Catalyze Gaming Ecosystem Growth on Arbitrum

[thedereksmart]

@AbdullahUmar

That being said, we’re not in favor of eliminating gaming in its entirety. There should still be programs to support game devs and attract publishers–but to a smaller account. Game development is very much an all or nothing task. Either we go all in or keep it light.

Indeed. However, I think the proposal is setting aside $400MM to curate games; not that it’s going to be spent all at once or on a few games with massive budgets. In fact, over in the educational post, I specifically highlighted the proposed budgets as being inadequate if the goal is to attract quality teams and their games.

The goal of this proposal is to play catch up, it seems. Hence, the focus should be on a handful of strong indie games. This budget could address that market, but we still feel that a smaller budget can be more prudently allocated to serve that purpose.

Agreed. But this is specifically what the proposal is seeking to do. Except, it’s not targeted at just indies, as that’s an even greater risk.

We would encourage this proposal to go forward with a much smaller ask and collaborate with the grant groups, like the gaming domain allocator, to come up with a way to grow gaming. That way, some data points are present to help guide the funding initiative.

All of this can be done within the GCP as it’s just marketing, metrics, and process. Adding another layer (gaming domain allocator?) - or a glorified focus group - isn’t going to achieve the expected results. I mean, the GCP could very well hire Helika or even Upptic, Windwalk, Naavik etc. and come up with sufficient metrics for guidance and pulse checking in any gaming areas they want.

We need follow-on investments to support the groups who are the most promising, and the best way to do so is track and monitor continual performance relative to given KPIs. As soon as KPIs are met, those teams attain more funding. This would elongate the timeline here from 2 years to many more. It would also reduce the ask of $400M to something smaller due to the tranched setup. This way, we are thinking more long-term and in an organized manner. Currently, it seems things are being rushed, which sounds like a recipe for disaster.

I believe that’s all part of the GCP process. I don’t believe that just because something isn’t mentioned in the - already detailed proposal - means that it’s not part of the process. For example, I don’t think that the GCP is going to dole out entire grant sums without milestone based tranches. However, at the same time, unless you’re doing something different from what others are doing, and which is more attractive to game devs, there’s little to no incentive to deploy on ARB. And so, adding what some would see as adequate safeguards which work in other industries outside gaming, may only serve to not only hamper the process but to also deter devs who already have a large pool of chains to deploy on.

The other aspect that we feel is unclear is how tangibly the reward will circle back to the DAO. There are two aspects this proposal can optimize for: increasing Arbitrum’s gaming presence and returning value to the DAO. Of course, both can theoretically be achieved, but there’s a very real likelihood that only one or none will be accomplished. If we are competing with groups like Immutable, who’ve spent the past several years throwing money at game studios, gaming partnerships, and tooling like their SDKs and custom APIs, it’s hard to justify spending this much capital to potentially see little return when a direct competitor is miles ahead and thinks about nothing else but gaming.

Very true. And it’s why the key to success has to be orchestrated via a fine balancing act by the GCP in how grant deals are structured.

Most of the chain deals that I have come across are either flat-out grants with no expectations of performance or venture deals with some ROI down the road. The GCP has to determine which route to take; but my guess is that even if it took the latter [ROI] route, structured properly and in a fair win-win manner, it would go a long way because game devs are already aware that in all cases they have to split their winnings.

The intrinsic issue here is that there are several factors that play into a win-win type ROI deal. For example, deploying on Steam means 30% of revenue, while deploying on EGS means 12% revenue.
Right there, you’ve given up a sizeable portion of your revenue to be on a platform.

And you don’t even have to deploy a game on either platform, although even with the saturation and discovery challenges on both, it’s still better to deploy on either than to not. And so, when taking ROI splits into account, one should be mindful of the fact that a dev isn’t likely to agree to any deal which doesn’t have a win-win concept. By nature, a vast majority of VC and publishing deals are highly exploitative. As a lifetime member of the IGDA, and a one-time president of a local chapter for many years, I have come across a vast number of deals which game devs ask my advisory (always free) on. You wouldn’t believe some of the deals that I have seen. In fact, I was once in that boat myself back when I first started out. And after my last deal concluded, I opted to self-publish. That was over two decades ago.

So, lets assume that games getting funding from the GCP plan to deploy on EGS (which, unlike Steam, allows Web3 games) . Right off the bat, that’s 12% of rev. When you factor in the game costs as well as the on-going (little known fact: most, if not all, Web3 games have on-going costs) operating costs, it’s easy to see that the financial pool shrinks - usually by a lot. So, a game seeking $250K funding, isn’t going to have the same expenses and constraints as one that seeks $1.5M. And this is why I outlined some grant budget thresholds and guidance over in this post because those are some of the things that a competent and experienced games BD team would be looking on a per deal basis.

Resources:

The hidden costs of indie game development

What is the Average Cost of Game Development? - Guru Blog

Game production cost – from development to marketing

What we could focus on instead is a chain agnostic approach, where the DAO truly runs a VC gaming arm for the sake of profit, and of course, has a bias towards developing on Arbitrum. That way, at least we can more reasonably forecast ROI.

What would a VC arm at a chain do differently from actual VC firms, BD teams at chains - or the Catalyst venture team that would be hired by the Council for this proposal? I would say, nothing different. Other than to adhere to less restrictive rules which guide profitability.

It should be noted that, the $400MM aside, this is also a marketing spend of sorts because if/when this passes Tally, at best, it will spark inquiries. Prior to that, my guess is that serious devs haven’t exactly been pounding on the Arb Foundation doors for gaming grants - substantial or otherwise. Also, take a look at quest book. The dearth of games on ARB is due to the fact that game devs already know that, outside of Treasure - and now XAI, gaming isn’t happening on ARB to any meaningful extent. This proposal, as I see it, is key to changing that.