- This third of a four-part series on blockchain gaming looks at how the funding and guild landscape have changed.
- Capital poured into the blockchain gaming sector in 2021, but by late 2022 the total deal value had dropped.
- Guilds – scholarships for players that want to earn yield on in-game assets – have also experienced a revenue decline.
This four-part series dives deep into the recently published 2022 Blockchain Gaming Report to distill the key insights for readers. The first part looked at the potential for mass adoption of blockchain gaming, in which players use blockchain technology to earn assets with real-world value. The second part looked at the speculation bubble in play-to-earn games. This, part three, looks at how the funding and the guild landscape have changed from the peak of the bull market.
How the funding and the guild landscape have changed for blockchain gaming
First, the report looks at the funding landscape in Q3 2021. That quarter saw an exponential growth in capital, with more than $1 billion flowing into the sector. Companies building platform layers and infrastructure for future games to live on benefited the most, in terms of funding size. Game developers were getting funded – albeit with less capital – but there was an emerging divide between small budget, big ambition developers and the triple-A developers.
By Q3 2022, total deal value was down by 19% year on year ($875M vs $1.1B). However, the total deal number was up 2.6 times year on year (58 vs 22). Seed round checks were somewhat smaller ($7m compared to $12M), and 2021’s seed round companies graduated to Series A, and some to Series B/B+. The biggest Q3 2022 deals were Limit Break’s $200M raise and Animoca Brands’ $110M raise.
Overall, the deal market is maturing, with more capital going towards blockchain gaming studios that use blockchain gaming infrastructure to produce engaging gaming content. Finally, the report adds, deal activity will continue to normalize going into 2023, as the bear market will reset the market.
In Q3 2022, guilds are one sector that did not see much funding. A large majority of guilds were created during the speculative bull market, and focused on play-to-earn game Axie Infinity. Guilds, which are essentially scholarships for players that want to earn yield on in-game assets, raised $200M over the past two years, with participation from notable venture capital firms like Andreessen Horowitz. But as part two of this series pointed out, the play-to-earn model is unsustainable and experiencing a major decline.
Super guilds like Yield Guild Games (YGG) are looking at significant revenue declines. So far, most of them have relied on community and investment management. That is, building an ecosystem around game scholars and efficiently managing the income from game yields. But that is not enough to sustain all of the 24,000 guilds on the market right now. 97% of players are in micro guilds (10-100 players), while only 1% of players are in macro guilds (1,000+ players).
Therefore, most guilds are undergoing a pivot throughout 2022-23. Unsurprisingly, large guilds like YGG and Meric Circle have better chances of executing this into a long-term sustainable business model. To do that, they can make use of their existing strengths or build new strengths to evolve. For instance, YGG is pivoting into becoming an e-sports organization. Another avenue is building new technology products like NFT marketplaces or ID layers allowing players to track their in-game assets across games. Guilds can also make use of the experience and human capital they acquired, such as providing beta testing services by its lower-skilled scholars. Such value-add services would provide a whole new revenue stream.
What is the World Economic Forum doing about the metaverse?
Experts believe that the metaverse will come to represent the next major computing platform, transforming consumer experience and business models across industries.
Fashion brands are one example. Over years, apparel companies have perfected the design, manufacture, and distribution of clothing to anticipate consumers’ wants and needs in line with seasonal changes. But today, most of their revenue is surpassed by the $3bn worth of sales of digital cosmetic items in Fortnite, which have a cultural significance that extends far into the physical world.
This is one of the economic opportunities of the metaverse - the possibility to “assetize” digital content, creating a framework of digital ownership for users. If it is replicated at scale and across sectors, then entire industries will be reshaped by changes to their traditional value chains.
However, the promise relies on the advancement of several key technologies, including augmented, virtual and mixed reality (collectively known as XR), as well as blockchain, connected devices and artificial intelligence. How should these be governed in a way that promotes their economic upsides while protecting individuals’ safety, security and privacy?
The World Economic Forum is bringing together leading voices from the private sector, civil society, academia and government to address this precise question. Over the next year, it will curate a multistakeholder community focusing on metaverse governance and economic and social value creation.
It will recommend regulatory frameworks for good governance of the metaverse and study how innovation and value creation can be strengthened for the benefit of society. Updates will be published on the World Economic Forum website on a regular basis.
Another area is content, where guilds could drive interest through articles, videos, streams and other media. Still, the future of guilds hangs very much in the balance. With a market in its consolidation phase, it is premature to predict the future of guilds.