Author: Xangle, CoinMarketCap
Translation: Zen, PANews
PANews obtains exclusive authorization and translation
Article highlights:
Overall, Asia’s strong market growth and characteristics of the casual/MMORPG-centric game market provide huge potential for blockchain games. The main reasons for Web2 gaming companies to enter the blockchain space are to secure new growth engines and raise new funds through tokens. After the success of Mir 4 Global launched by Wemade based on the blockchain ecosystem Wemix, companies such as Com2us are building their own blockchain ecosystem from the layer-1 base layer and striving to maximize the additional benefits generated by the entire ecosystem. value. With the support of 3A-level game IP, major players in the game industry are more conservative in their adoption of blockchain. The most significant experiment is the tokenization of game components, such as turning their characters, props, etc. into NFTs. Given that traditional game manufacturers will release a series of blockchain games this year, which will accelerate the large-scale adoption of blockchain games, a renaissance of blockchain games may be achieved in 2023. Asia, the global gaming leader A huge and rapidly growing market
Asia has the largest gaming market in the world today, and it is still full of growth potential and promising prospects. According to statistics from market research institutions Newzoo, IDC, etc., the Asia-Pacific region will have 1.75 billion game players in 2022, accounting for 55% of the global total; mobile game revenue in the region reached US$72 billion in 2019, accounting for 10% of global annual game revenue in 2019 52%. The region's significant per capita GDP growth will accelerate its game consumption capacity and further increase its global game market share. All of which explains why Asia is widely seen as a driving force in driving the global games industry forward in the coming decades.
Three East Asian countries lead the gaming industry
The Asian gaming market is dominated by three East Asian countries: China, Japan, and South Korea. Of the top 100 gaming companies in the world by market value, 62 are from these three countries. In China, the gaming industry is dominated by large gaming companies such as Tencent; in South Korea and Japan, the gaming industry is dominated by game developers and publishers. Except for China, where cryptocurrencies are banned, gaming companies in other regions are interested in blockchain technology, and most are already developing blockchain gaming projects. The following will explain how each gaming company applies blockchain technology to their game IPs.
Hardware has always been at the heart of progress. Japan and South Korea, the two leaders in the Asian gaming market, first sowed the seeds of a new arcade game industry in the 1980s. Later, they flourished in PC and console games in the new millennium and mobile games after 2010, eventually becoming the largest gaming market in the world today. In recent years, the Southeast Asian market has also begun to join in, and in this part of the market, easy-to-use mobile games are often more popular than PC games.
The Asian market prefers RPG games (Role Playing Games), while the US market is dominated by strategy and action games. Compared with strategy and action games, RPG is more suitable for blockchain technology, which is why Asia drives the blockchain game market in terms of growth and innovation.
Why blockchain games are booming in Asia
The types of games that are most suitable for blockchain are RPGs (role-playing games) and casual games. The former can understand and reflect the value of ownership, and the latter can run entirely on the blockchain due to its "lightweight" characteristics.
An MMORPG that reflects the value of digital asset ownership
Unlike other game types where users unilaterally consume content provided by companies, MMORPG (Massive Multiplayer Online Role Playing Game) is a game where users expand and complete content by playing and interacting with a large number of other players in a virtual world. Users create characters in the game and can obtain and own virtual items. Accordingly, the core of the entire blockchain concept is to realize the ownership of digital assets. The application of its NFT technology in the game allows users to transfer their assets, items and characters, so that ownership is fully recognized. In this context, blockchain technology and Web3 philosophy are also applicable to in-game reward systems and can compensate players proportionally for their contributions to the ecosystem.
Take Kakao Games' MMORPG "ArcheWorld" as an example. The game uses blockchain technology, and the application of NFT enables users to truly own assets, items, and characters. Users produce content through housing, farming, and trading, interact with other users, and receive rewards for expanding the game. This shows that the game regards users as contributors or components of the ecosystem and should receive a fair share of rewards, rather than just consumers. In this way, "ArcheWorld" intends to seek ways to participate in the development of the ecosystem and improve the gaming experience.
