NonFungible Heroes #4: Robby Yung from Animoca Brands

Who are you and what’s your personal background?

I started out originally in mobile, back in the analog cellular business in telecommunications back in the early 90s. I have spent most of my career working in Greater China, while predominantly being based in Hong Kong. Then I worked through the first wave of web development in the internet business in the mid and late 90s. After that, I moved into traditional media in the early 2000s and spent 10 years building a business aggregating ad supported media in China, which means TV, magazines, outdoor, radio and build a few businesses on the back of that. In 2012, I joined Animoca Brands and I have been enjoying it ever since. It’s interesting because I find mobile gaming to be very much the combination of many other things I have done before, because it actually combines internet business, mobile business as well as media and advertising all in one. That’s what I really enjoy about it.

What was Animoca like when you joined in 2012?

At the time I joined, Animoca was focused on free-to-play casual games on mobile and predominantly on iOS and we moved to Android the first year that I joined. Then, two years later we spun out the branded game part of the business and took it public. I have been running a public company since then. 

What is Animoca Brands and what has been your activity in the blockchain gaming and NFTs space?

Animoca Brands started out as a free-to-play mobile game publisher, predominantly focused on casual games and to a lesser extent on mid-core games. We are best known, as you can tell from our name including the word “Brands”, for working with third party brands that we license IP from and create original games featuring their IP. 

Over the last two years we have been making a lot of investments and R&D efforts into the intersection of blockchain and games. We think this area is extremely exciting, because we feel blockchain has the opportunity to revolutionize the way games are played, both on mobile and on the web. We think this technology has the ability, through the principle of true digital ownership, to change and enhance the players’ experience in gaming and grow the overall gaming market. Within blockchain gaming, NFTs are the flavor of the moment and where most of the action is right now.

What role do you see for Animoca in the blockchain gaming / NFT ecosystem in the future? Do you see Animoca more as a publisher in the space or also being involved in the infrastructure?

I think our role right now is to be an accelerator for the industry. We are a game developer and publisher at heart, That’s our DNA but, at the same time we just want to work with the best and brightest across this industry. And I think we are at such an early stage of blockchain gaming right now that there aren’t clearly defined roles and players yet. Even the lines between infrastructure, operator, and participant are kind of blurry. If you look at Dapper Labs, for example, they are building infrastructure, but also have popular blockchain games. So in the end, we want to support the growth of the blockchain gaming industry. We are investing in a way that we are trying to identify great teams and hopefully be able to support them in a way that they can create interesting products that attract and engage users, players, investors and bring more positivity into the blockchain gaming scene in general. 

Your F1 licensed game, F1 Delta Time, made headlines with its presale auctioning a single NFT-based F1 car for more than 110,000 USD. What was the idea and the expectations behind such an exclusive pre-sale?

In terms of expectations, I don’t think we really knew what to expect. 

Obviously, Formula 1 is a massive global brand and you can never underestimate the power of a big brand like that. I think what we wanted to do is to try to draw attention to the idea of true digital ownership. Of course, we are not the first, our friends from Lucid Sight have done that with Major League Baseball as a license and companies like Dapper are doing it with their own content. We are not the first one to sell NFTs, but I do think of the branded NFTs, Formula 1 is probably the biggest global brand to go into NFT market so far. 

We wanted to set up an auction, because we felt it would draw a reasonable amount of attention and interest to what we are doing and for people to pay attention to blockchain games. Hopefully it will be good for everyone in the blockchain gaming industry. People on both sides of the equation, from both blockchain and gaming, will find that they meet in the middle around something that interests them both and really take notice. I think that was our primary goal. 

You have a lot of expertise in IP licensing for gaming content. What’s the general take of major IP owners on blockchain gaming or any consumer blockchain experiences?

The brand owners we have spoken to are very interested in the idea of true digital ownership. But I think it’s a tricky concept to get your head around, if you come from a traditional digital marketing pedigree, because the main concern of digital marketers who manage licensing, royalties, and copyright has always been fraud and copying.

It’s kind of a strange idea to them that a digital product can have exclusivity and be controlled and limited in nature. In the past, every time you issue digital music or art work, it can just be copied. Once it’s sold, they lose control over it. So the idea of NFTs having permanence is something they need to get their heads around. Most of the time, when you license IP, there is a licensing period, for example a three year agreement. But in this case, you issue an NFT that will survive longer than 3 years. So I think the IP owners are very interested, but they have to go back to a more traditional analogy. Selling branded NFTs is a bit like selling stuffed animals, action figures or something like that. Because once you sell it, it truly belongs to the user and you can no longer control it. And that’s very different.

What’s special about NFTs is that they can also be used in a different context than they were originally designed for. We saw this with the KittyVerse around CryptoKitties. Potentially others could also commercialize on the re-use of NFTs in a new context. Is that a concern or discussion you had with IP owners?

Yes, that’s where brand owners really need to get out of their comfort zone and think about the real world analogy. For example, if a kid gets a Star Wars Lego set, they could use these blocks and make something that’s not Star Wars and you can’t control that. But they already bought it and they can do whatever they want to do with it. They could even use their Star Wars set and make something that looks like Star Trek. 

