It’s often said - I have said it - “the games industry doesn’t need blockchain”.
Thanks to Covid-19, the games industry grew by 25% in 2020. It might hit $200 billion of global revenue in 2021.
Most games companies are experiencing their most profitable years ever; just check out the boom in M&A.
Games companies are overwhelmed trying to fulfil their current opportunities. They don’t have time to do anything new, let alone jump into the conceptual disruption that is blockchain.
And yet, disruption is coming.
The future is now
I was struck recently by a comment from Supercell’s Ilkka Paananen.
The CEO of one of the most profitable games companies ever, he was explaining - perhaps bemoaning - that Supercell had experienced another year of declining revenues and profits; that despite having five games that have generated more than $1 billion in lifetime sales.
One particular point that jumped out was his insistence Supercell would not change its organisation structure - its supercells - that force the company and its employees to work smarter and smarter, not just hiring their way to efficiency.
Amazingly, Supercell has 340 employees in total, which - as Paananen pointed out - was less than some companies now employ for individual game teams. Brawl Stars - Supercell’s latest billion dollar game - is run by a team of 30.
In that context, Supercell’s achievements and continued success - and its management’s resistance to change the company’s underlying philosophy - is incredible.
And yet, given the scale of the competition, it seems to me that Supercell’s - and similar-thinking companies’ - advantage can only be maintained by them taking a leap into disruption.
First learns best
As we’re currently seeing in the NFT space, the advantage of being an early adopter of blockchain are immense.
It’s the companies and products I’m labelling ‘Year 0 NFTs’ - CryptoPunks, CryptoKitties and Axie Infinity - which three years on are proving the foundations of the entire industry.
Similarly, this status is now reflected in their valuations.
The cheapest CryptoPunk is +$30,000 (I’m still happy with my $10,000 sale btw);
three CryptoPunks have sold for over $1 million;
the cheapest Mystic Axie (the rarest) is +$15,000, and
CryptoKitties’ developer Dapper Labs has reached $200 million of lifetime trading activity with its NBA Top Shot project.
Nevertheless, the size of the NFT market is less than $500 million, compared to $200 billion of annual games revenue.
So it’s the companies that make the leap now - just as Supercell made the leap to free-to-play mobile games in 2011 - that will reap the rewards over the coming decade.
Because big brands are coming to blockchain.
The success of NBA Top Shot has underlined this. But there’s still plenty of opportunity to create the new brands of blockchain gaming era.
Who knows, maybe the likes of Season 00 Blankos will vive with Mario NFTs for MVP status, whenever Nintendo finally gets around to doing blockchain … sometime in early 2030.