From pay-to-play to free-to-own: turning the tables on value generation

Web3 is enabling a profound revolution in value sharing – with gamers recognized as co-creators, do developers need to charge at all? It’s worlds away from the exploitative microtransactions of F2P gacha games.

When things are changing fast, sometimes it’s hard to guess where things are heading – but sometimes, nothing could be more obvious. That is the case now, with major disruptions shaking up the video game industry yet again. The latest chapter in the ongoing saga of changing monetization models brings a twist that makes the direction of travel crystal clear, as upcoming release Limit Break goes beyond freemium to “less than free”, actually placing earnings power primarily in the hands of the players. A power shift that profound won’t be easily reversed. So what does this mean for game creators?

The story so far…

Games have already changed so much from the simple entertainment products they started out as. Today’s games aren’t just a one-way experience, and revenues aren’t just (or even primarily) derived from the unit sales price.

The once-off upfront cost is still common for consoles and some PC games. It makes sense that these customers, who have already invested in expensive hardware, are ready to lay out $50 or so for a new title they expect to deliver many hours of fun. But this segment now represents just half the market, and is set to be overtaken imminently by the rapidly growing mobile gaming market.

This matters, because mobile games can be credited with a major shift in revenue structure. Mobile’s “freemium” model relies on casual gamers who don’t want to spend a lot upfront, but can be persuaded to fork out a few bucks here and there to opt out of ads, or get past a frustrating level, or upgrade their avatar. Of course, microtransactions didn’t originate with mobile – downloadable content was already familiar in major games, and was paid for on top of the original game price. But mobile’s free-to-play model changed expectations dramatically.

The dominant games now are “live service”: online, massively multiplayer, cross-platform games such as Fortnite that rely entirely on microtransactions. That poses a challenge for publishers. Long-term player spend is their bread and butter (79% of revenues, by one account), so the content for sale must be worth paying for, but not unbalance the game. Free players need a decent chance at success; paying players need to feel they are getting value for money. Get it wrong, and the backlash is huge – as seen in the current furore around Overwatch 2, where the free reward system actually seems worse than the hated loot boxes.

Fortnite is often held up as the gold standard (or the culprit, depending on your perspective). Forking out for a battle pass gets you fun cosmetics and in-game currency (which you can even spend on the next season’s battle pass, making it a free ride). But these paid extras don’t increase your chances of winning, and free players can also earn a range of freebies, so they have no reason to feel left out. In this model, regular new content is king. The studio’s generosity keeps players motivated and supports an enthusiastic community – which is essential to game longevity.

And then there’s Web3.

Blockchain’s potential to upend power structures has an ideal use case in gaming. Players can take meaningful ownership of their in-game assets, have a say in game governance, and even potentially keep a game alive after the studio sunsets it. Crypto tokens or NFTs acquired in the game – whether bought or earned – become tangible, tradable assets that form very real rewards. But for critics, this carries a whiff of exploitation in a new form, with play-to-earn titles requiring significant investment and a strong disadvantage for late entrants (if the token has risen in value).

Greater expectations

Against this backdrop, Limit Break’s value proposition raises the bar significantly. Players need absolutely no cash buy-in: instead, they are handed the tools to mint and sell their own NFTs, with the studio taking a cut of that income if and when it materializes. Crypto investor Alok Vasudev points out that what’s really happening here is that the players are being rewarded for distribution: getting this direct stake incentivizes them to promote the game within their circles. And having no upfront cost should mean a more long-term perspective, with no pressure to earn back their stake.

Details of the game at this point are extremely scarce, and the obvious question is what makes it a game at all, rather than simply an NFT minting tool. Where’s the actual fun? Will players enjoy it for its own sake, or is it just a grind that will yet again spawn virtual sweatshops in developing countries? Will the developers see enough revenue, fast enough, to keep the game alive? Is this a model that makes any kind of sense for games that are focused on play, not assets?

There’s no way to tell at this point, but new game creators would be well advised to take note of this bold experiment. The genie isn’t going back in the bottle: gamers know how much value they contribute, and they know that it’s possible to share that value with them. New game designers need to think hard about how they reward players. Just as Fortnite has raised the bar for in-game assets (both earned and paid for), Limit Break may well force other developers to think more creatively about game pricing.

We already know that user-created content is a huge driver of game value. Using blockchain assets to leverage that value, and motivate players to create even more, is a no-brainer. Designing a monetization strategy that actually enlists players as your viral marketing team is the next step… but the fun must always come first. That’s the primary design challenge facing Web3 game studios, and as in any good game, we hope to see a range of routes to victory emerge.

Challenge accepted?