The Hidden Costs of Chasing NFT Trends

When considering the most successful licensing agreements in the gaming industry, it's easy to identify individual success stories, such as Rare's GoldenEye, as well as franchises like Lord of the Rings or Star Wars, which have produced a mix of hits and misses. However, for a consistently successful story, one often has to look to sports licenses. EA's long-standing partnership with FIFA, which spanned nearly 30 years and resulted in hundreds of millions of games sold, is a prime example. Another notable example is the Mario & Sonic at the Olympic Games series, a six-game series that covered Summer and Winter Olympic Games from Beijing in 2008 to Tokyo's delayed 2020 games. This series, developed and published by an unlikely partnership between Sega and Nintendo, may not have rivaled the commercial success of FIFA, but it sold reasonably well and was remarkably successful given the challenges of working with the Olympic license. The Olympics, held every four years and encompassing a wide range of sporting events, make for great television but pose significant challenges when adapting into a fun and well-made video game. This summer's Olympic Games in Paris will not have a Mario & Sonic tie-in. Instead, there's an under-promoted mobile and PC title, Olympics Go Paris 2024, a free-to-play game with in-app transactions, which initially focused on unlocking Olympics NFTs. The IOC's decision to end its partnership with Sega and Nintendo in favor of NFTs and esports has ultimately resulted in neither being pursued. In summary, a 12-year, six-game partnership that yielded successful and well-liked games from a challenging license was abandoned for a fleeting trend. Although it's easy to forget, many supposedly sensible industry professionals were taken in by NFT hype a few years ago. The IOC chose to exit a successful partnership to pursue a fad, resulting in no console title being released alongside the Paris games. The point here isn't to criticize NFTs but to emphasize that when such fads sweep the industry, they impose genuine costs and damage that can last for years. Opportunity cost is not just a business theory; it's a real cost imposed by poor decisions made around these fads. Resources like investment capital, development time, skills, and licenses are finite. Allocating them to dead-end fads means other projects don't move forward. The IOC's decision is a case study of a proven, valuable product being neglected due to distraction by a new trend. Tens of millions of dollars in venture capital investment were put into ill-conceived NFT projects, while developers with more grounded ideas struggled for funding. Good money is still being thrown after bad, as investors refuse to accept that their NFT investments are lost. It's challenging to estimate the time, money, and skilled labor pumped into doomed projects at publishers who attempted to jump on the bandwagon. The video game industry, inherently high-risk, is driven by opportunity cost calculations. The climate for investment has become challenging due to the high-interest environment, where opportunity cost for capital looks different. While investors and executives are good at calculating opportunity costs, the trade-off between established business models and new, unproven ones is a difficult calculation. After two years of layoffs and downsizing, it's clear that the industry's understanding of risk and reward needs to be updated. Unfortunately, it's often not the people who miscalculated risks who pay the price. The lesson to not ignore proven products and approaches in pursuit of new, unproven notions may take many more examples to truly take root.