From the perspective of compliance, traffic generation, and users: Will major IPs be an attempt for domestic blockchain games to break through?

Author: W Labs Guatian Laboratory

This article has actually been brewing for a long time, hitting the pain point: How to attempt breaking the circle of chain games in mainland China?

(1) What are the big companies in China doing?

W Labs has been quite active in producing articles about chain games and the metaverse, gradually attracting the attention of some traditional game giants in the industry. They often hold closed-door communication meetings to discuss strategies and the future of the chain game track. It should be said that any sizable game company is paying attention to chain games, differing only in the extent of their involvement:

1. Those still making a fortune in WEB2 games are in the research and observation stage;
2. A few super large companies have already formed WEB3 teams and are making some investments, but they have not yet developed or operated their own WEB3 projects;
3. Those that have established overseas structures are already deeply engaged in specific projects. The officially announced representative work is "King of Avalon" by Funplus, which has invested in establishing Xterio to create a metaverse platform (they are expected to release their first product preview by the end of November), so friends should keep an eye on that. Meanwhile, everyone can gossip about how FTX Venture's investment shares will be handled, hahaha.

However, the core point of this business model is that it must have an overseas structure and team. Once it involves doing something domestically, the first step will be met with severe resistance from the company's internal legal risk control department, and after much discussion, there will be no results.

So is there a way to break the circle domestically? In the currently ambiguous environment in China, creativity and action are needed to attempt breaking the circle. Whoever steps out first will be the king who establishes the moat.

W Labs has been conducting research in this area. As the saying goes: "A game player who doesn't want to be a lawyer is not a good analyst." This topic requires extensive interaction with partners from various circles: policy, legal, gaming, etc. We won't list all the research and verification processes, as there is currently no 100% conclusion on what to do. The process of promoting an industry in China is like "crossing the river by feeling the stones." As you feel your way, you will understand it better. This was the case 30 years ago during the reform and opening up, and it is likely to be the case with the recent "WEB3 Wave Rising in Hong Kong." We will follow the characteristics of this long article series and analyze a fresh and hot case: "Legend - Flame Judgment." Yes, there are already cases of chain games in China, just released two days ago, hahaha.

(2) What kind of game is "Legend - Flame Judgment"?

This is some official announcement from traditional media over the past few days, such as People's Daily, China News Network, and China.com… It states that Century Huatong has developed a game called "Legend - Flame Judgment," using the 20-year national game IP "Legend" + digital collectibles model.

According to communication between W Labs and the "Legend - Flame Judgment" team, this product aims to create the first legally compliant WEB3 game in China! This is exciting but also raises many questions in mind. Here, let's clarify a few concepts for the young friends in WEB3:

1. Century Huatong is a publicly listed company that owns China's largest game company, Shengqu. Shengqu's predecessor was Shanda (we will gossip about Shanda's story next time). For players, mentioning Shanda brings to mind two super game IPs: "Legend" and "Dragon Valley."
2. Digital collectibles are a rising version of NFTs in China, with many wealth creation myths this year. They later began to be regulated and are now entering a standardized phase, with cases available for reference at Ibox.
3. Last year, the South Korean game company WeMade Entertainment's hit chain game "Legend 4" made countless players rich, and its IP is closely related to "Legend - Flame Judgment." We will discuss this in the next chapter.
4. The gameplay of legend-type games is MMORPG, with main quests + open-world monster hunting, completing tasks, and dropping equipment, very similar in style to the "Diablo" series.

(3) The love and hate of "Legend"

Now we come to the gossip segment that Guage loves the most. To be honest, the biggest impulse to write this article is not to share a possible new business model for chain games in China, which we have been researching for a long time, but rather to gossip about the stormy stories surrounding the IP of MIR2 "Legend 2." Life is just a game.

Most friends know that last year's richest Chinese was Zhao Changpeng of Binance, and that the previous richest was WEB2 tycoon Ma of Taobao and Ma of QQ. Before that, it was Hong Kong's Superman Li Ka-shing, and for a while, it was Wanda's national father-in-law Wang Jianlin. But does anyone know who the richest person was 20 years ago?

Chen Tianqiao, who founded Shanda in 2002, made a fortune by introducing a South Korean game MIR2 "Legend," registering 70 million users, selling like hotcakes in China, earning 1 million a day, and becoming China's richest man 20 years ago at just 28 years old.

Guage is a hardcore player who has been playing games for thirty years. The most frustrating thing about playing games in school was having to hide from parents to play secretly because playing computer games was considered a waste of time. In the hierarchy of disdain from our parents' generation, computer games rank like this: studying > reading extracurricular books > playing ball > flirting with female classmates > playing computer games > gangsters. The status of computer games is just slightly higher than that of Hao Nan and Shan Ji.

Chen Tianqiao's emergence shocked the parents of game players: Can making games earn so much money? Then there was heartbreak: games have harmed so many young people, how much money must be spent? They would watch us closely, warning us not to spend money on games, while encouraging us to learn programming. Whether to play games or not is not important; what's important is to learn computers to become the next Chen Tianqiao.

