a16z Podcast: New Business Models for Gaming

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 Executive Chairman 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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