“Lightweight” casual games
Casual games are characterized by short session times and simple operations, such as Candy Crush and Anipang. Asia has historically preferred casual games due to relatively low overall hardware specifications. Hero Blaze: Three Kingdoms is a casual RPG game that became popular outside of South Korea in 2021 around the P2E concept. At present, the scalability of blockchain is still a problem. The scalability level of L1 and L2 blockchains cannot handle tens of millions of transactions for large games, but it can meet the needs of relatively low-specification casual games. Compared with other types, casual games with simple designs require relatively few transactions and can be put on the chain.
The high percentage of casual game revenue that comes from advertising also fits well with blockchain. Ads usually appear as banners at the top or bottom of the screen when the game app is launched or during gameplay. RPG games are intended to get players to spend money in the game, while casual games try to attract as many users as possible, expose them to ads and charge advertisers - so the more times the game is played, the higher the ad revenue. Axie Infinity, Hero Blaze: Three Kingdoms and MIR4 Global demonstrate the combination of in-app advertising and blockchain games, which can quickly build a significant user base in Asia, creating powerful synergies.
The starting point for the traditional gaming industry to enter the blockchain gaming market
In a more practical sense, there are two main reasons for the above-mentioned game companies to enter the blockchain game market, namely to secure new growth engines and to raise funds through tokens. For small and medium-sized game companies that need to secure new growth engines, they are not like large game companies with established brands that can obtain steadily rising revenues through their unique and mature IPs, so entering the emerging market of blockchain games will be an extremely attractive option. In addition, for these small and medium-sized companies, the cost of injecting blockchain elements into their existing IPs is much lower than making AAA games, which requires a lot of resources, time and costs of more than $100 million.
Even from the perspective of raising new funds, blockchain games can serve as an alternative way to attract additional funds for Web2 gaming companies that used to use stock IPOs as their first source of funding. Gaming companies have been raising funds by selling their tokens directly on the open market or attracting private investment before the token launch, such as Wemade, Com2uS, and Neowiz, who raised $250 million, $25 million, and $12 million respectively through their tokens, and the funds raised can be used to build a blockchain developer team, build their layer1 blockchain, and protect new content IP.
Blockchain Game Strategy 1: Build a Complete Blockchain Ecosystem MIR4 Global Discovers the Possibilities of Blockchain Games
Although many P2E projects died after a short life cycle, they successfully attracted a large number of users and demonstrated the potential of blockchain games. This was enough to attract various companies to start building games with blockchain elements, mainly led by small and medium-sized Web2 game companies that needed new growth engines to get rid of development stagnation. South Korea's Wemade is a major example. In the third quarter of 2021, Wemade launched a new game "MIR4 Global" with P2E elements based on the existing IP "MIR" series, which nearly doubled Wemade's sales in the fourth quarter month-on-month. It became a successful case that drove other Web2 game companies (such as Netmarble, Com2uS and Neowiz) to enter the blockchain game industry.
Wemade: South Korea's blockchain gaming leader
Founded in 2000, Wemade is a South Korean gaming company with a market value of $2 billion and the owner of the popular game IP "Legend of Mir 2". WeMade's average annual revenue from 2015 to 2020 reached $100 million. In 2021, the company's revenue increased significantly to $300 million due to the success of its blockchain game "Mir 4 Global" based on the blockchain project "Wemix". Similar to Axie Infinity, "Mir 4 Global" has a strong P2E feature and has been loved by users in Asian countries such as the Philippines and Thailand. The game has set a record of 1.4 million concurrent users and 6.2 million monthly active users, contributing to WeMade's growth.
Mir4 Global's success can be attributed to several factors:
Leveraging the popular game IP "Legend of Mir 2" to introduce a game-to-earn (P2E) mechanism during the cryptocurrency bull market and provide user-friendly services with low transaction fees
By using the “Legend of Mir 2” IP, Mir4 Global was able to offer a game with competitive elements, such as storylines and graphics, compared to existing Web3 native blockchain games. Releasing the game during the crypto bull run also provided a favorable environment for Mir4 Global and Wemix, leading to a positive cycle of rising token prices, increased P2E profits, more users, and ultimately rising token prices. In addition, by utilizing Klaytn’s sidechains to allow users to use blockchain infrastructure at a lower fee, Wemix was able to avoid the high gas fees that Axie had experienced in the past.
