Over a decade ago, a construction crew made a surprising find in the middle of the desert. Not gold or oil but a burial site. But instead of being some ancient tomb or resting place for a great leader, it was a burial site for a video game. More specifically, the crew discovered thousands of copies of the 1982 Atari flop E.T.
Those in the video game industry will know this story well — and the rationale behind burying thousands of unsold copies in the desert. While some may view this incident as a funny anecdote, Web3 games should see it as history repeating itself. However, just as ET’s failure didn’t mark the end of the games industry, the downturn in Web3 gaming does not signal the end of this industry.
History of Gaming Crashes and Web3’s First Slump
The burial of unsold E.T. games was not an isolated incident but rather a reflection of the gaming industry landscape in the 80s. Despite their popularity, the video game landscape faced a combination of market saturation and low-quality products. Games were increasingly marred by competing studios and poor player experiences.
Users responded with their wallets, and the market took a significant hit. The video game crash of 1983 saw a 97% drop in revenue, falling from its 1982 peak of $3 billion to a meagre $100 million by 1985. Studios couldn’t give their games away, which caused the infamous burial of Atari’s E.T.
Those in Web3 gaming will know this feeling all too well. CoinGeko points to over 75% of all Web3 games becoming inactive, while VC funding has hit an all-time low. It’s no surprise that many are announcing the ‘death’ of Web3 gaming as a whole.
But herein lies the problem. Crashes in the gaming industry are not a new thing. The sector has seen peaks and valleys across its entire existence. Web3 games are facing its first experience of this market backlash. And, like traditional video games, Web3 developers need to address the issues that caused this downturn to grow again.
Spoiled For Choice
With any burgeoning market, problems arise when groups get too excited about a sector’s potential rather than its reality. Web3 is no different. Many saw the impact blockchain would have on games and sought to create an experience that would deliver on that dream. However, while many had aspirations of Ready Player One, most delivered an experience comparable to early WoW.
This problem was only compounded by the fact that end users — the players themselves — had a wealth of Web2 games to choose from. With over 18,000 games released on Steam alone last year, Web3 will always have stiff competition. With these trends in mind, it’s easy to understand why only 15% of gamers are actually interested in playing a Web3 game.
Prioritising Quality and Player Experience in Web3 Games
So how can Web3 game developers stand out? The simple answer is that it’s down to building a solid experience. Many Web3 games failed to launch because the technology came before player experience. Web3 developers should instead define a player experience, gameplay loop, and roadmap that offers quality rather than quantity.
This narrower focus also aligns with the desires of modern players. Players are moving towards shorter experiences, with longer games having a negative correlation with player loyalty. Web3 developers who lean into this player demand will not only capture gamers but also address the current market appetite.
And even with low player interest, the games community is quick to change its mind. The infamous launch of No Man’s Sky and its subsequent redemption show how, with a genuine commitment from the developers, players will engage with the product.
Simply put, for Web3 game developers keen to keep the industry going, it needs to focus on an experience that players will enjoy and engage with. The product needs to be credible, with quality at its core — even if that means the initial offering is smaller in scope and scale. Taking this approach is vital to building increased faith in the Web3 games space and allow the industry to build itself back up.
Web3 Gaming Strategy to Mitigate Wider Market Downturns
While a ‘build it and they will come’ approach is important, the market cannot ignore the wider issues at play in the games space. Following overinvestment in the early 2020s, the gaming industry is seeing a sharp contraction — with studio closures, layoffs, and cancelled titles becoming common headlines. With this in mind, it’s easy to assume that no matter how good a Web3 game is, it cannot overcome the broader market issues at play.
But it is here that Web3 games have an ace up their sleeve. The Web3 community is far more sector-agnostic — with businesses working across a range of verticals from TradFi to retail. Unlike traditional games studios, Web3 games don’t exist in isolation. They can leverage the wider Web3 market to ensure their company is not over-exposed to market downturns.
In other words, while a Web3 game should prioritise players first, the business should act less like a games studio and more like a Web3 company.
In practice, commercialising the L2 for a Web3 game and licensing it out to other Web3 projects could diversify revenue streams. Alternatively, the game itself could be built as a cooperative. Players could vote on key decisions, and a portion of the company’s revenue would flow into a community-controlled Treasury. This would only be the start, as Web3 developers identify new ways their platform could mitigate market challenges.
Out Of The Desert
Although Web3 games have faced a significant hit in recent years, there is still a huge amount of potential. This year has seen blockchain make serious inroads towards mainstream acceptance — whether that’s government legislation or institutional investment. Serious engagement will mean increased liquidity, which will lead to greater trust in Web3 projects.
In combination with this, the downturn in Web2 games means that there is a huge pool of talent looking to engage with new and exciting projects. Put together, and we’re liable to see more quality experiences that align with player expectations while still leveraging the power of blockchain.
There’s no denying that Web3 games have hit a major slump. But if the sector can regroup, reevaluate, and align with the needs of the current games industry, it has a huge opportunity to flourish in the market. Just as traditional video games didn’t end with the crash of 1983, the Web3 market can continue to grow if it forges a path ahead.
- Max Daniels, Senior Account Director
