By Santiago Hunt
Earlier this year, this datapoint from “ARK Big Ideas” caught my eye. It showcases a clear shift that has been taking place for the last decade in the gaming landscape: The rise of Free to Play (FTP) franchises.
Franchises have always been a thing in videogames, as Super Mario, Sonic, Final Fantasy and Zelda can attest. The difference here though is the shift in business model: Free to play has won the war, establishing itself as the path going forward for the near future in gaming.
The videogame industry is HUGE ($150+ B) and has been growing strongly, but it hasn’t been able to escape a power law dynamic where a few big players (mostly FTP) have been able to capture the space. Just in the US, out of the top 1000 games, it is estimated that the top 10% account for over 2/3 of player spending (source: Sensor Tower). Today, top grossing games have revenues in the billions, and active users in the hundreds millions.
Many voices claimed (and still do) that these franchises were fads, that they were bound to be replaced by new ones or just grow stale. Yet many of them are ranging 5-15yrs in age and show no sign of stopping. What’s more, this is still the early innings. The “Golden Age” of videogames is yet to come (but almost here).
The seeds of change
Videogames have now long achieved “social acceptance”. The Atari/Nintendo/Sega gamers of the 80s (followed by PS/Xbox/PC in the 90s) grew up and made videogames “respected” societally in the 2000s. This was the necessary precursor to the next three big changes that dominated the past 10 years:
1) The birth of Battle Royale – enabled thanks to compute and latency advances in technology.
The idea of a “Battle Royale” is simple: pit a ton of contestants in an arena and have them fight each other until there’s only one left standing. This is arguably not an original idea, given we have seen it in a wide range of settings, from Roman Gladiators to Hunger Games. But technology unlocked this being a feasible game mode, and the ecosystem exploded. PUBG, Fortnite and Free Fire were born, and many incumbents adapted their FPS proposals to Battle Royale as well.
What’s truly different about Battle Royale is that it took engagement metrics to the next level for a vast group of players. Whilst hardcore players were always there (World Building or MOBA franchises prove this), BR as a segment created a new type of play experience: one which immersed a vast cohort of casual players to a deeper extent than ever before.
BR games like PUBG (top grossing game worldwide for 2020), Free Fire and Fortnite are all estimated to have over 2BN+ in annual revenue and attain a global scale.
2) The massive increase in game depth and world richness.
Quoting Josh Buckley (CEO ProductHunt), “…these games are no longer products. They are services…”. The breadth and depth of relationship between gamers and their FTP games is unparalleled. And technology has been a key enabler behind this.
These two changes (Battle Royale + game depth) are underpinned by tech advancement. Yet technology evolution has been a constant in the gaming landscape since day one. The true unlock in the past decade, which will in turn give birth to the Golden Age of Games is a different one: it’s the rise of Meta-Games.
3) The rise of Meta-Games: First things first. What’s a meta-game?
A meta-game is the driving force that makes you play a game again and again over an extended period of time, be it weeks, months or even years. In other words, what’s the reason that makes people come back to play Fortnite or Roblox again and again and again once the initial novelty has worn off? That’s the meta game.
What sets apart our current generation of top games from their predecessors is that they have succeeded at building powerful meta games. In particular, there’s 3 meta games that underpin gaming’s move into “the next level”.
The Meta-Game Triforce
These fundamental Meta-Games, once combined, will unlock the Golden Age of videogames. This meta-game Triforce consists of 3 distinct pieces:
a. Progression
b. Identity
c. Impact
a) The Progression Meta-Game:
This is arguably the primal Meta Game that has always existed in videogames. Levels, Bosses, Missions, etc. are all expressions of the Progression meta game.
The human psyche is in constant need of looking out for “What now?”. Our brains have thousands of years of evolution encoded that have taught us to focus on “what needs to be done next?”. The reason for this is simple — in the past, not addressing what needed to be done would likely result in death. Videogames have understood the need for “constant progression” and harnessed it to their advantage. More so than any other medium, they leveraged this kernel of human insight and built their “reason to be” around it.
What sets today’s games apart from their predecessors is that they took Progression further than ever before. The need to make the FTP business model sustainable requires an almost never ending set of quests and possibilities. Rankings/Guilds/Hierarchies are the vehicles. Games like Honor of Kings, Genshin Impact, Minecraft or PUBG offer endless progression possibilities when compared to what Super Mario or Tetris offered in the past.
