30 August 2018
The Content is the Platform: why we bought Pixowl and how the blockchain matters
22 years ago, Microsoft CEO and co-founder Bill Gates wrote a landmark essay titled “Content is King” in which he predicted that anyone would be able to produce content and reach an audience through a computer connected to the Internet, and that the Internet would therefore become the marketplace of the content revolution.
“One of the exciting things about the Internet is that anyone with a PC and a modem can publish whatever content they can create…. Those who succeed will propel the Internet forward as a marketplace of ideas, experiences, and products — a marketplace of content.” — Bill Gates
The last two decades have shown that Gates was remarkably prescient on this subject — particularly if we consider (as Gates did) that software is also a form of content. But that’s not the end of the story.
The wearing of pants
Jonathan Perelman of Buzzfeed expanded the famous phrase used by Bill Gates with this observation:
“Content is king, distribution is queen, and she wears the pants.” — Jonathan Perelman
The challenge for content providers is how to push the right content to you. Simultaneously blessed and cursed with a vast array of content, companies like Netflix, Amazon, Google, Apple, and many others invest heavily in content discovery and distribution to inform audiences of the availability of relevant content.
Apple’s iTunes maintains a strong editorial team whereas Google Play and Amazon put emphasis on machine learning, but these titanic companies (indeed, all companies) are competing to do exactly the same thing: distribute appropriate content to the right audience.
The majority of content developers struggle to make their products visible. This is particularly true in the field of mobile games, which is a focus for us at Animoca Brands. Advertising costs are high and there is heavy competition in all the app stores. Additionally, having a product on the major distribution platforms (iTunes, Google Play, etc.) requires you to pay the platform a significant portion of the revenue that your product generates on that platform.
Content has become a commodity. The “marketplace of ideas” envisioned by Bill Gates has become a thriving and chaotic bazaar with steep participation fees and no guarantees for exposure or revenue.
In the age of consumption, when there is so much content available, it is no longer the content itself that is of paramount importance, but the content that you have the opportunity to consume.
In other words, “distribution is queen, and she wears the pants”.
The awesome potential of Non-Fungible Tokens
The above provides background for the potential that blockchain offers to content providers and developers. We are particularly enthusiastic about the non-fungible token (or NFT).
First, let’s get this out of the way: the blockchain is simply a digital distributed (decentralized) ledger of various blocks of information linked by cryptography, offering excellent security and transparency for the management of digital assets. Digital assets can be nearly anything that belongs to someone: cryptocurrency, medical records, cooking recipes, in-game items, financial reports, loyalty points, etc.
On the blockchain, there are two types of cryptographic tokens that everyone needs to be familiar with. Both types of tokens represent digital assets, but they have functions that differ in a few important ways.
Fungible tokens are interchangeable, uniform and divisible (“fungible” is economics terminology for “interchangeable”). These are already widely used. Most cryptocurrencies are based on fungible tokens, and Bitcoin is the most famous example.
Non-fungible tokens is where it gets really interesting: these are non interchangeable, unique (or distinct), and indivisible. These tokens are not yet widely used.
A useful real-world example is the difference between a dollar bill and a limited-edition commemorative postage stamp. The dollar is fungible, meaning that it is fully interchangeable with (and equal in value to) every other dollar in circulation. But the limited-edition stamp is designed to be valued for its uniqueness or rarity — its scarcity.
A limited-edition stamp representing a postage value of one dollar may therefore attain much greater worth because its rarity makes it highly sought.
In a similar manner, cryptocurrencies aim to achieve fungibility in order to be accepted as common means of exchange or units of value, whereas the function of non-fungible tokens is the opposite: variety, differentiation, and some degree of digital scarcity.
Cryptographic Tokens
Blockchain, and particularly NFTs, can now make digital scarcity possible on a large and distributed scale. This has opened up some interesting possibilities that prompted us to steer Animoca Brands into cryptographic waters.
Explorations with cats
At Animoca Brands, we entered crypto and blockchain gaming via our 60% acquisition of Fuel Powered, whose co-founder is also a co-founder of CryptoKitties, the most popular blockchain game. This feline blockchain DApp (distributed application) single-handedly ground the Ethereum network to a crawl with its high volume of transactions.
The cats in CryptoKitties are cute visual representations of NFTs: unique virtual kittens carrying the property of true digital scarcity, verified through the blockchain without the need for a central organization. This is highly significant: a completely decentralized system that efficiently and transparently maintains distinct digital assets.
Equally significant is that the CryptoKitties cats (remember, the cats are actually NFTs) exist independently across the blockchain, meaning that anyone else has the ability to write applications for the kitties. This means that you are able to use NFTs like CryptoKitties in other games, which opens up vast new opportunities for content production and distribution.
The Content is the Platform
Content may be king and queen after all, because the content is becoming the platform. At least metaphorically speaking.
Blockchain and NFTs provide exciting new opportunities for content makers, distributors, and consumers.
Imagine if you could own a digital item that has multiple uses across different platforms. In very simplistic terms, you could take a Star Trek ship into a game about the Star Wars universe (or any other game world).
The value of your digital item (the starship, which is an NFT) would increase with your investment in it (its utility). You might equip your starship by purchasing better weapons, shields, or cargo capacity to increase value and usefulness. If the value and characteristics of your ship could be recognized in other game worlds, there would be some important implications.
