In early 2022, following a parabolic NFT bull run, Yuga Labs raised a $450 seed round valuing the company at $4 billion. Between this capital raise, the token issuance, and trading royalties collected, the company amassed a billion dollar treasury. The company then embarked on the development of a flagship metaverse experience titled Otherside, which would unite all the Yuga labs profile picture (PFP) IP in a virtual world.
Something that gets hammered into your head in business school is that some industries are much more attractive than others for new entrants. I can’t help but think that if I was running a company with a $1 billion dollar treasury, becoming a game publisher is one of the last businesses I would pick, next to starting my own airline.
The video game publisher space is extremely competitive and many people severely underestimate just how hard it is to build a title with global appeal. For context, I’ve been a gamer for most of my life, and have played titles from every major genre: FPS, MMOs, RPGs, flash/arcade, mobile, RTS, MOBA, survival, meta/builder.
Good games are hard to build, and category defining games are extremely hard to build.
The most popular games in the world like League of Legends, Counter Strike, and Valorant are so popular people sit down in a chair and play them for 12+ hours and consume another 2+ hours of YouTube videos of other people playing the same game before bed. There is not a single crypto game which has achieved even close to this upper echelon of fun and replayability, unless perhaps you consider trading on a centralized exchange a game.
Crypto gaming projects face an even harder challenge, they need to be just as fun (or more fun) than Web2 titles while also incorporating sustainable tokenomics and deflationary economies to drive value accrual for token holders and players. It’s hard enough to just build a game that stands on its own two legs without heavy incentives without having to solve for value accrual and blockchain infra constraints.
Of all of the 2021 trends, gaming and metaverse feel like the most downtrodden. We are always excited for fresh innovations and have a strong gaming thesis based on modding, generative AI characters, and meta games but fully expect the “metaverse” to take a few more years at least to be lifelike (8k resolution at 160fps) in a headset.
It feels as though the market isn’t bearish on gaming as a category, but rather bearish gaming in its current form. It seems almost as if crypto needs gaming more than gaming needs crypto.
However, all is not lost! We encourage crypto game devs to not give up, but rather to focus on quick, iterative development timelines to develop fun, light gaming experiences like Flappy Bird people can play on the bus to work rather than trying to out triple A the AAA studios: Rockstar has been building GTA 6 for 8 years with a near unlimited budget and is rumored to integrate crypto into the game when it launches in 2024-2025. It’s not realistic to think that a crypto native team with some Web2 gaming industry transplants can usurp a giant like Rockstar with decades of learning economics and millions of loyal fans waiting to dive into a sequel.
It’s much wiser for crypto game developers to position like the indie publishers Innersloth who created Among Us. Trying to compete with large, established publishers head on is a losing battle. Despite costing under $5m to produce, at its peak during COVID, Among Us had 60 million daily active users which is more than all blockchains combined.
Start small and iterate fast until you find something that people love.