It’s All a Game

This is an essay about the intersection of Web3 and games written by Colleen Sullivan, Co-Head of Venture at Brevan Howard Digital. It’s intended for anyone who enjoys games and is curious how Web3 technologies may impact the gaming industry. This essay is written in a modular fashion enabling readers to skip around and read the sections that are of most interest.

For the full essay, download the PDF version of this report.

The gaming industry is thriving with 3.38 billion gamers globally and $184 billion in expected revenue in 2023. Gen Z and Gen Alpha — who increasingly view digital and physical experiences as one — devote considerable time to gaming (~15 hours/week). $135 billion was spent in 2022 on virtual gaming items — none of which are owned or tradeable by gamers. In my opinion, it's inevitable that (younger) gamers will eventually demand ownership of virtual gaming items, and Web3 enables just that. Gaming goes through paradigm shifts approximately every 10 years, and in many respects, the rise of Web3 gaming is similar to the rise of free-to-play (F2P) gaming. I believe that over the next 10 years, most games will incorporate Web3 technologies and that monetization enabled by Web3 will become a dominant business model in gaming. When these paradigm shifts happen, they seem obvious only in retrospect, and this essay is an attempt to pull that future forward.

This essay covers:

• Chapter 1: Why I care so deeply about games and why we have an ownership problem
• Chapter 2: The size, scope, and make-up of the overall gaming industry
• Chapter 3: The definition of game “games” and, more specifically, “Web3 games”
• Chapter 4: Why gamers don’t actually hate Web3 gaming or NFTs and how the rise of Web3 gaming is similar to the rise of F2P gaming
• Chapter 5: What Web3 uniquely provides to games, including:
  • ownership of assets
  • programmability/composability of game assets
  • community and bringing non-spenders into game economies
  • royalties for developers and gamers
  • democratization/UGC on steroids
  • ownership of the game
  • mobile games, which generate 50% of gaming revenues, get their own sub-section, which covers the disproportionate impact Apple and Google have on the industry — and how adding Web3 to mobile games may be particularly impactful
• Chapter 6: A transparent take on where we are with crypto wallets in the context of gaming and where we need to go
• Chapter 7: Why most luxury and streetwear brands will start to operate like video game companies and “Forever Brand” Web3 activations; brand/Web3 collaborations; phygitals/digital twins; RWA in the form of sneakers, hoodies, and hats; and net new monetization opportunities for brands in Web3
• Chapter 8: Everything old is just new again and why Second Life is unlikely to get a second life in Web3. Also, why it’s important for game developers to consider money transmission rules
• Chapter 9: Why it’s all about the (digital) Benjamins for kids and why we have an “old people don’t understand” problem
• Afterword: My good friend Peter Kieltyka, CEO and Co-Founder of Horizon Blockchain Games, closes the essay out with an Afterword

For the full essay, download the PDF version of this report.

Important Legal Information & Disclaimer

The commentary contained in this essay represents the personal views of its author, Colleen Sullivan, and does not constitute the formal view of her employer or its affiliates. It does not constitute investment research. The views expressed in the document are not intended to be and should not be viewed as investment advice. This document does not constitute an invitation, recommendation, solicitation, or offer to subscribe for or purchase any securities, investments, products or services, or any investment fund. Unless expressly stated otherwise, the opinions are expressed as at the date published and are subject to change. No obligation is undertaken to update any information, data, or material contained in the essay. This essay is issued by Colleen Sullivan in a personal capacity.

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