What’s the Play-to-Earn Business Model?

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The Play-to-Earn business model is the latest development in the games industry. It’s a business model that embraces the concept of an open economy and provides financial benefits to all players who add value by contributing to the game world. It’s likely to introduce new game concepts and retention models not yet seen in modern gaming.

Business models around video games have evolved as technology became more accessible to the audience. In the late seventies and early eighties we played our games on arcade machines in local game centers. With a pocket full of quarters gamers would compete to get the high score.

Nowadays we play games on our smartphone when we’re in public transit or taking a moment for ourselves. When we want a deeper experience, we launch a game on our personal computer or home console. No matter the platform, there are business models that suit every player.

Free-to-play is the basis

Consumers need to purchase the right to play a premium game. They do this by buying a license from a digital store, or a physical copy from an online or local shop. The financial commitment is pretty steep, as it’s not uncommon to pay 60 dollars for a newly released game. Even though this is still a huge industry, the free-to-play business model has seen the most growth in recent years.

The free-to-play business model allows gamers to get a game completely free without any financial commitment. Free-to-play or freemium games are always downloadable, and give consumers a limited / constrained experience. Gamers will need to pay to speed-up their progress or to obtain special items. For example, users need to pay for in-game currencies, extra content or special cosmetics for their game characters.

Some of the biggest games on the market are actually available for free. Last year Fortnite alone was responsible for 1.8 billion dollars in revenue, even though the battle royale game is completely free. Selling cosmetics to allow more personalized customization is big business. Among the biggest games on the market are titles like League of Legends and Hearthstone, which are basically all available for free. However, each developer has its own ways to make users pay for additional content or cosmetics.

These free games have made billions of dollars in revenue, and there’s nothing stopping them. This just shows that the free-to-play business model has matured, and developers have learned the art of free-to-play monetization.

The play-to-earn business model has many similarities with the free-to-play one. Often a play-to-earn game also uses mechanics seen in free-to-play titles. However, play-to-earn games also allow gamers to make money or earn valuable digital assets.

Explaining play-to-earn

Giving gamers ownership over in-game assets and allowing them to increase their value by actively playing the game are key components of the play-to-earn business model. By participating in the in-game economy, players are creating value for other players and the developers. In turn they are rewarded with in-game assets. These digital assets can be anything ranging from cryptocurrencies to in-game resources that are tokenized on the blockchain. That’s why the play-to-earn business model goes very well together with blockchain games.

In the play-to-earn business model the game and the developers reward players for putting time and effort into their game. For example, in Axie Infinity players earn Small Love Potions (SLP). Players need these tokens to breed new Axies, but they can also sell the tokens to other players on the open marketplace. Other examples are the resources in League of Kingdoms, or the prizes players can earn in the fantasy football game Sorare.

Acquire value to participate

In essence a play-to-earn game should be free-to-play as well. However, that’s not always the case. At the moment gamers first need to buy three Axies before they are capable of battling inside Lunacia, the world of Axie Infinity. Sorare also requires players first to invest money in player cards, before they are able to earn cards in the weekly competitions. Games like Chainz Arena and League of Kingdoms are completely free-to-play, but idle gameplay mechanics and limitations sort of force gamers to invest some money into the game. So even though players earn something, they also need to pay.

Developing a video game costs money, and these games are created by businesses. However, the benefit of the play-to-earn business model is that a gamer always creates some value that can be sold. Even when a gamer needs to pay to start playing, these acquired items can always be sold again. Every card in Sorare can be sold, and so can every Axie in your wallet. At the same time games like Fortnite and League of Legends are making billions. Players spend money and throw their value in a bottomless pit. When they stop playing these games, their wallets will be empty.

Play-to-earn changes this. All obtained items represent a certain value. This means that gamers will always be able to make some money the moment they step away from a game.

Robert Hoogendoorn avatar
Robert Hoogendoorn is a gamer and blockchain enthusiast. He got in touch with crypto in 2014, but the fire really lit in 2017. Professionally he's a content optimization expert and worked for press agencies and video production companies, always with a focus on the video games & tech industry. He's a content manager and creator at heart, started the Play to Earn Online Magazine in early 2020.