To the game industry, NFTs are already dead
Hello, and welcome to Protocol Entertainment, your guide to the business of the gaming and media industries. This Friday, we’re discussing Sony’s new “digital collectibles” and how the game industry has soured on NFTs. Also: what to read, watch and play this weekend.
NFTs are dead. Long live digital collectibles.
The game industry’s messy relationship with crypto concepts like the blockchain and NFTs soured in dramatic fashion yesterday when Sony launched a new “digital collectibles” feature for a revamped PlayStation loyalty program.
What might have been a golden opportunity for Sony to march proudly into Web3 instead turned into a telling moment for the flagging NFT market, as Sony emphatically emphasized it was not in fact selling digital tokens of the non-fungible variety and had no plans to do so. For game companies, NFTs have become damaged goods.
Sony isn’t alone. Companies across the game industry and beyond are distancing themselves from NFTs — sometimes just in name alone — in a way that signals a reputational crisis for a technology Web3 enthusiasts claimed would be revolutionary.
- The Sony quote in question, and it’s an incredible one, comes from Grace Chen, the company’s vice president of network advertising, loyalty and licensed merchandise.
- “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,” Chen told The Washington Post, leaving not a shred of doubt about how damaging Sony thinks it would be to attach the crypto market to its valuable brand name.
- Reddit recently did something similar when it announced “collectible avatars” last month, choosing not to use the phrase NFT. But Reddit is indeed selling these avatars and using blockchain technology to denote their uniqueness and facilitate aftermarket trading.
- Some of the bigger names in the game industry have stopped singing the praises of NFTs and blockchain gaming after just a few months. Electronic Arts CEO Andrew Wilson called NFTs and blockchain gaming the “future of our industry” late last year. By February, he had backed off.
- Microsoft Gaming CEO Phil Spencer said last year he felt NFTs could be “exploitative” and that the market was rife with scams and speculation.
- Take-Two Interactive CEO Strauss Zelnick, a rare NFT believer among gaming’s top ranks, still earlier this year predicted a “reset” for NFTs in which they “take their proper place as part of the entertainment economy.”
The game industry turned on NFTs for two reasons. The first one is obvious: Some players hate them with a burning passion, and many at the very least are entirely ambivalent toward them. The second reason is the crypto crash, which has seen cryptocurrency prices plummet and NFT trading volume tank.
- A new survey of U.S. gamers over the age of 18 found that 81% of them had not purchased an NFT. And just 40% of players surveyed were interested in play-to-earn gaming.
- Axie Infinity, once a promising poster child for the blockchain gaming space, has experienced a stunning and swift fall from grace following a devastating hack of more than $600 million in crypto tokens and a cratering in-game economy.
- Parent company Sky Mavis promised to reimburse players, but not in full because the price of ethereum, on which the game is based, has crashed in the past few months.
- Any company, gaming or otherwise, that might have been interested in jumping into the NFT market is probably now reconsidering. Sales volume on leading NFT marketplace OpenSea has collapsed, falling 75% since May and 90% over the last six months. The firm said it was laying off about 20% of its staff on Thursday.
The underlying concept of NFTs makes sense for gaming. It’s the implementation that needs work. One of the highest-profile examples, and a telling test case for the rest of the industry, was Ubisoft’s Digits, which failed rather publicly — and quickly.
- The French publisher late last year launched collectible cosmetics in Ghost Recon Breakpoint, then a 2-year-old shooter with a shrinking player base. The backlash was fierce, the NFTs never rose high in value and Ubisoft shut the whole thing down four months later.
- No other mainstream game publishers or developers have tried launching NFTs since, and it may be unlikely we see another crack at it from Ubisoft for quite some time. When it does happen, it may not even be called an NFT, but instead a digital collectible.
- One company that won’t give up the dream is GameStop, the struggling retailer that this week launched its NFT marketplace in beta. Instead of focusing on gaming NFTs, which it plans to highlight eventually, GameStop is mostly selling what are known as “profile picture” NFTs.
