Video game

Video game companies should think twice about NFTs

The video game industry is at a crossroads. Attracted by the prospect of easy profits, game publishers and even a retailer like GameStop Corp. seize the opportunity presented by the hottest buzzword of the moment: blockchain-enabled non-fungible tokens, or NFTs. But they should reconsider.

Frustrated by weak sales of popular titles, game makers are looking for other sources of revenue. Yet with any gain comes a real risk of alienating their customers, many of whom view virtual goods sales as an intrusion into the gaming experience.

NFTs are unique collectibles stored on a blockchain that are associated with a digital asset such as images or videos. Virtual goods often come with little or no user rights. But that hasn’t stopped the speculative frenzy on the buying and selling of the items.

GameStop, for example, has been working on an NFT platform that will allow creators and publishers to list game-related items such as outfits and weapons. The Wall Street Journal reported on Thursday that the retailer had hired more than 20 employees for the project and planned to launch its market later this year. Last year, GameStop was one of a handful of companies caught up in the meme stock trading madness that has skyrocketed its shares.

Some leading executives and game companies have expressed concerns about the frothy nature of DTVs. In October, Valve banned any software that issues or authorizes NFTs on its popular PC game store. Epic Games Inc. CEO Tim Sweeney said the NFT space was filled with scams, while Microsoft Corp. Xbox manager Phil Spencer told Axios that some NFT gaming efforts were ” exploitative ”.

Their warnings haven’t stopped a wave of NFT initiatives among other gaming companies. In November, the management of Electronic Arts Inc. told analysts that NFT and the game to win, where players make money through playing time, would be an important part of the industry’s future. . Last month Ubisoft Entertainment, the game creator behind blockbuster titles like Assassin’s Creed, unveiled a handful of NFTs for digital elements in one of its older titles. Developer GSC Game World has said that its next version of STALKER will contain NFTs only to cancel plans the next day after players are pushed back.

NFT enthusiasts claim that virtual marketplaces foster vibrant gaming communities and provide a financial incentive to play longer. In addition, they argue, the technology will one day allow players to use digital game elements across different titles.

But these benefits will come at a cost to gaming brands. Dedicated gamers tend to be passionate about the design and experience of games. The introduction of lucrative mechanics into games will alter player behavior, potentially driving away major users. This is why video game giant Activision Blizzard Inc. has long banned so-called gold producers, players who join games only to acquire in-game currency, inside “World of Warcraft. “.

Game companies that embrace NFTs also overestimate the potential for virtual goods to move between different games. Most big budget titles use specialized software that doesn’t translate between companies. In other words, you can’t just take a horse from Rockstar Games’ Red Dead Redemption 2 and expect it to be easily transferred to ride in Assassin’s Creed. It would require a lot of additional custom code to work, which is unlikely between competing vendors.

But perhaps the most important reason game companies might want to avoid NFTs is that they are fueling a speculative frenzy. Once the NFT bubble bursts, as it will inevitably be, some players will hold onto worthless assets.

This is already happening in other markets. For example, many NFT NBA Top Shots have fallen in value over 95% in just a few months, now that initial enthusiasm has waned. It shouldn’t have been a surprise that 35,000 NFT copies of a random layup video wasn’t the smartest investment, but some consumers were blown away by the hype.

The backlash against video game companies could be fierce if gamers also end up losing a lot of money trading NFTs. Even those who don’t have the financial skin in the game will be appalled. If a game becomes less entertaining, consumers may simply decide to stop playing.