a16z: The Future of the Creator Economy in Gaming Has Arrived

Original Title: 《The Creator Economy Comes for Gaming》
Author: Joost van Dreunen, teaches at NYU Stern School of Business
Translator: Moni, Planet Daily

Sometimes, the difference between game makers and players is just a line, but the latter can complete a game much faster than the former can create one. Therefore, in the high-risk, high-reward industry of gaming, creativity becomes crucial, yet it is currently quite scarce. Talent is one of the biggest bottlenecks for the industry, which is why user-generated content can become fertile ground for nurturing the creator economy for game studio heads. People can create and consume content on platforms like YouTube, TikTok, and Twitch, which have now become growing centers of the creator economy. And now, the creator economy has entered the gaming industry.

Of course, for decades, game studios have been tapping into fan potential to provide themselves with a source of innovation. Doom, arguably the most famous first-person shooter of all time, achieved success in the 1990s largely due to one practice: opening its underlying source code to anyone willing to build additional levels and components—making it the original game that drove the phenomenon of "modding." After the release of the first-person shooter Half-Life, Valve gradually evolved from a publisher into a mature digital platform, including the world's largest PC game digital market, Steam. To this day, Valve has released one of the most successful games of all time, Counter-Strike: Global Offensive, which is a product of their own derivatives.

Although user-generated content in games has a long and rich history, traditionally, user contributions to games were seen as a form of self-expression or merely niche behavior: participants create content because they love the game and have a sense of community, not necessarily for monetary gain. However, this situation is changing: game studios are gradually realizing that the value creators bring to their games is worth tangible cash rewards. For example, Roblox, a popular multiplayer online creation game, nearly doubled its spending on external developers last year; while new-generation games like The Sandbox and Mythical Games allow players to build and own their own blockchain-based gaming experiences.

We see that the creator economy is gradually permeating the gaming industry, with players exploring new ways to monetize their contributions, whether by building original game worlds, creating and selling in-game items on the blockchain, or interacting with fans through new game streaming tools. Meanwhile, studios and game developers realize that creating opportunities for players to contribute—while sharing profits—is actually a competitive advantage. This is crucial for revitalizing the potential economy in game design and publishing.

The Economics Behind the UGC Boom

The rise of user-generated content (UGC) is not coincidental: it is largely inevitable. The cost of making games continues to rise. Legendary game designer Raph Koster found in an analysis conducted before the COVID-19 pandemic that, when calculated per megabyte, the effective creation costs of a $5 million independent mobile game and a $100 million cross-platform AAA game are the same. This explains why large publishers tend to avoid risks—or at least weigh their investments very carefully.

However, even investments from large publishers cannot drive continuous innovation. The competitive advantage of game studios comes from their ability to develop cool new experiences; if there is "too much similarity with slight differences," it becomes difficult to survive in a click-driven market. By opening up creation to players and external developers, publishers effectively outsource the innovation process and reduce their business risks. Shifting development responsibilities from a small team of professional designers to a large group of fans and enthusiastic players can greatly expand the entire design process. Opening up game-building modules and encouraging players to access and develop in-game items and experiences for others can uncover more novel content, which has been a part of the early beta testing process.

According to Electronic Arts Senior Vice President Samantha Ryan, in the past five years, Electronic Arts developer Maxis has created about 5,000 individual outfits for the simulation game The Sims. She pointed out in a recent panel discussion:

"But if you look at one of our largest user-generated content sites, you will see that they created 39,000 pieces in the same period. As a professional development company, we simply cannot keep up with our players."

Game executives like Samantha Ryan are now disclosing this fact. It is well known that traditional publishers often move very slowly in adopting novel revenue models and technologies (VR is a typical example). They tend to "wait and see" until they are forced to enter a field at a high price, usually through acquisitions. For example, when Activision Blizzard finally entered the mobile gaming space in 2016, it spent $5.9 billion to acquire King Digital. In this new era—characterized by massive fan participation and game monetization—it is clear that the creativity and viral spread of games are not driven by conservative traditional companies, but by external (often social) forces.

For game developers, there is another benefit: most publicly traded and private industries now generate revenue through service models, leading to content saturation. Digitalization and the resulting free-to-play revenue model have made games accessible to everyone. In a sea of available games, connecting consumers with content has become more expensive. User-generated content offsets marketing costs because it allows companies to retain players more easily and reduce churn rates. Being part of an active community and providing a continuous stream of new content for their favorite games encourages players to stick around longer. At the same time, this has a positive impact on the average game lifecycle and reduces threats from competitors.

Making Social Games, Not Just Playing

When participating in most traditional forms of entertainment, we are often quite passive: for example, the frenzy brought by Netflix's "Squid Game"; or going to a concert. Games, however, are entirely different; audiences can actively participate and even embody the spirit of entertainment, which is changing everything. Through experiences in games like Roblox, The Sandbox, and Rec Room, we find that the focus of these games is on game creation. User-generated content is not just a new way to play—it is also a gradually viable monetization method, a form of identity, and a social bond.

Character creation has long been at the core of role-playing games. Through user-generated content, characters in games become more fleshed out and expressive. Meanwhile, these customized virtual avatars not only provide unique adventure experiences in games but also help users enhance emotional connections. (Through companies like Itsme and Genies, these characters are becoming increasingly personalized.) Notably, we are not exploring the game world through anonymous avatars or game tokens, but through the unique skills and different personalities of characters. In one game session, I might become a sniper, diving into battle; in another, I might embody an invincible thug, taking on quests myself. Gameplay is gradually shifting from a form of entertainment to a form of expression.

Of course, the deeper aspect of games remains social—users' emotional needs are not just about connection but also about creation and contribution. By developing novel game objects or experiences, we can share with others rather than just play games purely. Nowadays, many social media interactions are limited to scrolling through feeds; in contrast, in the gaming world, players can interact in real-time with virtual identities—some users can even get married in customizable game worlds like Rec Room. Of course, concept art (character and scene images used during game production that leak before the game's release) has existed for a long time, but it has not become a revenue model because it is now integrated into the game.

Conclusion

Over the past thirty years, as gaming experiences have gradually enriched, players have begun to participate more deeply in increasingly important decision-making processes, ultimately leading to higher levels of customization, which means we are waving goodbye to a singular objective experience. Perhaps we are playing the same game, but we are gradually beginning to experience it in our own ways. Today, through the development of user-generated content, we can also share and sell these customized experiences with others.

Like the previous media, education, and crypto worlds, the creator economy is now manifesting in the broader gaming industry. Previously, modifying original content and user-generated content were seen as value-added revenue sources reserved for gaming fans, but now, creating games, participating in battles, trading, and selling in-game creations will also become an indispensable part of the player experience—undoubtedly, the future of the game creator economy is here.