However, despite Progression’s historical relevance, the most significant change of the past 10 years didn’t have to do with it. It took place in a different Meta-Game: Identity.
b) The Identity Meta Game:
Identity is at the heart of what has changed in videogames during the last decade. Prior to this, games could offer you progression. And they could offer you sense of belonging (with close or remote peers). But it is only in the past decade that Identity has become a true part of gaming. Video games are now worlds and spaces where people go to hangout with friends. Be it LoL, WoW, Free Fire, Fortnite, Minecraft, Roblox…in many cases the “play the game” dynamic has become secondary to “this is where I meet with my peers” dynamic. For that “I” and “my” to make sense, Identity is required.
For this to happen though, a fundamental logical shift had to take place: Identity >> Progression.
You could argue that Progression is still the central driving force behind these titles. That items and power ups are widely coveted because of how they enhance Progression. I believe that is more a function of status (which is a by-product of identity) than of the value these items grant in terms of playability per se. To be fair, the seeds of this transformation where already in place ~10 years ago. But the fundamental shift throughout these past years is that social graphs + cross console play have made game identities feasible reality.
With Progression having now iterated to an unforeseen extent, and Identity being now a real and growing feature, the question is: What’s missing?
What’s still missing is the third piece of the Meta Game Triforce: Impact.
c) The Impact Meta-Game:
What do I mean by Impact? To keep it simple: Impact occurs when what you do in the videogame has repercussions outside of the videogame.
Part of this is a natural byproduct of Identity. Once things you achieve can be associated to your persona, it is easier for these things to travel. Yet today still virtual personas and their achievements are mostly confined to their virtual worlds. Which leads to two paths for how the Impact meta game may come to life:
1) Content creation/professional gaming: This is a tangible reality today. A few gamers have monetized their skills. The sheer amount of viewed hours in YT/Twitch/Booyah/Etc is proof to this.
While this is a tangible example of Impact, it is limited in its scope. Being a content creator / professional gamer is hard. It requires talent and full time dedication to achieve at scale. For every creator/pro, there’s 1000X consumers watching or following. Which leads to the second path. A path that is being built as we speak.
2) The M******** word: What is the M******** word? It’s MetaVerse.
Disclaimer: This is NOT a Metaverse essay. We’re still far from a true Metaverse given technological constraints. If you’re interested in the subject, you should read Matthew Ball’s 9-part series which is great!
Having said this, there’s a shard of the MetaVerse which is being built and comes into play here, which is interoperability. Interoperable QR payment standards, decentralized crypto protocols, cross console play are all examples of this. The important thing about interoperability is that it allows things to travel. If you couple this with AR/VR tech, you get close to unlocking the Impact Meta Game: A world where everything is gamified.
In today’s world, gamification works by putting the cart before the horse. It tries to take mundane processes and “gamify them”, yet never truly becoming a game (h/t: Gabriel Leydon). But imagine a world where it’s the other way round, where you might use ecosystems a la Roblox to power platforms a la Shopify/Wix? Where you might use Battle Royale games as workout routines and/or health inputs? Where the actual gameplay has a vaster effect than just the game? Just now I saw a targeted ad on social media selling me “Understanding Money & Economics using Minecraft” for children 7-11!
That’s the Impact Meta Game unlocked. Not surprisingly, this is the haziest of the 3 Meta Games and not quite there yet. But it’s coming.
The Endgame
What happens once these 3 pieces come together? Simple: Games take over the world.
This is why Netflix has been vocal about Fortnite being their biggest competitor. And why now they’ve confirmed video games will be part of the Netflix subscription.
Or why Facebook has been spending so much resource behind their VR efforts, and why Zuckerberg has been so explicit about their Metaverse (here we go again…) endeavors.
Or why it’s almost impossible to find a corner of the gaming world that is not directly or indirectly connected to Tencent. And why the CCP seems intent in tightening its grip on all things gaming.
Or why Apple (and Google) are trying to be both gatekeepers (via the App/Play stores) as well as players (Apple Arcade/Stadia) in the ecosystem.
Or why much of the non-financial exploration behind Ethereum is about finding ways to become the platform and/or interchange standard associated to a more interconnected gaming future (hint: NFTs could be a really good vehicle for skin/weapon ownership).
Or why…the list goes on and on. The biggest companies in the world all know this to be true (at least to some extent). Ultimately, technology rewards immersion. And it’s hard to find activities that are more immersive than gaming, in particular when those games are not only challenging and fun, but they also have direct effects on your identity and your impact in the world. This will not happen overnight. The path is not easy nor straightforward. But the 150B+ market / 10% CAGR estimations seems too small for what is likely coming.
If you haven’t done so already, I encourage you to try one of the top FTP games. But I mean REALLY try it. Play it daily, 15’ a day, for 2 months. After those 2 months, I guarantee you’ll have a newfound appreciation for the ecosystem, and for the meta games upon which it is built. And even better: You’ll have a first hand sense of what is coming.