Similar to other P2E games such as Axie Infinity, Mir4 Global’s game cycle began to decline as the price of its governance token WEMIX peaked and began to fall back. In response, WeMade changed its strategy from a pure dApp game developer to launching its own layer 1 blockchain called “WEMIX Chain”, which was forked from Ethereum and built a complete blockchain ecosystem. Instead of developing blockchain games in the form of sidechains on Klaytn, the company now plans to add its other major game IPs such as “AniPang”, “Mir M” and “Icarus M” to the “WEMIX Chain” to create the WEMIX blockchain ecosystem.
There are several reasons for WeMade to launch its own chain, but the most important one is to maximize the added value generated across blockchains. When using the Klaytn L1 infrastructure, blockchain fees must be paid to Klaytn, and revenue generated from transactions such as token swaps must be paid to other DEXs and NFT markets. However, with the launch of "WEMIX Chain" (Layer 1), "Wemix Play" (gaming platform), "Wemix.Fi" (DeFi service), and "Wemix Dollar" (stablecoin), Wemix can now directly operate and expand its entire blockchain ecosystem.
WeMix Play currently offers 23 games, including Mir 4 Global and Mir M, which are based on the Legend of Mir 2. These games currently have 300,000 and 150,000 concurrent users, respectively, which is a considerable number compared to Web3 native games. Although there are only 34 games currently, including the number of games planned for release, which is far from the initial goal of 100 games, WeMix is preparing to release popular IPs from Web2, such as Anipang, Mu Legends, and Icarus M. The release of these games is expected to further consolidate WeMix's position as a blockchain gaming platform.
Netmarble integrates blockchain technology into its core IP
Netmarble is a large Korean gaming company founded in 2000 with a market value of $4 billion. The company owns popular game IPs such as "Seven Knights" and "Let's Get Rich". As part of its new growth strategy, Netmarble has chosen blockchain as a new growth engine, entering the blockchain market in a dual-track manner through a GameFi-oriented platform based on Klaytn (soon to be expanded to multi-chain led by BNB chain) Marblex and a BSC-based entertainment-oriented platform FNCY. Marblex launched three blockchain games in 2022, setting an amazing record of 13 million users and 22.5 million game downloads. The platform will make another leap in 2023 with the launch of a game that leverages its core IP "Let's Get Rich".
In 2022, Netmarble launched three blockchain games that leverage its IP, namely "A3: Still Alive", "Ni no Kuni: Cross Worlds" and "King of Fighters: Arena". "A3" is an MMORPG game that has seen a 7x increase in revenue, a 6x increase in DAU, and a more than 2x increase in retention after adopting blockchain technology. This is achieved by providing incentives to users and mining MBX tokens through gaming, a unique feature that only blockchain games can provide.
Another massively multiplayer online role-playing game, “Ni no Kuni,” was the most profitable mobile blockchain game last year, surpassing “Mir4 Global” and ranking in the top 10 in both app markets in 27 countries, including the United States. The game has shown an improvement in 30-day retention (+4%) and maintained a stable token price with an in-game burn rate of 95% compared to the number of game tokens mined. The problem of sustainable token economics has been identified as a constraint to the development of the first generation of blockchain games, and “Ni no Kuni” provides a solution by combining solid game content with a token pool that can only be achieved in blockchain games, demonstrating the potential sustainability of blockchain games.
Netmarble plans to launch Meta World: My City in the second quarter of this year, which uses the "Let's Get Rich" IP with 150 million cumulative downloads worldwide. It combines board games with the real estate metaverse, where players can trade land and buildings as NFTs and earn income in the form of game tokens through real estate investments, similar to the popular Korean mobile game Blue Marble. Unlike existing Web3 real estate games that only allow users to purchase real estate, "Meta World" is based on an IP that has established global popularity and provides unique content, which is expected to be successful.
