N’Gunu Tiny, Founder and Executive Chairman of the Emerald Group is an expert in Fintech, blockchain and innovative tech. Here’s his take on the impact blockchain could have on the gaming industry in Africa and around the world.
The global gaming industry is one of the few that has managed to thrive in 2020. Lockdown only increased the number of console and online gamers around the world. And there are no signs of it slowing down. In fact, with the integration of blockchain technology, gaming and how it’s funded is about to evolve onto a whole new level.
How does the games industry in Africa compare with the rest of the world?
Before we look at how this will affect Africa specifically, it’s important to look at the global gaming industry in context. Taking one of the biggest online games in the world, on 16 June 2020, Epic-owned Fortnite unveiled ‘The Device’. This live event offered the opportunity for players to book slots to witness the latest updates to the game. Twelve million players logged in. Add to this the eight million players watching the livestream, and this single gaming event had an audience of 20 million people.
Going back to 2004 when Blizzard Entertainment released World of Warcraft (WoW), how many people saw it turning into the leading light in the MMORPG (massively multiplayer online role-playing game) with more than 100 million users by 2014? Another example, this time of a console game – Activision’s Call of Duty: Black Ops. When this was released as the seventh game in the franchise in 2010, it set records across the entire entertainment industry. It took more than $650 million in the first five days of release.
In 2019, the industry broke another record with an annual revenue of $143 billion. More perspective. The music industry in the same year brought in $24 billion. TV and video combined $290 billion. It’s predicated that gaming will be responsible for 36% of the entire entertainment industry’s revenue by 2023 (up from 31% in 2020).
Microsoft says that worldwide, there are more than two billion gamers. This includes casual gamers on free online games, mobile games players, console gamers and those who play complex multiplayer games. Now that blockchain technology is joining the gaming industry, it could fundamentally change both for investors and for players.
Why blockchain funding models could change the entire gaming industry?
Blockchain funding models could completely alter the dominance of platforms, publishers, and developers. It could create entirely new gaming models and alter the way people play. Brand new revenue models could alter the way value is added to this already enormous and buoyant industry. And this means investors are already looking at gaming as a new market for blockchain technology.
Before we look at the potential impact of blockchain technology on the global gaming industry, let’s quickly turn to the gaming industry in Africa. Estimates say that by 2050, the number of young people (under 24) in Africa will double. By then, the continent will have the biggest number of young people in the world. Naturally, the youth of Africa are key for the future of Africa’s gaming industry.
In recent years there has been an increase in tech hubs in Africa, with more than 100 now functioning across the continent. Each one is educating, encouraging and enabling many thousands of innovative, forward-thinking young people to develop new applications, platforms and ideas. These hubs are vitally important as they are providing opportunities for the increase in young people armed with digital skills and an entrepreneurial mindset to launch their careers. Africa has just as many talented, focused and dedicated tech workers as other, more recognised, gaming communities such as North America, Canada and the UK.
We can expect to see a steady increase in hubs such as the Nairobi Game Development centre, with more of a centralised focus on gaming. A problem within the African gaming industry is the fragmented nature of development. There isn’t yet the kind of infrastructure that is often seen in countries with a high focus on gaming as an industry. This makes it difficult for developers and video game designers to get anything recognised or made. But now that there is a totally different focus on blockchain and the entire gaming ecosystem, investors are going to be much more interested in Africa as a gaming centre.
How blockchain could open up funding for game developers in Africa?
Right now, there are lots of venture capitalists (VCs) and investors like the Emerald Group, looking towards the gaming industry in Africa with real interest. If we consider the growth of the gaming industry as it stands in 2020, technological advances were the trigger for enormous growth at certain times. And blockchain is set to do the same.
Digital technology completely revolutionised the way games are made. The internet did the same for distribution. This has always been a double-edged sword in terms of the cost of making these games with the graphics and gameplay demanded by increasingly sophisticated players. Budgets to make Triple A video games have rocketed over the last 15 years, with costs of development and design now rivalling Hollywood blockbusters.
The most expensive video game in history is still Grand Theft Auto 5, which was made by Rockstar North in 2013. The budget for this was a sky-high $137 million, with almost the same amount again spent on marketing and release. By 2018, 18 video games had cost more than $100 million dollars each to make. These high costs and super-long lead times (2-3 years to produce a boxed console game) create major risks for video game developers, producers and publishers. But this is not the area of video games that is attracting high levels of venture capitalist interest.
Indie game developers around the world embrace blockchain technology
The focus is now on indie games – the smaller online games that are created by independent developers. Look at these developers as the disruptors of the gaming industry. Instead of major upfront costs, these indie developers concentrate on coming up with innovative gaming ideas that players can easily access online, whether via their mobile or browser.
Blockchain allows a totally different funding structure for these games. They don’t need billions up front, nor do they need major producers behind them. Instead developers can create tokens using blockchain technology that can work across multiple games. For example, an indie developer has come up with a game called BLOX. This is in beta now, but they have also created a token called QUDO that will be used to fund the projected 18-month development cost. It will also reward players.
The game will run on the Telos network, and in a revenue sharing structure, games and players will earn 90% of the generated tokens. The developer will get 10% of the QUDO tokens. It’s a win/win scenario and uses blockchain technology to completely change the video game development funding structure.
QUDO is the service for games that rewards players with the token (or coin) when they play and when they do well. The tokens will eventually be able to be used widely across the industry so that developers and players can together create purchasing power for the kinds of games they want to play. This eliminates the need for in-game adverts and opens the entire world of game development up to any developers who understand the potential of this innovative way to make and fund games.
Blockchain funding models will kickstart the gaming industry in Africa
Indie game developers get off the ground in exactly the same way as any other start-up. They rely on funding from VCs, angel investors, friends and family. However, it’s extremely difficult right now for indie developers to land VC funding. The failure rate for indie developers is also very high, with VC investors generally looking for a return of at least 10x their stake.
This switch to blockchain based funding and development should open the videogames industry up to all kinds of investors. Blockchain can bridge these gaps between game developers and funding, players and investors and can completely change the entire industry. This offers immense opportunities for the burgeoning gaming industry in Africa over the next 20 years, and I’m confident this is where we will see major growth.
How will blockchain technology change the game for players?
Game developers are also integrating blockchain technology and cryptocurrencies into the games themselves. This is primarily driven by the players. Benefits include streamlined payments, real-life ownership of in-game assets for players, decentralised and secure payments, safe trading of items and, crucially, compatibility across different games.
With integrated cryptocurrencies, players can earn, buy and spend virtual currencies in the games. The blockchain technology creates the kind of accounting system for game assets as other crypto applications. This means it can be traded and used outside of the game too. Examples of blockchain and cryptocurrency games now include Gods Unchained, Spells of Genesis and EOS Knight.
On the flipside investors and game developers can capitalize on the advantages of this business trend. The ability to capture customers at a young age and secure their business through to adulthood, creates a massive value pool. Teenagers gamers can become savers through nontraditional routes like crypto rewards. They will start using remittances to send these assets to 3rd parties and convert these into Fiat currencies. The natural progression would then to be able to convert these customers to use traditional banking products like payment cards, loans and capital markets investments.
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