Gu Yanxi: Blockchain can reduce payment and distribution costs in the game industry


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Game payment and distribution channels are in the hands of giant companies such as Apple and Google. The game industry can get rid of its dependence on traditional channels by forming industry alliances based on blockchain.

Original title: “The game industry now needs to establish a blockchain-based industry alliance”
Written by: Gu Yanxi, founder of the American Liyan Consulting Company, a researcher and practitioner in the blockchain and encrypted digital asset industry

Recently, Fortnite, a world-renowned game developer, has started to face-to-face confrontation with Apple App Store and Google App Store. Both the Apple Store and Google App Store require game developers to recharge their games through its payment system. These two stores withdraw 30% of the recharge revenue as service fees. As a result, 30% of game developers’ revenue is directly contributed to these two stores. As one of the world’s largest game developers, Fortnite contributes a lot of revenue to these two stores. Obviously, the high commissions of these two app stores have already caused dissatisfaction among game developers. But due to the monopoly of these two app stores, individual game developers cannot fight against them. Only the largest game developer like Fortnite can compete with these two stores. Fortnite has embedded its own payment system in its application. This caused the two app stores to immediately remove the Fortnite app. Fortnite therefore filed a lawsuit in court. Commercial confrontational behavior has now risen to the point that it needs to be resolved through legal means.

The battle between Fortnite and the two app stores is a typical game between product producers and channel parties. Obviously in the game distribution industry, these two application stores are already in a monopoly position. Therefore, they can extract 30% of the revenue from the product sales. Previously, when the two app stores initially charged a 30% service fee, another option for gamers was to pre-install apps on their phones. They need to pay a 50-60% revenue share to mobile phone manufacturers. The share ratio provided by the two application stores was in line with the market’s competitive needs at the time. So they have the support of application developers. But today, game developers have no other better choice in terms of product distribution channels, so they can only take a frontal confrontation with these two app stores to try to reduce channel costs. But such a strategy is not the best strategy. In fact, today, the development of blockchain technology can already provide another more effective means of competition. The distribution cost of game products can be reduced to a few thousandths. And such a solution can be an industry solution, and it will no longer be owned by an organization alone.

The most basic feature of blockchain technology is to support direct transaction transfers between peers. Regardless of whether it is Bitcoin or Ethereum, the transfer fee has a very strong advantage over the transfer fee in the existing financial system. Therefore, in terms of technology, it has been developed to provide a more effective means of payment and transfer based on blockchain technology. In terms of specific applications, there are already Stellar or Ripple-based technologies between banks that have achieved very efficient and low-cost cross-border transfers. So just from the transfer function, a more efficient transfer method can appear in the game industry. In the current gaming industry, in addition to the payment methods provided by these two app stores, PayPal charges 2.9% for this. Although this ratio has been significantly reduced relative to 30% of the app store, if a payment method is provided based on blockchain technology, the cost of payment can be reduced by an order of magnitude relative to the cost of PayPal. This will bring huge benefits to the producer and consumer of the game.

In addition to high support costs, another problem faced by game developers is the distribution of their products. The reason Fortnite has to file a lawsuit with Apple and Google is because it still needs the traffic provided by the app stores of Apple and Google, and it needs to provide downloads for potential users through these two stores. The essence of this question is a question of information exchange. Regarding this problem, even the world’s largest game developer like Fortnite cannot build its own channels. It still needs to rely on distribution channels in the industry. So for game developers, the problem they need to solve is not just a lower-cost payment method, but also a more efficient and low-cost information distribution channel. In this regard, the game industry can also learn from the innovative learning brought about by the development of blockchain technology, and provide a more comprehensive solution in the game industry in an innovative way. Such a solution is to establish an industry alliance based on the support of blockchain technology and an equal and reasonable mechanism.

Blockchain technology supports cooperation between multiple parties on an equal basis. Cooperate on the basis of a pre-set and technically guaranteed mechanism. Bitcoin’s mining mechanism is the best embodiment of this aspect. All nodes in the Bitcoin network are based on the same rules. Whoever calculates the random number required for bookkeeping first will get the reward of Bitcoin. Due to the operating mechanism of Bitcoin products and the attractiveness of Bitcoin, the Bitcoin network has developed globally. For the game industry (in fact, for many industries), the same mechanism can be used to establish a more equal and fair ecology on a global scale.

Specific to the game industry, this industry can build its own network with the support of blockchain technology. This network is composed of game developers in the industry. Due to the support of blockchain technology for payment, very low-cost and efficient payments can be made between nodes in the network. The payment function therefore no longer requires a separate third-party specialized agency. In terms of product distribution information, this alliance can support a common information distribution mechanism. Consumers of game products can therefore easily find game products they are interested in. Since this distribution mechanism is shared by industry alliances, if it is set up based on a fair mechanism, it will gain industry support. Such an industry alliance based on blockchain technology can provide an industry solution for the game industry. Therefore, game developers do not have to rely on third-party channels. The reduction of channel costs will naturally benefit game consumers. Both producers and consumers of game products will benefit from the improvement of this market infrastructure.