While some other large game companies have been hesitant to integrate blockchain technology for fear of compromising their IP, Netmarble has taken a different route by leveraging its core IP and has achieved strong results with three blockchain games released in the past year. Netmarble intends to expand its influence as a blockchain game publisher by publishing third-party games, and given Netmarble's strong publishing capabilities, people have high expectations for this aspect of its business. Netmarble has developed its own blockchain game design know-how and success formula through bold experimentation and repeated trials, positioning it as a potential leading company in the blockchain game market.
Com2uS: Building XPLA, the killer content candidate for the Cosmos ecosystem
XPLA is a gaming platform developed by Com2uS, a medium-sized Korean gaming company, using the CosmosSDK blockchain. Founded in 2007, Com2uS is a company that mainly develops casual mobile games. With the advent of smartphones in the 2010s, the mobile gaming industry has grown significantly, and it has grown into a medium-sized gaming company. In particular, the mobile game IP "Summoner's War" released by Com2uS in 2014 has been very popular worldwide, increasing the company's sales to $500 million and its market value to $1 billion.
Given Com2us’s track record of staying ahead of the game industry as it pivoted to mobile devices, the company seems to have spotted an opportunity in the current transition to blockchain and Web3. Among the many elements of blockchain, Com2us has been focused on transferring “ownership” to the user. In this sense, its preferred game types for blockchain integration are RPGs where users can retain assets in the game, and casual games where the game economy is relatively easy to build.
Com2us's Web3 strategy can be divided into two parts: one is to promote the growth of the Cosmos-based Layer 1 ecosystem and to include its own content in XPLA. Although the first part of the strategy was delayed in the overall roadmap timeline after the collapse of Terra and FTX last year, it is expected that developer infrastructure (such as EVM compatibility, Solidity-CosmWasm integration, and Layer2 solution development) will be completed by the end of this year.
As for the strategy for the second half, the lineup of dApps that will be launched on XPLA this year has been outlined to a certain extent. Com2us plans to launch the blockchain version of Chronicle in the third quarter of this year. The game is one of the IPs of "Summoner's War", which has accumulated $3 billion in revenue in the past eight years, and will also launch three or four casual games such as "Minigame Heaven" in the first half of this year. This makes us believe that in the Cosmos ecosystem, which is seriously short of content, XPLA will have the potential to become a killer game content platform. Especially considering that in order to survive the increasingly fierce Layer 1 competition, the company plans to maximize its own IP content and is developing a roadmap for the infrastructure required for external dApp loading, such as the introduction of XATP, enhanced EVM compatibility, IPFS storage nodes, Layer2 support, etc.
However, with Ethereum L2 becoming the mainstream development choice, choosing the Cosmos ecosystem remains a challenge. The Cosmos ecosystem may require more infrastructure development than the Ethereum ecosystem, posing a risk of fragmenting the resource pool. However, XPLA may have difficulty meeting the needs of developers who want to develop services on native rollups or chains, further increasing the cost of maintaining infrastructure. In addition, the adoption of blockchain technology still lacks tangible results, which will be a daunting task for game developers when launching projects on the network this year.
Blockchain Game Strategy 2: Testing blockchain on selected game IPs
While large and medium-sized game companies are vigorously leading the formation of the Korean blockchain game ecosystem, large Web2 game companies have taken a more cautious approach to the integration of blockchain technology. Some people point out that this silence is due to the small size of the blockchain market compared to the sales of large game companies and the possibility that the core IP of game manufacturers will be damaged by blockchain strategies.
NEXON: Let MapleStory become a 30-year blockchain game
Last summer, during the first session of the Xangle Adoption conference, Nexon COO Kang Dae-hyun described Nexon as "a company that makes unsustainable games sustainable" during his presentation. Indeed, Nexon's game IPs Dungeon & Fighter and MapleStory are 17 and 20 years old respectively, and these two IPs account for nearly half of the company's annual revenue of $3 billion and are still growing steadily. Nexon is clearly a heavyweight gaming company focused on creating sustainable and long-lasting games.
