The Metaverse and Evolving User + Business Behaviours

The biggest behavioral shift in the last year has been the increase in time spent online and in virtual realms. This time is more important than ever. Since the 1980s, “gamers,” or “gamers,” have been creating “fake avatars” and spending their time in digital worlds. They also pursue miscellaneous tasks and accomplish non-game-like goals like designing a room in 2L (versus killing terrorists in Counter Strike). If they didn’t see it as a problem, a large portion of society considered such efforts strange, wasteful, or anti-social. Others saw it as an adult building a train set from their basement.

It is hard to imagine what could have done more to change this perception than COVID-19. Many of these skeptics have participated in and enjoyed virtual worlds and activities like Animal Crossing or Fortnite. They searched for things to do, attended events previously planned for the real-world, or spent time indoors with their children. This has not only de-stigmatized virtual life and “the Metaverse,” but may even lead to an additional generation participating in it.

It’s almost like ordering online groceries. Millions of people have been aware of this service for years, but they refused to use it because they believed that if they did not pick their groceries, they would be damaged, spoiled, or otherwise unacceptable. These customers believed that even if the apples were not bruised, it would be wrong. And there was no marketing or Net Promoters to change this. Many of these people have been forced to order grocery delivery since the Coronavirus. These customers are now finding that their groceries are good quality and easy to use. Some customers will return to shopping in person, but not always.

Developers will see higher revenues and more engagement, which in turn will lead to better products and investment. Two other important injections of “Metaverse revenue” have occurred in the last year. The first is rapid legitimization, and investment into pure virtual assets, mainly via cryptocurrencies or NFTs. The second is the investment of major talent and brands that are not gaming, such as Prada, Ford and Gucci, to cryptocurrencies and NFTs. This investment helps virtual platforms move away from the traditional focus on win, shoot kill, defeat and score. Instead, it allows them to diversify away form their historic focus on “game-like”, objective like win, kill, defeat and score, and instead towards more appealing activities like create, explore and identify, express themselves, collaborate, and socialize.

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Many companies are shifting their technology pipelines and investments in support of the Metaverse. Hollywood is one example. They are shifting productions to real-time rendering solutions like Unity and Unreal, or creating their own engines, such as Disney’s Helios. This allows Hollywood to have greater creative flexibility, more efficient shooting times, and it also allows them to create “virtual backlots.” The House of Mouse has a virtual archive of digital assets, from Ancient Mandalore to Baby Yoda, Din Djarin’s Razor Crest to the city of Nevarro. While AutoCAD and other vertically-specific solutions are being replaced by Unreal and Unity, building operators, architects, and car companies are switching to Unity.

These shifts allow anything that was originally designed for the real-world, such as a Ford F150 or a vehicle used for one purpose like Moff Gideon’s light cruiser can be easily, cheaply, and seamlessly “to the Metaverse”, and can be infinitely reused and iterated upon. It is hard to underestimate the impact of this. Virtual content must be created for the Metaverse. However, this content can be expensive to produce and often does not have a short-term business case. It is possible for many of us to ride the Endor planet on Zwift. However, it is very expensive. It is possible to tailor it if Disney has made it. A further benefit is that Disney’s virtual Endor can be leveraged to increase quality.

The ongoing March of Open Asset Economies, and Sharing

Section VIII – I discussed the economic significance of being in a position to transfer assets, currencies, and items between virtual experiences. To this end, the entertainment industry continues to be driven by “economic gravity” towards greater openness.

This trend started with Fortnite. It was the first game where players could access, collect and use their in-game assets (e.g. Items, currencies, achievements, and progression data can be accessed on almost every computing platform worldwide, as well as through the respective online accounts/services. This privilege is available to all players without the need to pay.

Epic is able to do this, at least conceptually. The company’s lawsuit with Apple revealed that in order to launch cross-play/purchase/progression on PlayStation, Epic agreed to pay a sort of micro-transaction “true up” to the company in order to ensure that interconnection didn’t come at the expense of player spending.

While cross-play/purchase/progression is obviously good for the player and should therefore result in greater engagement and greater spending, it opens up the opportunity for revenue leakage for all participating platforms (in addition to weaker network effects, as discussed earlier). Most platforms’ business models are heavily dependent on a 25-30% fee to transact in-game. Sony appears to be concerned that users might use PlayStation more often than they purchase through PlayStation. Players would then have to compensate a competitor platform for goods they use on Sony’s. A player might play on their PlayStation 4 25% of the day and their Nintendo Switch 25%. However, 40% of their purchases are made on the Nintendo Switch, which would result in a loss of 15% of PlayStation’s gross revenues. Epic doubles the amount for “underlapped” transactions to avoid this. It would then pay 25% to both Sony and Nintendo for this 15%.

It’s not clear whether this payment structure is still in place today — close to three years after Sony embraced cross-play/purchase/progression for Fortnite. Fortnite is still cross-platform compatible with PlayStation. Epic must therefore find that cross-platform functionality results in greater spending to compensate for margin compression. Sony has since unlocked this functionality in many other titles, and there have been no reports of comparable “true ups”. Sony believes that the structure has been removed and that cross-platform play leads to an increase in per-player spending that significantly exceeds any revenue leakage. Regardless, cross-play/purchase/progression is now a table stakes capability and any platform that revoked it would doubtlessly suffer user loss.

Cross-play and purchase are not the only options. This is also cross-IP interoperation. It is, however, philosophically crucial.

Virtual platforms such as Fortnite and Minecraft, and Roblox have become culture-driving social places. They’re now an integral part of consumer marketing, brand building, multi-media franchise experiences, and consumer marketing. Fortnite has produced experiences with the NFL and FIFA as well as Disney’s Marvel Comics and Star Wars and Alien, Warner Bros. DC Comics, Legendary’s John Wick, Microsoft’s Halo and Sony’s God of War and Horizon Zero Dawn. Capcom’s Street Fighter and Hasbro’s G.I. Joe, Nike, Michael Jordan, Travis Scott and many more.

Brand owners have to accept something that they rarely allow in a marketing partnership or activation: unlimited-term licenses (players keep in-game outfits forever), overlapping marketing windows (some brand events occur days apart, or completely over), and no control over editorial. This means that you can now dress up as Neymar, while carrying a Baby Yoda backpack or Air Jordan backpack, Aquaman’s Trident in your hand, and exploring Stark Industries. These franchise owners want it to happen.

Source: https://www.matthewball.vc/all/userbehaviorsmetaverse

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