The Lingering Consequences of NFT Frenzy | Opinion

Throughout the history of the gaming industry, which licensing agreements have yielded the most success? It's not difficult to pinpoint individual success stories, such as Rare's GoldenEye, and licenses like Lord of the Rings or Star Wars have produced a string of hits, albeit with some misses. However, for a consistently successful story, one must look to sports licenses. EA's long-standing partnership with FIFA, which spanned nearly three decades and hundreds of millions of games sold, is a prime example. Nevertheless, a notable mention must be given to Mario & Sonic at the Olympic Games, a six-game series that covered both Summer and Winter Olympic Games from Beijing in 2008 to the delayed 2020 Tokyo games. Utilizing a license from the International Olympic Committee and developed and published by the unlikely partnership between Sega and Nintendo, the games may not have rivaled the commercial success of FIFA, but they sold remarkably well and received positive reviews, especially considering the challenges associated with this license. The Olympics, held every four years and encompassing a vast array of sporting events, some of which are obscure to the general public, make for great television but pose significant challenges when adapting into a fun, well-crafted video game, particularly when compared to individual popular sports like football, basketball, or hockey. However, for the upcoming Paris Olympic Games, there will be no Mario & Sonic tie-in. Instead, there is an under-promoted mobile and PC title, Olympics Go Paris 2024, a free-to-play game with the standard array of in-app transactions. Upon reviewing earlier statements and descriptions, it becomes clear that there was a significant focus on the ability to unlock Olympics NFTs through the game, a fact confirmed by a recent report on Eurogamer. The IOC appears to have lost interest in its partnership with Sega and Nintendo in favor of pursuing NFTs and esports, although it seems they have not made significant progress in either area. In summary, a 12-year, six-game partnership that yielded remarkably successful and well-liked games from a challenging license was abandoned in favor of a fleeting trend, which, at the time of the decision, was NFTs. This timeline offers some explanation, if not justification, for the IOC's decision. While it would be inexcusable to fall for NFT hype in 2024, it's easy to forget how many sensible and serious industry professionals were swayed by NFT hype just a few years ago. The ultimate result is that the IOC has ended its successful partnership and is now without a console title to accompany the Paris games. The point is not to criticize NFTs, a topic already extensively covered, but to highlight the genuine costs and damage inflicted by such fads, which can have lasting effects. Opportunity cost is not merely a business theory; it is a real cost imposed by poor decisions surrounding these fads, with repercussions that can be felt for years. Resources such as investment capital, development time, skills, and licenses are finite. Allocating them to fleeting fads means other projects are put on hold, and while it's often difficult to gauge the potential success of an alternative project, sometimes a clear case study emerges, such as a proven, valuable product being neglected due to decision-makers being distracted by a new trend. The IOC's foolishness in being swayed by NFT delusions is one such case, but there are many other situations where the effects of NFT madness are still being felt. Tens of millions of dollars in venture capital investment were poured into NFT projects during this time, a period when developers with more grounded ideas were struggling to secure funding. In many cases, investors are still pouring good money after bad, unable to accept that their investments in NFTs and crypto-based games are lost, keeping many doomed projects on life support. The speculative investments of venture capitalists are not publicly disclosed but can be tracked relatively easily. It's challenging to estimate the amount of time, money, and skilled labor invested in similarly doomed projects at publishers that attempted to jump on the bandwagon, not to mention the potential impact these resources could have had on other projects that were overlooked in favor of pursuing a fad. The video game industry, inherently high-risk, is driven by opportunity cost calculations. The investment climate has become challenging in recent years, with opportunity costs for capital looking different in a high-interest environment compared to the low-interest environment of previous years. While investors and executives are adept at calculating these risks, the trade-off between established, successful business models and new, unproven, and exciting models is a calculation that seems more difficult for many to make. After two years of significant layoffs and downsizing, which continue to this day, as evidenced by the recent layoffs at Bungie, it should be clear that the industry's understanding of the balance between risks and rewards needs to be updated and improved. Unfortunately, it's often not the individuals who miscalculated these risks who bear the consequences; it's unclear if the right lessons are being learned by the right people. The principle of not ignoring and under-resourcing proven, successful products and approaches in pursuit of a new, unproven notion seems straightforward, but it may require many more examples of clear opportunity costs for this lesson to take root.