As long as brand owners understand upfront that this is similar to a physical product that is sold to a customer, so that they might use that NFT in a different environment, then they are ok with. 

As you know, blockchain lets us place limitations on how the NFTs are used. What we try to help brand owners realize is that limitations and restrictions placed on NFTs have an effect on the end value of the NFT. The fewer restrictions placed on the product, the more valuable it is to users.

Currently, monetization in the blockchain gaming space is really focused on item pre-sales and partly some royalties on item trading. What do you think will be the predominant monetization mechanism two to three years from now?

I think that right now there is a lot of pent up demand for blockchain games. And the content that’s being created is relatively unique. So if you look at F1 Delta Time, these are the first F1 NFTs in existence. I think for hardcore collectors and Superfans of Formula 1, they are interested in collecting these kinds of objects. I think the idea of pre-selling content is a great way for game developers to finance the development of their games. This happened before blockchain as well. We had lots of indie developers financing new games based on payments from players through crowd sales and under different business models. So I don’t think that’s necessarily new or unique. But I think also its way for developers to tap into demand now, even though it takes a little bit of time to develop a good game. So you see a lot of pre-sales happening at during Q2 and Q3 2019 and the titles are not expected to be released before the end of this year or early next year. It’s also kind of a placeholder until the games actually come out.

A lot of the focus has been on royalties from item trading, but I do think money in blockchain gaming for developers and publishers is gonna be made like in other kinds of games from subscriptions, sales of content in games, premium content, so very similar to what we see in other gaming platforms. The only difference is that blockchain enables us to have a robust secondary market for content. And so the secondary market for content will be divided amongst two different pools of users. One pool will be the speculators, who only want to bet on the future value of content, but the larger pool will be the gamers, who look at the marketplace more as a place to exchange content, because everybody has limited resources. Maybe I spend a 100 euros on content for a game I love, but then get tired or bored and I want to move on to a new game. If I have a marketplace to trade my content with somebody else and earn 50 euros to  spend on a new game, that’s very exciting.

Being early in the mobile gaming space, do you see a lot of parallels to the blockchain gaming and Dapp space today?

For sure, and in fact we see parallels to the beginning of the web in the mid-90s. 

If you look at early mobile gaming and you go back to 2009, the quality of the games was very different to what we see in mobile games today. Keep in mind that the number of users and the ecosystem itself was much smaller. In 2009, if you had a million users, that was incredible, whereas today, you expect to have a million users for your A/B test in your beta before you even launch the game. So we see parallels there, because the blockchain games’ user base today is very small in terms of active users (DAUs, MAUs), even for the popular blockchain games. But fortunately the average revenue per user (ARPU) is very high, which helps to generate revenues for the game developers.

How do you think Google and Apple will play along in the future for mobile as a platform for blockchain gaming? Have you had any discussions with them regarding this?

I don’t think there is anything official yet, but blockchain gaming is definitely on the radar for Google and Apple. Obviously the industry is still very small, so they are treading carefully to make sure that they can make a distinction between gaming and financial services, because they are very different applications of blockchain.

There was a lot of excitement about blockchain gaming, maybe around 18 months ago, that this is gonna be a way to build a gaming ecosystem and payment methods outside of Google and Apple’s platforms. Frankly, I think that’s short-sighted, because these two platforms have been incredible for the gaming industry as a whole. While it’s true that we pay platform fees in exchange for distribution, the distribution capability is unprecedented. There is no bigger distribution compared to anything on earth than the Play Store and App Store. Developers need to take a long and hard look in the mirror and ask themselves: Am I willing to forgo 30% of revenues in exchange for access to billions of consumers? And my guess is that at the end of the day, the answer is “yes”. We very much support the idea of working together with these platforms, because we want to benefit from this distribution network. So I think for us it makes sense to partner with them. 

So you think they will adapt and embrace blockchain gaming, when they see that there is enough traction? 

Yes, for sure. I think it’s just a matter of figuring out, from a technical standpoint, how they can maintain this idea of the app going through their platform. It presents some new challenges for them, only because the in-game soft currency and in-game items take on a new meaning when they are tokenized. It’s that aspect of the implementation that they need to figure out. I think if they can comfortably levy their platform fee, they will be happy to work with us.

To wrap it up, one final question: How far are we from a blockchain game reaching a mass audience?

You mean when are we getting our own Angry Birds? Good question! My guess is that it will be next year. I feel like this year is really the year of getting the infrastructure just right. Over the last six months, I have seen so much progress in terms of developers and the community rallying around specific types of standards and tool chains. We all acknowledge that onboarding into blockchain gaming is not the best experience at the moment. But if you compare it to 6 or 9 month ago, it’s improving very quickly. The way I see it, we are just waiting for someone to create some very sticky content, so I wouldn’t be surprised if we see some sort of mass adoption in 2020.

Thanks a lot, Robby!

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