Shanda made a fortune in China, which made the South Korean developer of "Legend," WeMade, extremely envious: "Brother, you are already the richest man in China, and I can't even make it to the top ten in Korea. Let's renegotiate the revenue-sharing ratio." Chen Tianqiao definitely refused, saying, "What about the spirit of the contract?" The cooperation with South Korea was cut off. Shanda had long been prepared; wasn't it just a fork? They developed a new game "Legend World" and directed users to the new "Legend World." WeMade was even angrier, claiming it was blatant plagiarism! They then started a lawsuit that lasted several years. In the meantime, it got even funnier: Shanda showcased its financial strength by secretly acquiring the Korean company Actoz, which owned the "Legend" IP (originally controlled by WeMade), hahaha. This is a classic case in business history: WeMade, you accuse me of copyright infringement? I am infringing my own copyright; what does that have to do with you? In the end, both parties reached an out-of-court settlement in 2007, and the result was quite complicated. Guage has heard from Shanda's friends several times but hasn't quite figured it out, but it doesn't matter anymore.

Back to Chen Tianqiao, I have always believed that his position in the history of China's internet development is second only to the two Ma's. He pioneered many new business models, such as the "free-to-play + in-app purchase" model, which is still the main way most online games make money. More commendable is his strategic vision; after making money from games, he established Shanda Literature, monopolizing 70% of China's literary IPs, with Qidian and Rongshuxia all belonging to him, later acquired by Tencent. He also launched Shanda Box, which ultimately failed because it was too early, encroaching on the television business and was shut down. If it had succeeded, it would have been a comprehensive entity like "Xiaomi Box and other boxes + Youku, iQIYI, and other content."

Unfortunately, later Chen Tianqiao developed a brain disease, sold Shanda, and moved overseas for treatment while investing heavily in brain science research. A once-great talent ultimately fell into the unavoidable pit of health, which is quite lamentable.

Chen Tianqiao and Luo Qianqian couple: A model of entrepreneurial couples who share joys and sorrows.

(4) What is the essence of this business model?

With the nostalgia mode over, let's discuss the essence of the "Legend - Flame Judgment" case from several perspectives:

• Compliance: Games are games, and digital collectibles are digital collectibles; both are compliant, and together they are also compliant. "Legend - Flame Judgment" has a license number, and the digital collectibles are on the "National Version Chain" (National Copyright Alliance Chain), which is a consortium chain backed by government departments.
• Can it be traded: The digital collectibles of "Legend - Flame Judgment" (like "Legend Order," which we define as "Digital Collectible A") sold on the National Version Chain at the end of November have empowering features in the game, increasing the drop rate of another type of digital collectible game equipment (which we define as "Digital Collectible B"). More importantly, both Digital Collectible A and B can be traded on the "National Version Chain" after holding for 21 days! This is crucial! A pain point of domestic digital collectibles is that they cannot be traded formally; if you want to trade, you can only do OTC. As of now, W Labs has found that the only domestic digital collectible project that has announced it can be traded is the upcoming game "Legend - Flame Judgment."

• Who are the users: In discussions with WEB2 game giants, W Labs has consistently emphasized two points: Who are the target users of the chain games you launch? Are they the 300,000 active addresses in all current chain game projects? Or are they the 3 billion players in WEB2 games? Different positioning leads to different strategies. Without exception, the big companies are thinking about attracting WEB2 game players. This is the century-old dilemma in the chain game industry; there is currently no correct answer, and I estimate there is no single answer, but if you don't try, you may not find an answer. There are too many entangled points involved: the traditional user acquisition costs are not much saved; issues with deposits and withdrawals; the education cost for players entering WEB3, etc.

  "Legend - Flame Judgment" has clearly defined its target audience as the old player group of Legend 2, so it mainly uses traditional game user acquisition methods. The idea is to make old players of Legend 2 realize that some of the equipment they drop has value, can become their own assets, and can be listed for trade.

• What type of game: If you want WEB2 game players to enter the chain game circle, the most effective way is to recognize the game IP, and it should not be promoted as a way to get rich quickly. For example, if "Sword and Fairy" were to release a chain game, I would definitely buy the NFT. If WEB2 game giants want to try this area, I suggest using big IPs. I believe Century Huatong's attempt this time is very valuable, bringing out the biggest "Legend" IP instead of some games that are just slightly better than Axie.

"Legend - Flame Judgment" is expected to start internal testing and digital collectible sales at the end of the month. W Labs will continue to track and observe this innovative case. Currently, a discussion channel has been specially established in Guatian's Discord community, where some project details and information will be discussed and announced. We hope interested friends will join.

In summary, the model of big companies and big IPs + digital collectibles may become a new model for breaking the ice in domestic chain games. However, several points need attention: the tradability of collectibles must be genuinely feasible; the methods and ways of attracting WEB2 users; the game IP needs to be strong; and it is necessary to control the volatility of collectibles to align with policy guidance. Players come to play games and for nostalgia; those looking to get rich or lose big can go chase meme coins.