Business of Esports TV: Value in Play-to-Earn

(Livestream 137)

In this segment, we discuss weighing the value of play-to-earn games.

The Business Of Esports brings you news, debates, and all the information you need to know about the gaming sector, the world’s fastest-growing market. With Paul “The Profit” Dawalibi leading the charge, and a variety of special guests, BoE TV is the only place to find insider information on the esports industry!

Check out the full livestream here:

Paul Dawalibi 34:11
But this story is it’s not so much the story but what sort of comes from the story the discussion that that we can I think can extract from the story which is the the headline here is we yield guild games raises 4 million for the players. To earn era of games, okay? And it’s talking about a game developer called yield guild games I hate the name it’s actually really awful name. They raised 4 million in funding, of course, who would they raise it from? None other than the sugar daddy of the esports industry bit craft. And, and, and fundamentally what they do is they make games that their whole belief is people should be able to learn earn a living from video games, and so that people who play their games should be able to earn real money from them. And fundamentally their first game here, which they talked about xe infinity, if you play you earn some in game currency called s SLP, I think and you can trade that for crypto, which can then be traded for real dollars. Does anyone think play to earn as a business model for games? Is something that’s here to stay? We’re gonna see entire games built around this or do we think this is flash in the pan? Because crypto is hot and anything that sort of talks about this like where do you guys put played earn on the spectrum?

Jeff Cohen 36:20
Can I sorry, I hate this I hate this so much. This is some serious dystopian messed up you know crap like this video games are supposed to be at fun, right? Like this is like some serious dystopian Hey, like let’s go everyday to work and rather than like work in Excel and like have a job we’ll just you know, mined for Bitcoin like in our you know, within our virtual world. Like this is no I hate this so much.

Paul Dawalibi 36:51
Love I got a Christmas Christmas framing of it. Child Labor ambulance chasers income. Yeah, I

William Collis 37:00
don’t know. No, no. Let

Jeff Cohen 37:02
me caveat that because I always like to, I like to play devil’s advocate. So sometimes I’ll even play devil’s advocate on myself. You know, if we are to get a world where we enter a metaverse world, in theory, people have to make money. Right. So maybe there will be some sort of in game labor economy. But that world sucks. I don’t want to live in that world. I think that I don’t like this story. Yeah, I think games are supposed to be about fun. And if you’re going into the game to labor and to make money, that is not fun. That is a job. Yeah. Well get yourself a real job and then play video games for fun. Like I don’t see the point of this.

Paul Dawalibi 37:40
I just want to clarify, I don’t disagree with Jeff. But I just want to clarify, I was correct. So players earn an in game token called smooth love potion. Also so called SLP by winning battles against other players, and SLP is required in game to breed new axes, I guess or characters. Or it can be sold on an open marketplace and traded for other cryptocurrencies.

Jimmy Baratta 38:12
So when I when I was running a clan and had the time to play video games, all that you know, a lot. And whenever I was in also, I was consulting for developers and other companies. Whenever I would show their product to other kids, the number one question they would ask is, how do I make money using this product? How do I make money using this app? How do I expand my brand? How do I grow my gaming audience? But always, always, always, how do I make money using this or doing this? So I mean, Jeff describing this world with kid you know, like, like these, like children’s sweatshops, you know, mining and video games. That sounds awesome to me. You know, and it sounds like what these kids want, I’m the exact opposite. I think it’s incredibly entertaining. I think all these kids are hustlers. Like you don’t know how hard Gen Z works. This is a how to do it yourself. YouTube, so you know, current generation that learns to do things and they’re not going door to door mowing lawns. They’re posting on Fiverr they’re, you know, they’re trying to get in the door anyway and just earn a buck. So if they’re going to do that gaming, you know, then then I would have done that right if I was at age, so I’m I’m all for it.

Paul Dawalibi 39:24
I find your says agreed the name is awful. It’s like World of Warcraft, gold mining or the auction house. I was gonna say that’s, you know, this is not that different, right. Like you could buy you could farm golden Wow. And then sell it for real dollars. I guess. So. William, where are you on? This is played earn. Will that be in your next book?

William Collis 39:48
Right. So I’d like to point out that this joins a massive trend in industries as anybody know you can earn a ton of money reading books, there’s a pay to read industry. You can earn a lot drinking. There’s a Pay to drink industry people just pay you to drink alcohol. There’s a pay to watch football industry. It’s guys like the reality is like, like, I’m sorry, but this is like unless we end up in some how to describe it like literally unless this is the end of Wally the movie, right sorry, spoilers like, there’s just the monetization per unit time from gaming just, it’s not there, your value is created to sponsors, advertisers and eyeballs like that’s it. So you can spin it however you want in terms of how the value is delivered to the consumer. But fundamentally, you’re playing the game doesn’t really create real value, right? Like as an ad like your only your to your attention is not super monetizable just on a pan consumer basis, like, it is true that you can be generating economic activity in these games in a different way. The example I’d point to is World of Warcraft, right? We all know that World of Warcraft is different, because you could actually earn money from World of Warcraft, not just by selling ads on your screen, which actually happened for a while but bear in this example. But the gold the items, there was a market for that people wanted those digital assets. And I have often thought that games could do more around monetizing the digital asset pieces that they create. But the problem there is the fundamental thing you require is an absolutely smash hit triple A game, right? I think that that’s hard enough to do today, without burdening it with this external monetization model. See the Diablo three auction house, right? Like big publishers don’t know how to do this. So the conversation I’d be interested in having is not, hey, we’re gonna make games in one place. Because guess what, no one’s gonna want to play these games. You know, they’re built like it’s just they’re built to monetize. And the interesting thing is, can majorly successful games reverse into some sort of open itemization model? And is it better done on a free traded public basis versus a publisher driven basis? And I’d argue, wow, is still the best example is say, like, you can buy boosts to get your character to max level, right? Which is equivalent to, you know, the industry that I think used to be around where you would basically like pay people to play your character to level them up, right. So like, there’s something going on here of interest, but I don’t think it’s addressed in this in the solution that’s being described here, at least in the press release.

