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)
The views expressed here are those of the individual AH Capital Management, L.L.C. (“a16z”) personnel quoted and are not the views of a16z or its affiliates. Certain information contained in here has been obtained from third-party sources, including from portfolio companies of funds managed by a16z. While taken from sources believed to be reliable, a16z has not independently verified such information and makes no representations about the enduring accuracy of the information or its appropriateness for a given situation.
This content is provided for informational purposes only, and should not be relied upon as legal, business, investment, or tax advice. You should consult your own advisers as to those matters. References to any securities or digital assets are for illustrative purposes only, and do not constitute an investment recommendation or offer to provide investment advisory services. Furthermore, this content is not directed at nor intended for use by any investors or prospective investors, and may not under any circumstances be relied upon when making a decision to invest in any fund managed by a16z. (An offering to invest in an a16z fund will be made only by the private placement memorandum, subscription agreement, and other relevant documentation of any such fund and should be read in their entirety.) Any investments or portfolio companies mentioned, referred to, or described are not representative of all investments in vehicles managed by a16z, and there can be no assurance that the investments will be profitable or that other investments made in the future will have similar characteristics or results. A list of investments made by funds managed by Andreessen Horowitz (excluding investments for which the issuer has not provided permission for a16z to disclose publicly as well as unannounced investments in publicly traded digital assets) is available at https://a16z.com/investments/.
Charts and graphs provided within are for informational purposes solely and should not be relied upon when making any investment decision. Past performance is not indicative of future results. The content speaks only as of the date indicated. Any projections, estimates, forecasts, targets, prospects, and/or opinions expressed in these materials are subject to change without notice and may differ or be contrary to opinions expressed by others. Please see https://a16z.com/disclosures for additional important information.