The $200M Bet to Reinvent Video Game Monetization
A company called Limit Break just raised $200 million to build a game called DigiDaigaku that will reinvent video game economics and gameplay as we know it. And they did it purely on a theory.
That theory is called Free-to-Own and it utilizes NFTs and the blockchain to make it work.
These are not your average joes who raised all this money. Limit Break is founded by Gabriel Leydon & Halbert Nakagawa who previously founded Machine Zone. They created Game of War, which earned $2.8B in revenue over five years. So they know a thing or two about building successful games.
They were pioneers of the Free-to-Play gaming model, which allows players to start playing for free and then charges for in-game upgrades. Games like Fortnite and Apex Legends are the top Free-to-Play games. Free-to-Play currently stands as the dominant business model of video games, accounting for ⅘ of the $120 billion global digital games market in 2019.
Limit Break believes Free-to-Own can replace Free-to-Play.
What is Free-to-Own Gaming?
Free-to-Own Gaming is based on the same underlying principle as all blockchain games, where in-game items, characters, and other assets are represented as scarce NFTs. Because the assets in the game are ownable, players can trade them to earn money. This is the concept known as Play-to-Earn gaming. Basically, playing the game allows you to earn whether through upgrading and selling items or completing quests and battles to acquire rare items.
However, most Play-to-Earn blockchain games (like Axie Infinity) charge players to acquire the NFTs needed to start playing the game. There are two problems with the Play-to-Earn model:
- Game startups often sell NFTs to fund their game development, which means that some of these games will never be created
- It creates a barrier to entry for players that cannot afford the startup costs of playing.
Free-to-Own differs itself by distributing its gameplay NFTs to its players for free. They call this a “free mint game”. Because all players start from zero investment, this creates a more organic community of believers in the game.
Furthermore, these original NFTs act as Factory NFTs. As the game developers want to release new assets for the game, they allow owners of the Factory NFTs to generate the new assets. This incentivizes players to continue playing the game, as it gives you the best chances of generating new (valuable) assets.
How do the developers make money if they’re not selling any in-game assets or charging to play the game?
Free-to-Own game makers have a small royalty fee embedded in all of their smart contracts which allows them to earn revenue through each NFT transaction. Thus, it’s on the game creators to continue developing experiences that their players are asking for. And this also creates a strong relationship of feedback between the two parties.
Overall, Free-to-Own combines the best qualities of Free-to-Play games (like Fortnite) and Play-to-Earn blockchain games (like Axie Infinity).
It's possible that we will see mainstream adoption of this model in the same way that thousands of mobile apps adopted the Play-to-Earn model. However, it's still the early days of Web3 and NFTs, so I don't expect Free-to-Own games to be crushing the charts tomorrow.
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