- The company achieved a modest $3.5 million in trading volume after three days. But at a 2.25% cut, that amounts to a minuscule $78,750 in revenue for the company.
- When a company best known for its meme stock and selling Blu-ray discs at your local mall is one of the last ones left holding the flag for this particular brand of NFTs, it may be time to move on.
NFTs are not going to disappear completely. But as Take-Two’s Zelnick predicted, we may be seeing a reset in real time as companies distance themselves from the NFT phrase — a poisoned well, from a marketing perspective — and look beyond to much more useful takes on digital ownership. It may be that blockchain tech is involved. Or, as Sony has figured out, it may not require a blockchain at all.
“I think we’ve only seen the tip of the iceberg. Most of the headlines were stolen by profile picture NFTs, but I think they have way more use cases,” Mihai Vicol, the metaverse lead at market research firm Newzoo, told me recently. “I think the concept of an NFT if you strip it down is a very powerful concept. The idea of owning a digital item that is verifiably scarce and verifiably yours — it cannot be faked and it exists as an original.”
But, Vicol added, “I think game companies need to do more work and figure out how to best implement these NFTs in games.”
— Nick Statt
A MESSAGE FROM SOUL MACHINES
Soul Machines co-founder and CEO Greg Cross and his co-founder Mark Sagar, Ph.D., FRSNZ are leading their Auckland and San Francisco-based teams to create AI-enabled Digital People to populate the internet, at first, and soon the metaverse.
#TGIF: How to spend your weekend
“Abbott Elementary” — ABC / Hulu. Move over, Ted Lasso: “Abbott Elementary,” a workplace comedy set in a Philadelphia public school, received an Emmy nomination for Best Comedy this week, and rightly so. Shot as a mockumentary, “Abbott Elementary” explores the reality of underfunded public schools — without getting stuck in cliches.
No one is coming to “save these kids.” Instead, the teachers make do, often using hilarious shortcuts to overcome resource scarcities and other challenges. And while all teachers are heroes in my book, “Abbott’s” band of characters are so lovable and fun to watch because they are imperfect, insecure and quirky.
The Road to All-Day XR Glasses — Medium. Apple, Snap and Meta are all trying to invent the next big thing: AR glasses that can be worn for hours at a time and eventually play as big a role in our lives as the smartphone. AR/VR pioneer Avi Bar-Zeev sums up some of the key challenges these companies are facing, and shares his thoughts on how to overcome them.
“Stranger” — Netflix. This South Korean crime drama features Cho Seung-woo as a prosecutor who had a lobotomy that left him unable to feel emotion. It’s a trait that has made him ruthless, and incredibly effective in his job, but also in need of being kept in check.
Enter Bae Doona of “Kingdom” and “Sense8” fame, who plays a cop tasked with grounding her steely partner and helping him with his blind spots. “Stranger” first debuted in 2017, but with Korean fare becoming hugely popular on Netflix in recent months (“Squid Game,” “All of Us Are Dead”), now’s a perfect time to rediscover this gripping gem of a show.
PatchWorld — Meta Quest. There have been many takes on music experiences in VR. Some are more gamified, like Beat Saber and Audica, whereas others are trying to reinvent more traditional studio or DJ environments in VR (Electronauts, Tribe XR).
PatchWorld aims to combine the best of both worlds by offering access to sequencers and everything else you’d need to make your own tracks, while also letting you jam in weird and trippy underwater worlds with moody ocean spirits. It’s odd, intriguing and a lot of fun.
— Janko Roettgers
A MESSAGE FROM SOUL MACHINES
Soul Machines is at the cutting edge of AGI research with its unique Digital Brain, based on the latest neuroscience and developmental psychology research.
Thoughts, questions, tips? Send them to firstname.lastname@example.org. Enjoy your day, see you Tuesday.