Players hated virtual goods long before NFTs

Non-fungible tokens, or NFTs, have a small foothold in the video game industry, but it’s already too much for some gamers. The setback over the possibility that a prominent gaming company indulges in digital tokens has been rapid and violent, which has led to some developers going back on big plans almost immediately.

Players have traditionally pushed back on what they see as exploitative content designed to extract money from their wallets. From downloadable content, or DLC, to loot boxes, the gaming industry is always looking for innovative ways to monetize products. Despite feedback from gamers, experts say that NFTs in video games, just like DLC, are here to stay because tokens like these can be potential money makers for big gaming companies.

The early days of DLC have much in common with the current state of NFTs. A certain part of the content was especially infamous and represented the beginning of a new era in revenue generation for video games.

It all started with a horse

Content available via download was somewhat common in the late 90’s with the first DLC made for the real-time strategy PC game Total Annihilation. Developers wanted to create new maps, devices and other content in the game that PC gamers could download for free.

Things changed dramatically in April 2006, when Bethesda Game Studios released the infamous Horse Armor Pack for the popular game The Elder Scrolls 4: Oblivion. Priced at 250 Marketplace points, or about $ 2.50, Horse Armor Pack was the butt of jokes for years after its release. It served no purpose beyond cosmetics, and was a precursor to in-game skins, similar to those found in games like Fortnite today.

These low-cost elements of the game, referred to as microtransactions, were part of Microsoft’s new revenue model for the Xbox 360, released in 2005. We take microtransactions for granted today, but then the reaction was immediate. And dramatic.

The setback against the Horse Armor Pack spread across net message boards like a fire in dry grass. Many were concerned about the precedent.

Despite the criticism, DLC was a big seller for Bethesda.

“[Horse Armor] was one of the most popular [DLC packs] we did it, believe it or not, “Todd Howard, game director and executive producer for Bethesda Game Studios, told IGN in 2016.” The funny thing is, we went away from Horse Armor, and the rest of the industry has gone against Horse armor. “

In the wake of that, microtransactions have since become a major money maker for gaming companies that bring in more profits than the games themselves.

In 2020, video game analytics firm SuperData estimated that the industry earned more than $ 92 billion on them by 2020. By comparison, purchases of entire games totaled nearly $ 12 billion.

It’s deja vu again

When it comes to video games, NFTs serve a slightly different purpose than traditional downloadable content like Horse Armor. NFTs are digital tokens for mostly digital assets. The digital resource can be anything from a JPEG image of a “boring monkey“to a pixelated image of a bird.

Some examples of in-game NFTs include Pokemon-like creatures you can swap in a game called Axie Infinity or in-game equipment in Ghost Recon Breakpoint. The latter did not work, giving a reported $ 400 in total when it was released in December last year. While the former has been a big money maker for some – a player was able to buy two houses with their winnings last year – the value of the Axie Infinity NFTs has been declining for most of 2022, thanks in part to a hack by the company blockchain, resulting in more than $ 600 million of stolen crypto.

Gaming companies are still trying to figure out their strategy for NFTs. They have decided to take the cautious approach so far.

“Initially, they were presented by publishers as tokens representing things already offered for sale in games, such as weapons in shooting games,” said Wedbush Securities analyst Michael Pachter. “The player’s response was that calling items in the app that were offered for sale ‘NFTs’ did not change what they were, and reacted as if this was just a money grab from the few publishers who put the idea forward. These publishers quickly withdrew back.”

Ubisoft, the publisher behind Ghost Recon Breakpoint, has since withdrawn from NFTs. EA and Square Enix are two other large companies that signaled interest in the digital token business, but have not yet revealed their plans.

So far, NFT plans from major game publishers have not yet thrilled players.

“What needs to happen is [NFTs] must allow players to do things and experience things they otherwise could not experience and do, and these things and experiences must be compelling, “said Lewis Ward, research director for IDC.” NFTs must answer the question “What’s in it for me? “From the player’s perspective, and the answer to that question should be cool.”

Even game developers are skeptical of NFTs. In the State of the Games Industry 2022 report from the Game Developers Conference, 70% of the developers surveyed had no interest in digital tokens.

Still, the skepticism was the same for DLC, and billions of dollars later, microtransactions come nowhere.

“NFTs will eventually be a natural part of gaming,” Pachter said. “I think it will start as user-generated content to make games better, like artists who make skins, and will expand into brands. After that, it will be the Wild West.”