Collapse and Reshaping: Drawing Lessons from the History of the Gaming Industry to Envision the Future of NFTs

Author: Tastingo.eth, Founder of OHDAT

In the next 1-2 years, the NFT market landscape will undergo significant changes, and new platform companies will pose serious challenges to the old order! What are the characteristics of the new platforms? How will they differentiate themselves to capture market share?

Let's rewind the clock back to the early days of the video game industry 40 years ago.

On Christmas 1982, children in the United States were eagerly anticipating a game called "E.T. the Extra-Terrestrial." This was not surprising, as the leading game manufacturer at the time, Atari, had spent a whopping $25 million to acquire the hottest IP commercial license from Spielberg. Everyone's expectations were sky-high, convinced it would be a blockbuster and incredibly fun. Atari seemed ambitious, ready to make a fortune during the Christmas season and shake off the shadow of losing market share to a multitude of emerging game development companies.

However, a devastating event occurred. What people could not accept was that this game was developed by just one person in six weeks, resulting in a Christmas flop. Worse still, besides this terrible game, a plethora of other junk games were developed between 1982 and 1983. This all stemmed from Atari's lax approach to allowing third-party game companies to develop games for its platform, permitting them to connect to the console without ever conducting serious quality reviews (including their own subpar games), betraying consumer trust. In 1983, the video game industry rapidly collapsed, plummeting from annual sales of $3.5 billion to just $100 million by 1985. A staggering 97% drop! "E.T. the Extra-Terrestrial" was labeled the worst video game of all time.

The collapse of "E.T. the Extra-Terrestrial" highlights the importance of product quality oversight. Glitzy promotional videos, massive investments in IP rights endorsements, and the inability of ordinary consumers to assess game quality beforehand led to losses amidst over-promising and false advertising. Does this not bear some resemblance to our current situation?

So how did the video game industry regain confidence and rekindle consumer love? I believe it relied on four main strategies:

1) Platform companies reclaim distribution rights and conduct reviews before launch

As Atari declined, Japan's Nintendo and SEGA stepped in. Particularly, Nintendo implemented a royalty system, leveraging its market share to regulate third-party game developers and ensure game quality.

2) Strong companies develop quality projects to boost market confidence

Nintendo and SEGA's own studios were also very effective, using several exquisite games as flagship titles to restore market confidence. The IPs we know today were born from the ruins of that time:

Examples:

Super Mario Bros.: This game became the flagship title for the NES and achieved tremendous success worldwide. It set a new standard for side-scrolling platform games.

The Legend of Zelda: This game is an open-world adventure that became one of Nintendo's most popular series, laying the foundation for the subsequent Zelda series.

3) New technologies, new experiences, new players

Activision and EA were also founded around 1985, but they chose new tracks and technological development standards, namely the blank market for personal computers, releasing the first generation of PC games that sparked significant interest among new consumers and led to the branching development of the industry:

Examples:

"The Bard's Tale": The dawn of role-playing games.

"King's Quest": Paving the way for PC adventure games.

"SimCity": The first milestone in simulation games.

4) Emergence of rating media

With the rise of gaming magazines in the 1990s and the internet in the 2000s, game companies tended to let media with professional appraisal capabilities playtest their games first and provide reviews. The emergence of reviews significantly reduced the information asymmetry between products and consumer expectations, exposing subpar products.

Examples:

IGN and Gamespot have become essential PR targets for all game companies.

Conclusion:

Companies like Nintendo saved the industry through a series of subjective actions, promoting healthy competition and becoming prominent giants in various fields. The gaming industry is now a market worth hundreds of billions of dollars.

From this, we can draw some valuable conclusions:

1) NFT platform companies should take on the responsibility of industry standardization

If the old forces continue to condone the production of junk content and fail to filter and support quality content, new forces will inevitably take their place.

2) New NFT platforms will possess integrated production and research capabilities

As they leverage first-party quality projects to eliminate competitors' contracts, they will gradually encroach on their market share.

3) New NFT platforms will innovate using new technologies like AI/AR/VR

Utilizing new media and experiences will attract new players and create new market opportunities, expanding the battlefield to new territories and seizing incremental territory.

4) New NFT platforms will promote professional project due diligence and engage KOL reputation ratings

During the project due diligence process, key tasks such as real-name verification, background checks, art asset previews, and contract audits need to be conducted seriously.

Although predecessors have provided standard answers, the industry is dynamically evolving, and the fundamentals of the past may not necessarily be our starting conditions. We must recognize that we still face many issues that the gaming industry did not encounter before.

1) Industry regulation remains insufficient

There are still significant disagreements within the community regarding integration into the mainstream world, and top entrepreneurs in the industry should step up to promote this integration.

2) Payment and wallet usability issues

This is mainly limited by regulation, which is essentially a continuation of issue 1.

3) Unclear business models

I believe that the existing primary sales and secondary royalties are reasonable business models that should be respected. They are the core motivation for artists to transition from web 2 to web 3, and we should not throw the baby out with the bathwater. Similarly, issuing more NFTs does not necessarily dilute holders. Project teams can differentiate based on rights, rarity, community status, and pricing. Different series themes, non-homogeneous designs, and experiences can sustainably issue NFTs without causing significant dilution issues. This has been demonstrated in the collectible toy and sneaker markets.

Therefore, while we await the efforts of new platform companies, we should further observe the progress of regulatory and payment compliance issues in the crypto industry. Once the timing is right, the next wave of true upheaval will begin, and the new industry landscape will present enormous wealth creation opportunities.

That's all for today. If you like my content, please like, share, and leave your wonderful comments. Of course, this is just my personal opinion. I welcome everyone to share logic, examples, and inspire each other to make the industry better together.