Why are game companies giving up on NFTs? Are NFTs in Games?

According to an industry-wide report, developers aren’t interested in NFTs in Games. 2700 game developers were surveyed ahead of the 2022 Game Developers Conference (which takes place March 21 – April 1). 72 per cent said their studios had no interest in cryptocurrency as a payment tool while 70 per cent weren’t interested by NFTs.

Video Game Companies Should Think Twice About NFTs

A pedestrian walks by a GameStop store on March 10, 2021 in San Francisco, California.

Trading of GameStop shares was halted several times on Wednesday due to volatility after the stock surged to a record high of $348.50 per share before falling to below $200 per share. The stock closed at $265 per share.

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

Frustrated by sluggish sales of popular titles, game makers are on the hunt for other revenue sources. Yet any gains come with a real risk of alienating their customers, many of whom view sales of virtual goods as an intrusion on the gaming experience.

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

GameStop, for example, has been working on an NFT platform that will allow creators and publishers to list gaming-related items such as outfits and weapons. On Thursday, the Wall Street Journal reported the retailer had hired more than 20 employees for the project and plans to launch its marketplace later this year. GameStop last year was among a handful of companies caught up in the meme-stock trading mania that sent its shares soaring.

What do leading game companies think?

Some leading gaming executives and companies have raised concerns about the frothy nature of NFTs. In October, Valve banned any software that issues or allows NFTs on its popular PC game store. Epic Games Inc. Chief Executive Officer Tim Sweeney has said the NFT space is filled with scams, while Microsoft Corp.’s head of Xbox, Phil Spencer, told Axios some NFT gaming efforts are “exploitive.”

Their warnings haven’t stopped a wave of NFT initiatives among other gaming companies. In November, Electronic Arts Inc. management told analysts that NFTs and play-to-earn, where gamers earn money through play time, would be an important part of the industry’s future. Last month, Ubisoft Entertainment, the game maker behind hit titles such as Assassin’s Creed, unveiled a handful of NFTs for digital items in one of its older titles. Developer GSC Game World said its next S.T.A.L.K.E.R. release would contain NFTs only to cancel the plans the next day after pushback from gamers.

What do NFT fans say?

NFT enthusiasts say the virtual marketplaces foster vibrant communities around games and offer a financial incentive to play longer. In addition, they contend, the technology will some day allow players to use digital gaming items across different titles.

But those advantages will come at a cost for game brands. Devoted gamers tend to be passionate about the design and experience of games. Introducing money-making mechanics inside games will alter how players behave, potentially driving away core users. That’s why video game giant Activision Blizzard Inc. has long banned so-called gold farmers, players who join games solely to acquire in-game currency, inside “World of Warcraft.”

Game companies adopting NFTs are also overestimating the potential for moving virtual goods among different games. Most big-budget titles use specialized software that doesn’t translate across companies. In other words, you can’t just take a horse from Rockstar Games’ Red Dead Redemption 2 and expect it to easily be transferred to ride in Assassin’s Creed. It would require a lot of extra customized code to work, something unlikely to happen between competing publishers.

Risk of Fueling

But perhaps the most important reason that game companies might want to steer clear of NFTs is that they would be fueling a speculative frenzy. Once the NFT bubble bursts, as it inevitably will, some gamers will be left holding worthless assets.

It’s already happening in other markets. For instance, the value of many NBA Top Shot NFTs has fallen more than 95% in just a few months now that the initial excitement has faded. It shouldn’t have been a surprise that 35,000 NFT copies of a random layup video wasn’t the wisest investment, but some consumers were swept up in the hype.

The backlash against video game companies could be fierce if players similarly wind up losing a lot of money trading NFTs. Even those without financial skin in the game will be dismayed. If a game become less entertaining, consumers might just decide to stop playing.

This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners. Tae Kim is a Bloomberg Opinion columnist covering technology. He previously covered technology for Barron’s, following an earlier career as an equity analyst.

What’s Happening With NFTs in Games then?

This is currently the most high-profile scenario courtesy of Ubisoft and its Quartz programme. It offers ‘digits’, which is just branding for NFTs, that take the form of cosmetics in Ghost Recon: Breakpoint for PC. These NFTs weren’t directly sold to players initially, but distributed on a first-come-first-served basis if you claimed them or met certain in-game requirements, such as playing for a minimum number of hours (it varied depending on the item). The initiative is partnered with Tezos, a platform with its own cryptocurrency (XTZ); transactions seem to be taking place with the Tezos cryptocurrency, so anyone that sells a Quartz Digit will need to navigate the Tezos ‘wallet’ system and follow multi-step processes if they want to convert the sale into a conventional currency like US dollars.

Ubisoft won’t be the last to tie what were previously microtransactions into limited edition NFTs, we’re likely to see more companies attempt the model. What it does allow, for those who either earn or buy the items, is the option to sell them on again if there’s demand. Ken Barnes highlights the potential positives of this in comparison to standard microtransactions in things like FIFA Ultimate Team, while highlighting an obvious downside.

Digital Game Trading

At present the role of in-game transactions with NFTs seems difficult, but what about digital game ownership? In recent years it’s become a notable topic as digital stores have closed down, such as the Wii Shop, and some game content has been ‘lost’ forever. While defunct stores do sometimes give us a means of accessing our old purchased content for redownload, the small print often emphasizes that this isn’t a permanent luxury. The reality is that when we buy a download game we’re effectively leasing it — theoretically it can disappear anytime.

If the game and its servers shut down, your NFT loses its purpose. It doesn’t appear to be a valid use of blockchain, or even one that’s particularly functional

The blockchain can’t really fix that for the reasons we’ve highlighted — our game content is controlled centrally by the platform holders / publishers, etc. However, one area that is open to change is what we do with our digital games while they’re active, and the form our ‘ownership’ takes. What, for example, if you could re-sell your download games when you’re finished with them?

Michael Yum points us to Robot Cache, which is “like Steam and GameStop in one”. It allows people to buy PC games and then, when they’re ready, sell them on. As you can see if you view the store, there are a number of publishers on board, and purchases and sales can be made with standard currencies like US dollars or the store’s own virtual currency, ‘IRON’. When you want to sell a game, it is listed for the same price you paid, but you get 25% of the money — 5% goes to the store, with the publisher then getting 70% of the resell. It functions rather like used game trade-ins with physical games, but in this case the publisher / developer gets a big chunk of money each time.

What is the point of owning an NFT?

An NFT essentially allows its buyer to say that they own the original copy of a digital file, in the same way you might own the original copy of a piece of physical art or the master file of a music recording.

What does NFT stand for in games?

Regardless of whether it’s used in gaming or elsewhere, the acronym NFT refers to a “Non-Fungible Token” for a digital item. It sounds a bit complicated in name, but the idea is actually fairly simple. An NFT is a certificate of ownership of a digital good that’s supposed to be made in a limited quantity.

Do people actually buy NFTs?

What we do know is that the amount of people buying NFTs is almost definitely about to grow. It’s estimated that around 250,000 people trade NFTs each month on OpenSea, the biggest NFT marketplace.

Are NFTs worth investing in?

Since the popularity is very huge, NFTs are very common and bought and sold by the majority of the digital community. NFTs as an investment is a very safe way to experience some profit; the profit is dependent on the longevity of the asset and luck. Some NFT investors experience. But, overall, it is a good investment.