Paul Dawalibi 42:21
Agreed, William, but do you think there’s a world like, in some ways, the whole NFT thing has created maybe a maybe it’s a long term, but definitely a short term opportunity where you can get people doing something like playing your game, right? With the promise of earning, let’s say, an NF t, which has perceived value, but may have zero cost?

Jeff Cohen 42:46
Yep.

Paul Dawalibi 42:47
Right. And so in some ways you’re earning, but like, what you’re earning May, at some point have zero value may have a ton of value? Who knows? And I kind of like Greg’s comment here, which is, I could have been paid to read The Book of Esports. Right. And, and and I would argue, similar comment of you could be paid to watch The Business of Esports, right? Could we could we come up with some scheme where if you watch the podcast, or you listen to the podcast, or you watch the live stream, you earn a Business of Esports NFT? or something? Or like, you know what I mean, where now you’re paying people? Something that has Jeff, I sorry, I mean,

Jeff Cohen 43:32
like, muted me, what the hell?

Paul Dawalibi 43:35
Cuz there was an echo. Fine, go ahead. I mean,

Jeff Cohen 43:40
I think we’ve we’ve talked about this a bunch of times, like I’m definitely pretty bullish. I think we’ve all been pretty bullish about NFT in games and, you know, having items transferable and, you know, we I think we go back to like, the golden sword, you know, that you earn and has value. But I think the difference is, a lot of these stories that I see, and a lot of these games companies that are trying to raise me is that they’re putting the cart before the horse. It’s like, Hey, guys, I’ve got this great idea. We’re gonna create NF T’s in games, and it’s like, cool. Okay, what’s the game? I don’t know, yet. It’s just gonna be NF t in games. Okay, well, the game fun does, like, is the game going to exist in six months? Are there going to be any players because, you know, I could spend 12 hours getting a $10,000 nF t sword. But if in three months, there’s nobody in the server and the game doesn’t exist, I guarantee you that NFT sword is going to be worth literally $0. You know, well, if World of Warcraft did this, or a game that actually has longevity and staying power, you know, implemented these kinds of NFT principles and sort of creating the economy around that. I would be bullish on that, but just creating an NFT for the sake of creating NFT and then wrapping a game around it. It’s effectively like create A social casino. Yeah, you know, you’re creating a mobile game. But at the end of the day, it’s just a casino. And you’ve wrapped a pretty bells and whistles and created a mobile game around it. But it’s literally just a loot box and a casino. It’s a slot machine

Paul Dawalibi 45:13
that does you agree that for a game developer right now, the NFT may be the perfect hook, because you can give something away that has perceived value, but has zero cost, or close to zero cost? Sure, but

Jeff Cohen 45:28
how is that different than them selling microtransactions just like theoretically, it’s more of a Ponzi scheme, and that it could be worth something like different models that are around forever. It’s like, hey, buy this loot box where you have the potential to win a golden sword that’s worth nothing or find the golden sword that is worth $10,000. But it’s actually not worth anything. It’s two sides of the same coin.

William Collis 45:54
The more interesting question is the economic question here, which is, which is the greater revenue driver for the publishers? Is it the publisher directly selling to the market themselves? Right, which is sort of how we’ve solved it today. Right? Like, that’s sort of like, is the publisher selling direct themselves? In which case, this this market won’t ever exist? Because it was better for the publishers? Or is it? Is it truly a player driven economy like we saw in Wow, right? Where the publisher concede some control, because the overall activity in playing the game itself, and you know, that the really interesting thing? To me, and this is a little bit sad, but like, we lost subscription, as a revenue model for games, right? Like, we lot like subscription really doesn’t exist. I mean, it’s sort of, like battle passes now and stuff, but like, you know, it’s like, we sort of lost what was doing a bit subscription was really interesting from the perspective of it was one of the purest aligning factors for the publisher to say, as long as this game is fun to play month to month, we both win, right? Like subscription is a very good model for aligning player and publisher incentives.

Paul Dawalibi 47:09
It’s a good point. I don’t know why that went away. Because wow was such a success. But that’s just

William Collis 47:15
wow, because you make more on micro I mean, I know why it went away micro was probably the bet because the benefit is micro is the subscription that you don’t see and you spend on but I mean, the playground

Jeff Cohen 47:27
a little bit, unlike standard question. The perfect model is the Roblox model, where you don’t sell anything, you don’t create anything, you just take a take rate on the, you know, the currency in the game. That’s why

Paul Dawalibi 47:42
every VCs favorite word some

Jeff Cohen 47:44
reason why user generated content platform, and Roblox those three words together are worth 40 billion when you know, take two is worth 15 It’s a great model

Paul Dawalibi 47:57
for sort of, I think, again found the right word for this. This this other company pyramid scheme, the video game by Activision. I can’t wait to play that I didn’t I missed the crispy. I can’t wait for bigger really mastered.