Aside from being potentially a lot of fun, the ability to use NFTs across multiple games could bring about a dramatic reduction in the need to rely on exclusive platforms — whether the platform in question is a mobile app store, a game, a publisher, etc.
NFTs allow your digital asset to become the centre of your digital experience: the content itself becomes the platform through which you consume other content.
Content developers could benefit by leveraging larger active communities. Fans of Star Trek and fans Star Wars could both enjoy each other’s content, meaning that both franchises and their content developers benefit through increased retention, utility, and gameplay.
Players would benefit greatly. In-game items would no longer be confined to single games, and could even increase in value over time (e.g., someone buys your levelled up Star Trek ship).
Virtual items could finally attain lasting and even growing value, meaning that the time you spend gaming could generate something that has real-world worth and profit potential, and would persist independently of any single game.
CryptoKitties already demonstrated that much of what I just described is possible. Games and even game items (i.e., content) really could become the platform.
If you’re having trouble with the concept of what exactly a platform is or will be, I don’t blame you. Perhaps this crude analogy will help: you own a car, and you drive that car on a variety of roads: country roads, paved roads, highways — all in the same car. The car works as well on one road as on another.
In this example, the road isn’t your platform. The car is your platform.
Of Minecraft and blockchain
Minecraft is an incredibly popular user generated world-building game acquired by Microsoft for $2.5 billion. It is not blockchain-based and does not have NFTs, but it is a good example of a user generated microcosmos.
Developer Mojang made the important decision to allow Minecraft users to develop any code they want for the game, as long as they make their code open source. Rather than attempt to monopolize the market, Mojang allowed users to freely develop content for Minecraft, which resulted in massive growth.
Roblox is a massively multiplayer online game creation platform that allows users to design their own games and play games designed by other players. It is sometimes described as “Minecraft meets the centralized content marketplace”. Roblox has provided abundant evidence that user generated content has the power and appeal to sustain a large economy: this year Roblox will pay out $70 million to its in-game content developers (many of them teenagers!).
Both Minecraft and Roblox, despite their remarkable successes and some degree of openness, are centralized ecosystems. We believe that a truly decentralized approach could absolutely revolutionize the game creation industry. And that’s a big part of why we bought Pixowl and its world-building game The Sandbox.
Why Pixowl and The Sandbox?
Recently, we acquired 100% of Pixowl. The reasons are legion.
Pixowl has an insanely talented team. The company is backed by some outstanding names, including my good entrepreneurial friend Martin Varsavsky. The founders of Pixowl, Arthur Madrid and Sebastien Borget, are recognized industry veterans with a thorough understanding of both the mobile games and the branded items spaces. Pixowl already works with world-class brands like Peanuts, Goosebumps, and Garfield, providing strong synergy with the business model of Animoca Brands.
But, most importantly, Pixowl and its founders have deep insight into blockchain and NFTs, and have already demonstrated that they know how to make great products. Add that up and what you get is leadership in cryptogaming.
The Sandbox Game on the Blockchain Pre-Release
The biggest game in Pixowl’s stable is The Sandbox, one of the largest independent user-generated content platforms and gaming ecosystems. It’s an innovative world-building game with 40 million downloads, one million monthly active users, and 57 million user generated worlds. Every day the players of The Sandbox create 100,000 new worlds and 25,000 new world elements.
The Sandbox is a great product, but it’s about to get even better: in 2019, a blockchain version of the game will be released — imagine Minecraft on the blockchain. All of the myriad creations of its user base will exist on the blockchain, allowing us to explore the many opportunities unlocked by the use of non-fungible tokens.
For NFTs to succeed, you need an audience of creators — which The Sandbox has in spades. The digital assets that players own in The Sandbox will be NFTs, which means that players will be free to do whatever they like with them — including selling or using them outside of the framework provided by the game.
Prolific creators in The Sandbox could be rewarded not just with entertainment, but also with real-world value when they sell or trade their creations.
And, of course, both Pixowl and Animoca Brands stand to benefit significantly from cross-audience opportunities in areas like market reach and monetization, among others.
The NFT creator and marketplace
The vision that Pixowl is working on for the upcoming blockchain version of The Sandbox is a decentralized, community-driven gaming ecosystem where creators can share and monetize game assets and experiences.
One of the key technologies that Pixowl is building is a non-fungible token creator which will allow anyone to create their own NFTs. These NFTs will have utility not just in The Sandbox but also in any other environment that utilizes Pixowl’s voxel-styled content editor.
In addition to content creation tools, The Sandbox will also need a place where creators can showcase and sell their content. That’s why The Sandbox is building an open online marketplace where virtual assets (published as NFTs) will be bought and sold.
This open market will allow for the free trade of in-game NFT assets between different platform users (not just users of The Sandbox).
In short, Pixowl is not simply building one of the first truly great blockchain games, but also tools and systems that will help to transform content into a platform through the blockchain, heralding the decentralized age of content creation, utilization, and monetization.
These are just some of the reasons that we acquired Pixowl and are bringing its highly talented and market-proven team into the Animoca Brands family. The vision and direction of both our companies are aligned, and the many opportunities of blockchain gaming await us.
At a future date I will talk about the upcoming projects we are undertaking with The Sandbox and its considerable potential for adoption. I will also discuss in a little more depth some of the opportunities mentioned above. Thanks for reading!