Nexon's blockchain strategy is to try to integrate blockchain technology into services without having an impact on the entire business. The company will test whether this will increase the number of users or extend the life of the game. In particular, Nexon's planned launch of "MapleStory N World" with blockchain elements is a project with the explicit goal of "making successful games more sustainable." To this end, the company has decided to give up areas it once tried to control. Most notably, its plan is to decentralize various game elements such as "quests" to build an ecosystem for game creators and enable users to play native content in the blockchain ecosystem.
Blockchain technology (particularly NFTs) and token economics will be used as a means to support the formation of this self-sustaining ecosystem. MapleStory N is reportedly scheduled to launch sometime in 2023. If MapleStory’s adoption of blockchain in games successfully drives the creation of a creator ecosystem that increases game lifecycles and revenues, it will serve as a guide for game companies that are hesitant to adopt blockchain.
Kakao Games: Integrating new IP into blockchain gaming platform BORA
Kakao Games is the $3 billion gaming division of South Korean tech giant Kakao. It initially achieved high sales growth by leveraging Kakao's mobile messaging app KakaoTalk (which has a 95% market share) as a platform and through casual mobile games featuring the popular Kakao Friends characters. Today, Kakao Games has successfully expanded into multiple genres such as MMORPGs and simulation games, with annual revenue of $900 million.
As part of its new business portfolio, Kakao Games operates BORA, a cross-chain-based blockchain gaming platform. In 2022, BORA launched the MMORPG ArcheWorld and the casual sports game Birdie Shot, based on the IPs of ArcheAge and Kakao Friends, respectively. After testing the application of blockchain technology in two very different game types, BORA concluded that casual games, where the game economy is relatively easy to design and modify, have better synergy with blockchain. Starting with the launch of hyper-casual games in the second quarter of 2023, BORA will launch various types of casual games, including puzzle, sports, and social casino games, from the second quarter of 2023 to the first quarter of 2024.
For Kakao Games, 2023 will be the year to introduce and test various token economics in casual games to finally determine a successful token economics model. Only when Kakao Games finds its own way out and proves a sustainable model can it more actively and boldly apply blockchain to its big IPs.
Square Enix - The first blockchain game Symbiogenesis is coming soon
Square Enix is a leading Japanese gaming company, with core IPs such as Final Fantasy and Dragon Quest being the most prominent. Unlike in the past, when the company used its core IP to produce console game series, it has successfully transitioned to mobile, as evidenced by the fact that its mobile game revenue now accounts for half of its total game revenue. Following its successful shift to mobile, Square Enix recently proposed blockchain gaming as a mid- to long-term growth strategy. In his 2023 New Year's speech, Square Enix CEO Yosuke Matsuda emphasized the growth potential of blockchain gaming - breaking away from the motivation of game companies to unilaterally provide games and promoting user-driven growth within games.
Symbiogenesis, currently in development, embodies this vision and is expected to be the first new blockchain game from Square Enix. Details are still scarce, except that Symbiogenesis will be launched on the Polygon blockchain and will be an NFT game based on 10,000 NFTs and its own universe. Although the deployment of blockchain in its flagship IPs "Final Fantasy" and "Dragon Quest" has not yet been finalized, the new year news seems to indicate that more blockchain games may be developed and released starting with Symbiogenesis.
Of the top 100 gaming companies in the world, about 70% are based in Asia. We surveyed these companies to analyze their blockchain adoption plans. The results show that Korean gaming companies are at the forefront of developing blockchain games. (See the table below.)
Although Japanese game companies started late, their stance on embracing blockchain technology is not much different from that of Korean companies. Although no game company specializes in blockchain Layer 1 business, many major brands in the Japanese game industry, including SEGA and Bandai Namco, are indirectly involved in Layer 1 business by serving as validators of the game public chain Oasys. Bandai Namco also announced plans to connect its unique IP with its fans by investing in blockchain startups. As the first step in this plan, Bandai Namco invested in blockchain game developer Gangbusters Ltd.
