Minecraft’s NFT ban starts a reckoning for blockchain games
Hello, and welcome to Protocol Entertainment, your guide to the business of the gaming and media industries. This Tuesday, we’re discussing the fallout from Microsoft’s ban on blockchain tech and NFTs in Minecraft, new unionization efforts in the game industry and the quagmire surrounding loot box regulations.
Gaming culture’s own crypto winter
The video game industry’s adoption of Web3 technologies like NFTs had already begun to chill. But last week’s blockchain ban from Minecraft developer Mojang, combined with a crashing crypto market and plummeting NFT sales, sent the burgeoning blockchain gaming market into thoroughly icy territory.
Mojang, with the backing of its parent company Microsoft, didn’t mince words, calling NFT speculation “inconsistent with the long-term joy and success of our players” and saying the current digital ownership structure of most blockchain projects “does not align with Minecraft values of creative inclusion and playing together.” The decision reverberated quickly throughout the broader game industry, providing a much-needed wake-up call to blockchain gaming proponents.
Minecraft was an attractive Web3 prospect. Part of the reason Mojang’s announcement hit so hard was because Minecraft is a critical example of the kind of platform blockchain gaming boosters desperately want to create and build atop of.
- Minecraft is a video game creation tool, social network and massive global fan community. It is the best-selling game of all time, with nearly 250 million copies sold.
- The game facilitates a vibrant network of third-party modders, Twitch and YouTube streamers and other digital creators who have built entire careers and even small businesses around the product, a lucrative revenue driver for Microsoft that began to accelerate dramatically with the launch of the Minecraft marketplace in 2017.
- Minecraft already sells mods, skins and plenty of other digital goods ripe for tokenization. If Minecraft were to get into blockchain gaming and NFTs, Mojang could have thrust these technologies into the mainstream. Instead, the game is centrally controlled by Microsoft, and Microsoft decided it wanted nothing to do with the crypto movement, for now.
- While Mojang didn’t rule out ever embracing Web3 tech — it said it would “be paying close attention to how blockchain technology evolves over time” — the message was loud and clear: “We have no plans of implementing blockchain technology into Minecraft right now,” the announcement concluded.
Gaming’s biggest players don’t want, or need, NFTs. Microsoft’s decision follows a similar denunciation of NFTs and blockchain tech from Sony, which is launching its own digital collectibles feature as part of a new rewards program.
- “It’s definitely not NFTs. Definitely not. You can’t trade them or sell them. It is not leveraging any blockchain technologies and definitely not NFTs,” Grace Chen, a Sony vice president in charge of advertising and merchandise, told the Washington Post earlier this month of the company’s collectibles.
- “A lot of these large industries don’t have a large monetary incentive to use blockchain because they already own everything,” Christopher Swenor, CEO of blockchain gaming service provider Alloy, told Protocol. “Why would any established player blow up what they have unless they’re forced to? Innovation won’t come from these old players.”
- Swenor said most implementations of NFTs in gaming right now are missing the mark because they’re either focused too narrowly on play-to-earn economies or trying fruitlessly to make digital assets interoperable without coming up with a good reason why players might actually want that.
- “If you have to pay me to play your game, your game is not good,” he said. “Blockchain should be behind the scenes, providing value and sustainable value, not flash-in-the-pan, get-rich-quick schemes.”
Minecraft had good reason to cut off blockchain integrations. Mojang mentioned in its announcement that some companies “recently launched NFT implementations that are associated with Minecraft world files and skin packs.” It became clear in short order the studio was referring to projects like NFT Worlds.
- The crypto project turned what are known as Minecraft world seeds — algorithmically generated Minecraft servers — into NFTs that players could buy and then monetize how they saw fit. Within hours of the announcement, NFT Worlds’ crypto token crashed in value, and the project, which had a trading volume of more than $75 million, was in serious jeopardy.
- The creators of NFT Worlds remained defiant, issuing a statement on Friday that they would develop their own Minecraft competitor now that they were no longer allowed to transact inside Minecraft, integrate with the game’s APIs or create NFTs based on Mojang’s intellectual property. “Make no mistake, this is a Web2 vs. Web3 battle,” they said in a statement.
- Web3 evangelist and Andreessen Horowitz investor Chris Dixon put it bluntly on Twitter: “Good reminder of why you shouldn’t build on corporate-owned (web2) networks. They change the rules on developers on a whim.”
It may be tempting to look at the Minecraft NFT ban as a sign these technologies won’t take off. The backlash against blockchain tech in gaming can seem overwhelming.
- But there is real money behind the movement. It may take time, and perhaps more public failures, to iron out the kinks. Investment firm Drake Star Partners reported last week that more than half of all startup investments in gaming in the first half of 2022 — roughly $2.2 billion — were for blockchain and NFT gaming projects. For what it’s worth, Andreessen Horowitz, a firm I wouldn’t advise betting against, is also undeterred in its enthusiasm.
- Some major publishers, like Square Enix, are quietly still experimenting in digital collectibles, though now omitting any mention of “blockchain” or “NFT.”
- Big tech companies, including Instagram and Facebook parent Meta, Reddit and Spotify, are all betting on the long-term viability of NFTs, Platformer’s Casey Newton points out, though with a crashing crypto market and plummeting NFT sales, it may be a long while before we see any meaningful Web3 product integrations.
