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Konvoy Ventures is a thesis driven venture capital firm focused on the video gaming industry. We invest in infrastructure technology, tools, and platforms.

Gaming: Financial Reward vs Entertainment

Play-to-earn or play-and-earn?

P2E Gaming: The Entire Future or Just One Part of It?

In a recent episode of the “Where it Happens” podcast, Reddit co-founder Alexis Ohanian stated that he believes 90% of gamers will only play play-to-earn (P2E) games in 5 years. In short, we completely disagree. While we are excited about the prospects of blockchain gaming, past trends and the fundamental purpose of entertainment make this homogenous vision of the future hard to believe.

We also want to clarify an important distinction between play-to-earn (P2E) and play-and-earn (P&E). P2E games are built primarily for the ability to earn money; that is the core experience. Play-and-earn (or play-and-own), where blockchain utility is a feature and not the core focus, is where we view a lot of value in blockchain games.

There is also some nuance to this argument because of how the market justifies this business model vs how the players actually view it. Conversations on Discord, Reddit and Twitter on the official pages of many P2E games are littered with questions from prospective players around strategies for making money, future NFT drops, or discussion around token prices and predictions. From a consumer perspective, it seems many players care more about potential financial gain than actual gameplay and enjoyment.

Gaming is Entertainment (not work): The first reason to be skeptical of this future is that “playing” is not entertainment if the core reason to engage with a game (or watch a movie, go to a theme park, etc) is to extract financial value from the experience. That’s just another form of a job, which we believe very few gamers want their time playing games to feel like. The only form of entertainment where the core attractiveness is making money is gambling, which is not always a healthy or sustainable medium of entertainment for many people.

Overall, hyper-focusing on financial rewards in games is a dangerous mentality. Time does not always need to be valued through the ability to “earn” income. Entertainment is about leisure, and games are a form of entertainment. It is unhealthy for the quality of entertainment and leisure to be correlated to the optimal financial value consumers extract from it.

Business Models: The gaming landscape is characterized by a wide range of gameplay and business models, and new entrants tend to expand rather than cannibalize the market. The gaming industry has one of the largest user bases across any market (especially entertainment) which is why so many different types of games and business models thrive. Fortnite (free-to-play, first-person shooter that monetizes from cosmetics and battle passes), for example, is one of the most recent large-scale success stories in gaming. Total registered users surpassed 350m and even if you assume that every single registered user is still actively playing Fortnite, that would only be 11.7% of the 3b gamers around the globe.

The gaming market has a wide array of genres including puzzle games, first-person shooters, RPG, strategy, sandboxes, and simulations. Additionally, there are a number of business models such as free-to-play (ad-supported), free-to-play (microtransaction-supported), subscriptions, upfront paid games, and UGC. To think all of this will assimilate to a single business model (P2E), as Alexis Ohanian is claiming, is entirely unlikely and will not happen. We would argue that this is not what gamers want because of how consumers view games: enjoyable entertainment experiences.

What we do think is a more sustainable model and something that would align with the integrity of gameplay is bottom-line profit-sharing which is a far more sustainable model than the current P2E model.

Developer Focus: The last concern we have with an exclusively P2E future is how developers would have to start building for their players. Traditional games build moats through their gameplay. If another game with better gameplay comes out, users will shift their finite time and attention to those games. This reality led to the rise of live ops and continuous updates.

If play-to-earn were to become the majority of gameplay (unlikely) then developers will be forced to focus on earning potential. In the long run, this would turn games into financial products with gameplay as a secondary benefit. To us, this isn’t the right future nor is it a future that most gamers even want.

Takeaway: Games are a form of entertainment, and as a result they’re not meant to exclusively be financial-reward-generating activities. The developers that only build for optimal “earning” will not last because gamers don’t want to feel like their time constantly needs to be efficiently monetized. The gaming industry has always been an industry that is defined by innovation, but advancements have historically improved a user’s gaming experience. P2E can offer real value to players and has a significant place in the future of gaming, but we do not believe it will completely overrun existing monetization models.