The opportunity costs of NFT madness are still being paid

The IOC exiting its very fruitful licensing deal with Nintendo and Sega to pursue an NFT dead-end is an object lesson

Image credit: Nintendo, Sega

What have been the most successful licensing arrangements in games industry history? It’s easy to pick out individual success stories – Rare’s GoldenEye is the classic example, and some licenses like Lord of the Rings or Star Wars have produced a solid number of hits alongside various misses.

For a really consistent success story, though, you generally have to turn to sports licenses. EA’s long-running but now defunct partnership with FIFA certainly takes the crown, spanning as it did almost 30 years and hundreds of millions of games sold – but a tip of the hat is due to Mario & Sonic at the Olympic Games, a six-game series spanning Summer and Winter Olympic Games from Beijing in 2008 to Tokyo’s delayed 2020 games.

Using a license from the International Olympic Committee, and developed and published by a once-unlikely partnership between Sega and Nintendo, the games were by no means a challenger to the commercial success of something like FIFA, but they sold pretty handsomely nonetheless, and were remarkably successful and well-received given how tricky this license is to work with.

Being held only once every four years and spanning a massive range of different sporting events – some of them quite obscure to most people – makes the Olympics into great television, but also makes it vastly more challenging to adapt into a fun, well-made video game than any individual popular sport like football, basketball, or hockey.

For this summer’s Olympic Games in Paris, however, there is no Mario & Sonic tie-in.

The IOC chose to exit an unusually successful partnership in pursuit of a fad

There is an under-promoted mobile and PC title, Olympics Go Paris 2024, which is an F2P title with the usual array of in-app transactions; and if you go back a bit into earlier statements and descriptions, you find a lot of focus on the proposed ability to unlock Olympics NFTs through the game.

The emphasis on this aspect was confirmed by a report on Eurogamer this week. The IOC appears to have lost interest in its partnership with Sega and Nintendo because it wanted to do something with NFTs (and esports) instead, although ultimately it seems to have done neither of those things.

So, to summarise: a 12-year, six-game partnership with two of the world’s most respected games companies that yielded almost miraculously successful and well-liked games from a very tricky license was tossed to one side in favour of the snake-oil buzzword of the moment which, a few years back when these decisions were being made, would have been NFTs.

That timeline does offer some explanation, if not justification – falling for NFT nonsense in 2024 would be unforgiveable, but it’s easy to forget just how many supposedly sensible, serious people in the industry were taken in by NFT hype just a few years ago.

Nonetheless, the ultimate result here is that the IOC chose to exit an unusually successful partnership in pursuit of a fad, and has ended up without a console title of any description launching alongside the Paris games.

It’s all very well to roll our eyes as the grifters grift and the gullible fall for the new fad, but we often treat such things as an essentially victimless outbreak of foolishness. Opportunity cost, however, is not just a business school theory; it is a genuine cost that is imposed by poor decisions made around these fads, one whose repercussions can be felt for years.

Resources like investment capital, development time, skills, and licenses are all finite. Allocating them to dead end fads means other projects don’t move ahead – and while that’s often quite a vague hypothetical, because who knows how successful an alternative project might actually have been, sometimes we get to see a clear case study; a proven, valuable product withering on the vine because some of the decision makers involved were distracted by a new shiny thing.

The foolishness of the IOC being suckered by NFT delusions – whatever other considerations may have been in play – is one such case, but there are many, many other situations still playing out around the industry where the ripple effects of the few quarters of NFT madness are still being felt.

Tens of millions of dollars – at least – of venture capital investment were put into patently daft NFT projects during that time, a period when developers with more grounded ideas and pitches were struggling for funding.

In quite a number of cases, good money is still quietly being thrown after bad investors who can’t face the idea that the money they put into NFTs and crypto-based games is simply gone are still keeping many dead-end projects on financial life support.

The speculative investments of VCs are not public information, but are relatively easy to keep track of. It’s almost impossible to estimate how much time, money, and skilled labour has been pumped into similarly doomed projects at publishers who tried to leap on this bandwagon, let alone how much difference those resources could have made to other projects in development that were passed over in favour of pursuing a fad.

The point here isn’t to dunk on NFTs – that ground is all too well-trodden at this point – but rather to emphasise that when these kinds of fads sweep the industry, they impose genuine costs and damage that can last for years down the line
In many regards, an inherently high-risk business like video games is one that is driven by opportunity cost calculations. That’s why the climate for investment has become so challenging in recent years; opportunity cost for capital looks very different in a high-interest environment where you can earn an essentially risk-free 5%, compared to the low-interest environment of previous years where uninvested capital was essentially just sitting still and being slowly eroded by inflation.

Yet while investors and executives are generally very good at figuring out that calculation, the trade-off between established, successful, if perhaps slightly dull business models, versus new, unproven, and exciting models, is an opportunity cost calculation that seems much more difficult for many people.

After two years of punishing layoffs and downsizing – which are still very much continuing, as this week’s major layoffs at Bungie sadly demonstrate – 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 usually not the people who have miscalculated those risks who pay the price when things go wrong; it’s not clear at all that the right lessons are being learned by the right people.

“Don’t ignore and under-resource your proven, successful products and approaches in order to pursue a new shiny notion you don’t fully understand” seems like it should be a pretty simple tenet to follow, but it may take many more examples where the opportunity cost is extremely clear for that straightforward lesson to really take root.