Interested in learning what's next for the gaming industry? Join gaming executives to discuss emerging parts of the industry this October at GamesBeat Summit Next. Learn more.
Kevin Chou has made his mark with Kabam in mobile games and Gen.G in esports. And now he has gathered his crew together for another startup, a blockchain gaming company called Forte (pronounced for-tay).
Chou’s founding team comes from Kabam, GarageGames, Unity, and Linden Lab. They’ve listened to the siren song of blockchain and have gathered to create a platform offering for game developers to accelerate adoption of blockchain technologies supporting peer-to-peer economies within new and existing games.
(Chou will be a speaker at our GamesBeat Summit 2019 event on April 23 and April 24 in Los Angeles; early bird discounts expire on Friday).
Not everybody thinks blockchain games are going to be a magical thing, since blockchain — a decentralized immutable ledger — has mostly been used to create secure and transparent cryptocurrencies. It has also been associated with the crypto bubble and bust, and a number of scams related to startups raising money via initial coin offerings.
Others who have studied blockchain and games say it benefits the infrastructure for games (like stores, collectibles, or item trading), but it doesn’t necessarily change games themselves. But Chou isn’t deterred. He has proven to be a visionary before, heading teams that created mobile games like Marvel Contest of Champions that were played by hundreds of millions of people over the past decade.
“The emergence of free-to-play and cloud gaming let us deliver games on Facebook and on mobile,” Chou said in an interview with GamesBeat. “But while we got hundreds of millions of people to play, a very small percentage paid. So the incentives for the game developer were very hard to align with the incentives for the players. It devolved into ‘pay to win'” schemes that left many users frustrated.
“Many of the devs we talk to share frustration with the way free-to-play economies have to be run now,” Chou said.
But with blockchain, Chou believes peer-to-peer trading and economies can correct some of those wrongs and minimize risks for various parties. He thinks it has transformative potential for nearly all forms of digital interaction, in particular in games where digital transactions represent an $80 billion industry, or 80 percent of global games revenue, and engage roughly 2.5 billion people.
“What we see is the opportunity to bring people who made game engines and games before to using blockchain for peer-to-peer economies within games,” Chou said.
How games can benefit from blockchain
Forte’s mission is to accelerate the adoption of blockchain technology in the games industry by creating decentralized products and solutions that make it easy for game developers to use blockchain in their games.
An example: In a multiplayer game, players form clans. The clans might be able to use blockchain rewards or items to incentivize their own players to go on a quest or do something for the clan. That means the players would have control over what happens with the blockchain items, rather than just the game developers.
Forte will bring these offerings to market through a combination of building, incubating, and funding promising teams and projects. The company already has about 70 people, said Chou, who grew Kabam to $400 million in annual revenue and 1,000 employees before selling it in various parts for close to $1 billion Netmarble and FoxNext. He also cofounded Gen.G, the esports organization, with former Kabam chief operating officer Kent Wakeford. Gen.G recently named Chris Park as CEO, freeing Chou and Wakeford to start Forte.
Wakeford is also joining Forte, as are ex-Kabam executive Weiwei Geng and ex-Unity executive Brett Seyler. Seyler will be chief platform officer at Forte. Mahesh Vellanki, formerly of Redpoint Ventures, an early backer of Kabam, is also joining Forte.
“The microtransaction-driven game industry has matured and consolidated, and as a result innovation has grown stagnant. Blockchain technology offers new growth vectors and an opportunity to do things differently,” said Chou. “We are focused on making blockchain technology ready for the mass market and working closely with developers to create player-driven game economies that benefit both players and developers.”
While the games industry continues to grow worldwide, growth is slowing and continued consolidation has seen 77 percent of global game industry revenue captured by just 25 companies, according to market researcher Newzoo. This increased competitive pressure among free-to-play game developers has resulted in more aggressive monetization patterns, leaving many players feeling burnt and disappointed by new products. Blockchain technologies create opportunities to align developers with their players with increasingly player-driven peer-to-peer economies, Chou said.
“Peer-to-peer economies have historically proven a tremendous and expensive challenge for game developers to support without negative player experiences due to fraud and dependence on misaligned actors,” Seyler said. “The atomic unit of innovation inherent in blockchain substantially resolves these risks and unlocks vast potential for new types of game economies. We expect its application to be as transformative for the games industry as free-to-play business models have proven over the previous decade’s double-digit growth.”
Additional announcements and product rollouts will be revealed in the coming months. Forte is based in the financial district in San Francisco. Chou said that news of funding and partnerships will come in the near future.
Chou said the team has been working for a while, evolving plans and exploring the technology. While others are focused on bringing better security, scalability, and throughput to blockchain transactions, Chou said.
As for the blockchain skeptics out there, he said, “It can be very confusing. There are a lot of different disciplines from cryptocurrency to economics to tokens and ICOs.
The right way to do game economies
“From the highest level, we focus on the same type of incentives for game developers and players,” said Seyler, who made more than 50 free-to-play games over the course of a decade. “Managing a game economy is hard to get things to line up. That’s where the concept of peer-to-peer trading comes in. With games like World of Warcraft and Counter-Strike, you had to trust the company to continue to allow the trading of skins to happen. But in those cases, the game developer didn’t make as much money on an item trade as they did when they sold a brand new weapon in the game. So a company might come out and say you can’t do this trading.”
For game companies that run their markets with command-and-control precision, it’s hard to give players the freedom they want. It’s also hard to balance the game for both older players, who have paid for a lot of stuff, and relatively defenseless players who are new to the game. Virtual worlds like Second Life encouraged item trading and item creation. But there’s also a risk of counterfeiting in secondary markets.
“Second Life is more of a free market and a good example,” Seyler said.
With the unique identification possible with blockchain, that risk can be minimized. Players can transact with each other in ways that the game publisher cannot control.
“We think the best solutions for games will apply a bunch of solutions, depending on use case that the developers want to implement,” Seyler said in an interview.
Chou added, “A big part of what we are doing is building out tech to demystify this for game developers, so they don’t have to understand throughput, latency issues, and other things without having to go super deep.”
I noted that the blockchain opportunity is muddied because of the crypto bust and the fraud, much like it was hard to sort out the winners and losers in the middle of the dotcom bust of the early 2000s. But Seyler said he believes the winners and losers in blockchain will shake out faster than the dotcom days, when it was hard to convince consumers to buy things online and trust web sites with credit cards.
“A lot of innovative work is happening in software,” said Chou. “In the dotcom days, they were trying to figure out how to connect the internet across continents. My view is it will happen faster” with blockchain.
And games can lead the way, in part because gamers have proven so fearless in adopting new technologies, Chou said.
GamesBeat's creed when covering the game industry is "where passion meets business." What does this mean? We want to tell you how the news matters to you -- not just as a decision-maker at a game studio, but also as a fan of games. Whether you read our articles, listen to our podcasts, or watch our videos, GamesBeat will help you learn about the industry and enjoy engaging with it. Learn more about membership.