What is play-to-earn and why should marketers care about it?
Gaming is already the most lucrative entertainment medium on the planet. The advent of web3 is offering new ways for the developers of games – and the players themselves – to earn money. So what is ‘play-to-earn’ (P2E) and why should marketers experimenting in the gaming world care about it? Here’s what you need to know.
Blockchain tech and cryptocurrencies are creating a new breed of games that allow users to (in theory) earn ‘money’ as they play. They allow players to create or buy in-game assets, linked to non-fungible tokens (NFTs). By playing the game, the owners of those assets are boosting their value.
Effectively in-game resources, land and items are tokenized, meaning they can be sold to anyone, anywhere on open peer-to-peer markets. To put the value of some of those assets into perspective, an avatar in the game Axie Infinity was sold for 300 ETH – the equivalent of about $120k.
Axie Infinity is a ‘play-to-earn’ game – and the subject of a $600m crypto heist
That is the basis of the mooted P2E gaming economy, which turns in-game items into assets that players can own, increase the value of and ultimately sell to earn real-world money.
The developers of Axie Infinity – Sky Mavis – explain it in ambitious terms: “Axie has a 100% player-owned, real money economy. Rather than selling game items or copies, the developers of the game focus on growing the player-to-player economy. Marketplace fees go into a Community Treasury whose usage will be guided by AXS holders. The developers monetize through their ownership of AXS tokens. Axies are created by players using in-game resources and sold to new/other players.
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“You can think of Axie as a nation with a real economy. The holders of the AXS token are the government that receives tax revenues.”
Brands and celebrities are launching into the space, attracted by the opportunity to take a portion of any sale. Celebrity chef Gino D’Acampo has invested in Big Town Chef, a metaverse game that “enables players to farm, trade virtual ingredients and compete in cook-off battles.” The chef avatars created by players – including D’Acampo – are ultimately the investment that will be traded.
For brands such as Nike, which have already seen success in developing their own metaverse spaces, the opportunity is to effectively employ players to boost the value of their branded NFTs – and to take a cut of the sale.
The interplay between real and virtual currencies in gaming has been around for years. World of Warcraft, one of the largest multiplayer online games in the world, struggled to get its ‘gold-farming’ population under control, in which the in-game currency was illicitly bought and sold for real-world currencies. Other multiplayer games including EVE Online, with complex in-game economies, have seen assets worth around $378,000 in real-world currencies wiped out in single in-game incidents.
Players have been habituated to think of those in-game currencies as real for years. But with the advent of NFTs, which can be traded on the blockchain for cryptocurrencies, that has become very literal.
Since then, however, things have taken a turn. Axie Infinity has been the subject of the “largest crypto heist ever,” with around $600m having been stolen. The lack of stability in the market has also been highlighted as the official Formula 1 NFT game – F1 Delta Time – has shut down due to licensing issues, with the tokens created by players in that space now practically worthless.
The challenge for NFT advocates in gaming is understanding how to appeal to an audience that is mostly unimpressed by NFT inclusion to date. There have been far more backlashes from the gaming audience around the perceived intrusion of NFTs into long-running franchises than there have been successful executions.
Team17 was forced into climbing down from its NFT plans after a fan revolt. Ubisoft, the publisher of titles including the Far Cry and Tom Clancy’s Ghost Recon series, saw a similar backlash against its attempts to insert NFTs into its games, from both its audience and its developers.
It also speaks to the need to add value to the gaming environment in which NFTs are launched. That isn’t a fringe viewpoint – Reddit’s co-founder Alex Ohanian believes that P2E will be the dominant form of gaming in a few short years: “In five years, you will actually value your time properly. And instead of being harvested for advertisements, or being fleeced for dollars to buy stupid hammers you don’t actually own, you will be playing some on-chain equivalent game that will be just as fun, but you’ll actually earn value and you will be the harvester.”
It remains to be seen whether NFTs will enter the gaming space widely enough for that to become a reality. The price of many NFTs slumped at the start of the year, and there is still an enormous reputational issue to overcome from the general public. As the Axie Infinity and F1 Delta Time cautionary tales demonstrate, there are still concerns over security.
What is already clear, though, is that significant investment is already flooding into the NFT games space – but that brands need to be extremely wary of doing it without adding value to the players.