Other big companies are reluctant to choose blockchain because the market is still too small and they are worried that intellectual property rights may be damaged.
In fact, the revenue generated by the blockchain gaming market is negligible compared to the annual revenue of large gaming companies. According to Newzoo, the global gaming market reached $175 billion in 2021. Leading game manufacturers such as Nintendo ($14.9 billion), Activision Blizzard ($8.8 billion), Electronic Arts ($5.6 billion), and Nexon ($2.5 billion) have all achieved record high performance during the COVID-19 pandemic. In contrast, the revenue generated by the blockchain market is negligible. Axie Infinity, a game that represents almost the entire blockchain gaming market, had cumulative sales of less than $1.3 billion in 2021 and 2022, and its monthly revenue has now fallen to about $1 million. Similarly, Wemade's MIR4 Global has accumulated sales of only $140 million in the same period, which is not impressive compared to the sales usually seen at large gaming companies. All in all, the blockchain gaming market is too small to attract the attention of traditional Web2 gaming companies.
Another consideration for large gaming companies is the potential negative impact that the integration of blockchain and token economics could have on their valuable IPs, which are often their main source of revenue and long-term cash cows that continue to generate significant profits over a long period of time. After witnessing extremely short-lived P2E game cases such as Axie Infinity and STEPN, it is not an easy task to introduce P2E elements into their existing games. For example, Krafton, a South Korean gaming company with a market value of $7 billion, relies heavily on its popular shooter game PUBG: BATTLEGROUNDS for most of its sales. It is understood that the company currently has no plans to integrate blockchain technology into the IP.
Some use blockchain to test the waters
Even so, there are still some large Web2 game makers cautiously seeking to introduce blockchain to overcome these disadvantages. Nexon, a Korean game company listed in Japan, plans to release "MapleStory N" by applying blockchain elements such as NFT to its "MapleStory" IP, which accounts for about 25% of Nexon's revenue. South Korea's NCSOFT also plans to enter the North American and European markets by injecting blockchain elements into its representative game "Lineage" IP. One thing these companies have in common is that their strategy is to verify the feasibility of blockchain technology applications by testing services that are not large enough to have any company-wide impact. They will test whether the introduced elements will lead to an increase in the number of users or the life of the game.
Among them, Nexon's MapleStory N is one of the most anticipated IPs, as it is a project rooted in "making successful games more sustainable." Nexon said it is introducing blockchain to make this game, which has been around for more than two decades, a more durable game. It defines its Web3 element as the decentralization of the MapleStory IP to enable and support various communities voluntarily generated by users in the ecosystem to drive the game, and blockchain technology (including NFT) and token economics will be used as a means to support them. Assuming that the introduction of blockchain into games will help build an ecosystem for creators, ultimately leading to an increase in game life and sales, in this case, a wind of change may blow for game companies that are reluctant to adopt blockchain in their games.
in conclusion
In 2023, the blockchain gaming industry is expected to be even stronger, with the Web2 industry releasing more Web3 games, starting with Wemade's MIR M in January 2023. Netmarble's Meta World and Com2uS' Summoners War are scheduled to be released in the second and third quarters of 2023, respectively, while Nexon's MapleStory N and Square Enix's Symbiogenesis are expected to launch within this year. Blockchain games will take the quality of games to a new level, potentially driving mass adoption of Web3 games compared to the previously released, less than entirely successful P2E games.
Many game developers in Asia are developing blockchain games, and they have adopted different strategies and approaches. They see potential synergies between games and blockchain technology, which gives users ownership of their data and allows them to trade. Another possible opportunity factor is that Chinese game companies, which are rapidly emerging and competitive, are unable to enter the blockchain market due to relevant regulations. Although the blockchain game industry has been relatively slow in mass adoption since the launch of STEPN in the first half of 2022, we hope that traditional Web2 game companies with development capabilities and resources launching blockchain games will bring synergies in the crypto industry.