What is the Play-to-Earn Business Model?

Business models evolving around video games became commonplace as technology became accessible to audiences. We used to play our games in arcades in the late seventies and early eighties. With coins in pockets, players would compete for high scores.

Nowadays, we play games on smartphones almost everywhere. Since the games we play on smartphones are generally more superficial, when we want a more complete gaming experience, we play games on our PC or game consoles. There are business models suitable for every platform and every player.

Free to Play (free-to-play) Games

Consumers need to purchase the game for a premium game. They do this by purchasing a license from a digital store, online or by purchasing a physical copy from a local store. The financial commitment is quite high as it is customary to pay a certain amount for a newly released game. While this is still a huge industry, the free-to-play business model has had the most growth in recent years.

The free-to-play business model allows players to get a completely free game without any financial commitments. Free-to-play games are always available for download and offer consumers a limited experience. Players need to pay to speed up their progress or get special items. For example, players must pay for the game characters they own to receive in-game currency, extra content, or special cosmetics.

Some of the biggest games on the market are actually free games. Although the Battle Royale game is completely free, Fortnite alone generated $1.8 billion in revenue last year. Selling cosmetics to allow for more customization is a big trade. Among the biggest games on the market are games like League of Legends and Hearthstone, which are basically all free. However, every game developer has their own way of getting players to pay for additional content or cosmetics.

These free games have generated billions of dollars in revenue and nothing is on the horizon to stop them. This shows that the free-to-play business model has matured and developers are learning the art of monetizing free-to-play games.

The play-to-win business model has many similarities with the free-to-play business model. Usually a play-to-win game uses similar mechanics seen in free-to-play games. However, play-to-win games also allow players to earn money or acquire valuable digital assets.

Play-to-win Games

Owning in-game assets and allowing them to increase their value by playing the game are key components of the play-to-win business model. Players create value for other players and developers by contributing to the in-game economy. In return, they are rewarded with in-game assets. These digital assets can be anything from cryptocurrencies to in-game resources on the blockchain. Therefore, the play-to-win business model is highly compatible with blockchain games.

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

Get value for participating

In essence, a play-to-win game should also be free-to-play. However, this is not always the case. Currently, players must purchase three Axies before they can fight in the Axie Infinity world Lunacia. Sorare also requires players to deposit money into their player card before they can earn cards in weekly competitions. Games like Chainz Arena and League of Kingdoms are completely free to play, but the idle game (the game running in the background even when you close the game) mechanics and limitations force players to deposit money into the game. So even if players win something, they have to pay.

Developing a video game requires money, and these games are created by businesses. However, the benefit of the play-to-win business model is that it always creates value that a player can sell. Even if a player has to pay to start playing, these acquired assets can always be resold. Every card in Sorare and every Axie in your wallet can be sold. At the same time, games like Fortnite and League of Legends make billions. But when players spend money, they kind of throw their money into a bottomless pit. When they stop playing these games, their wallets will be empty as they have no assets to sell.

Play-win is changing this model. All assets acquired have a certain value. This means that when players quit the game, they always have assets that they can earn money from.