two other significant businesses, EA and Square Enix, have expressed interest in the digital token market but have not yet made their intentions public.
Major game publishers’ NFT plans haven’t yet managed to pique gamers’ interest.
Lewis Ward, research director for IDC, stated that “what needs to happen is [NFTs] need to allow gamers to do things and experience things that they couldn’t otherwise experience and do, and those things and experiences need to be compelling.” “NFTs must respond to the question “What’s in it for me?” from the viewpoint of the gamer, and the response better be cool.”
Even game designers have their doubts about NFTs. According to the Game Developers Conference’s State of the Games Industry 2022 report, 70% of developers polled expressed no interest in digital tokens.
Even so, there was the same skepticism regarding DLC, and despite having generated billions of dollars, microtransactions aren’t going anywhere.
NFTs will eventually become a standard component of games, predicted Pachter. “I believe it will begin as user-generated content, such as artists creating skins, to improve games, and then it will grow to include brands. The Wild West will follow that.”