If the game industry wants to get it right, Web3 proponents might have to rethink their approaches, and perhaps stop trying to use other companies’ IP. “Games should sell their products based on the value they’re providing. Blockchain is not value. It’s a tool you can use to provide value,” said Swenor. “Until game developers start viewing it that way to make their games better, it won’t take off.”
— Nick Statt
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Thinking outside your wall: How the path to net zero requires a new approach to collaboration and knowledge sharing: The emissions that make up a full greenhouse gas footprint can emanate from outside the four walls of your own manufacturing operations, like in the case of PepsiCo, where 93% of emissions come from its value chain.
“Developers should be free to decide how to build their games, and you are free to decide whether to play them. I believe stores and operating system makers shouldn’t interfere by forcing their views onto others. We definitely won’t.” — Epic Games CEO Tim Sweeney defended his company’s decision to distribute blockchain games on its PC game marketplace in response to the Minecraft ban and competitor Valve’s Steam ban.
“If I'm going to make this game, it means I have to build a team, and if I build a team, I have to build a company, and if we're going to do that then we have to do it the right way … It has to be inclusive, equitable, and collaborative, full of big-hearted people that want to grow both professionally and personally. The culture needs to be as iterative as the way we make games.” — Bruce Straley, a former Naughty Dog director behind games like Uncharted and The Last of Us, posted a video to YouTube about returning to the game industry after a five-year hiatus to form a new studio, Wildflower Interactive.
In other news
More unions in the game industry. A second group of Activision Blizzard employees, this time at subsidiary Blizzard Albany, filed for a NLRB union election last week, while management at LA-based indie developer Tender Claws will voluntarily recognize a new union unit, Polygon reported.
Hulu has blocked ads on abortion and gun control. Democrats charge that the Disney-owned streamer has blocked ads that have run on a variety of other services.
Pico gets ready to release a new VR headset. The Pico 4 headset is likely part of the company’s strategy to take on Meta’s Quest VR hardware. Pico is a subsidiary of TikTok owner ByteDance.
Ubisoft’s rough release slate. The French publisher said last week it would push multiple projects to 2023, including a game based on James Cameron’s “Avatar” and a new Assassin’s Creed entry. Ubisoft is also canceling both Splinter Cell and Ghost Recon projects.
What’s next for Netflix’s interactive shows. The lines between games and choose-your-own-adventure stories are starting to blur as Netflix continues to work on interactive content.
Bungie’s legal offensive. The Destiny developer, now officially a Sony-owned studio, filed a lawsuit against a serial harasser who threatened its employees. Bungie has been increasingly wielding the legal system to combat cheaters, copyright trolls and now online abuse.
The adaptations don’t stop coming. Hollywood adaptations of video games continue unabated, including a new “Grounded” TV series from “Star Wars: The Clone Wars” writer Brent Friedman and a follow-up to Simon McQuoid’s “Mortal Kombat” reboot.
Riot Games’ settlement inches closer to payouts. A historic $100 million gender discrimination settlement between the Valorant developer and current and former employees was granted preliminary approval on Friday, Axios reported.
The loot box lives on
The vital role of the loot box in the game industry’s bag of monetization tricks doesn’t appear to be changing any time soon, despite concerted efforts from European regulators.
- Last week, after calling for an investigation into the practice back in 2020, the U.K.’s Department for Digital, Culture, Media & Sport concluded last week that it should not at this time regulate loot boxes as a form of gambling.
- The DCMS report on loot boxes said regulating them as such would be “premature” due to unintended consequences for other markets, like trading cards and blind box subscription services.
The decision dealt a blow to critics of the practice, who say loot boxes target underage video game players and exploit consumers by using feedback loops similar to gambling.
- A number of countries have proposed legislation regulating loot boxes, but so far only Belgium and the Netherlands regulate loot boxes as a form of gambling — an effective ban on the practice that has reshaped gaming monetization in those markets.
- Some game makers have modified their games to abide by those rules, either by removing loot boxes entirely or creating special versions of games for Belgian and Dutch players that don’t include loot boxes.
- In some cases, however, developers have exited those markets completely. Activision Blizzard’s new mobile free-to-play game Diablo Immortal was not released in Belgium or the Netherlands, for instance.
The regulatory heat around loot boxes isn’t letting up, however.
- In June, a group of 20 consumer groups from 18 European countries backed a new report from the Norwegian Consumer Council calling loot boxes “deceptive” and saying they “exploit cognitive or behavioral biases to incentivise spending."
- While efforts to regulate loot boxes have largely stalled in the U.S., the NCC’s report advised European governments to consider an outright ban on the business practice.
- Some game makers have begun to wise up. Though Diablo Immortal is rife with randomized microtransactions, Blizzard’s upcoming Overwatch 2 is removing loot boxes entirely.
— Nick Statt
SPONSORED CONTENT FROM PEPSICO
Thinking outside your wall: How the path to net zero requires a new approach to collaboration and knowledge sharing: Asking suppliers and associated companies to overhaul the way they work is no small feat, but PepsiCo is taking a three-pronged approach centered around the principles of educating, enabling and incentivizing. The Sustainability Action Center aims to engage and equip value chain partners with tools to undergo their own sustainability journey.