Is virtual real estate speculation spoiling the promise of the metaverse?


Hello, and welcome to Protocol Entertainment, your guide to the business of the gaming and media industries. This Tuesday, we’re examining the effects of rampant virtual real estate speculation on metaverse platforms, whether Wordle has gotten more difficult, and the fatigue caused by an overcrowded game release calendar.

The metaverse gold rush is here

Virtual land is drawing in large sums of very real money, and it’s causing division in the burgeoning new metaverse movement brewing in the corners of the tech and gaming industries.

While Big Tech has proclaimed the metaverse as the next big shift for the internet, there are already a number of companies that have a multiyear head start. They’re now fast becoming hotspots of virtual real estate speculation as they open their doors to third-party investors, land developers and crypto enthusiasts.

The virtual land gold rush is concentrated among four companies all making what are best described as successors to influential life sim platform Second Life.

  • These companies — Decentraland, Cryptovoxels, The Sandbox and Somnium Space — all mix decentralized blockchain tech like NFTs and cryptocurrencies with elements of social media and online gaming. Yet unlike most games, these metaverse platforms let you buy, sell and swap virtual land and do with it as you please.
  • Scores of third parties, including real estate companies and crypto firms, are now rushing in to buy up these artificially scarce land parcels. Over $500 million in real estate was sold on metaverse platforms in 2021 and prices have soared by as much as 500% in recent months, CNBC reported. .
  • These firms, like real-world developers, have ambitions to build luxury virtual condos for the tech savvy and ultrarich and invest in commercial spaces for brand activations, shopping centers and entertainment venues.

It’s not all about the money for crypto enthusiasts. Somnium CEO and founder Artur Sychov told Protocol he was inspired to build the platform in 2017 after playing games like Ultima Online, which helped pioneer concepts like virtual avatars and land ownership in video games.

  • “I’m not a big fan right now of all the hype around prices or how they’re being reported,” Sychov told me. “It just fuels the FOMO even more and throws more people at this dumpster fire of buying NFTs without realizing why they’re doing it or that they can’t even really use them anywhere.”
  • Somnium, unlike some competitors that demand upfront payments from players to participate, is free to access. It also supports virtual reality. Sychov even conducted his interview with me over Zoom while embodying a lizard creature, which also happens to be an NFT he owns.
  • “You can see right now, today, there are tons of so-called metaverses that sell land or items we don’t even have a working product [for] yet,” Sychov said. “Virtual land is just a small piece. It will stay in the spotlight and be relevant for a certain period of time, but I don’t think we’ll see the hype because virtual land costs something only if it’s useful to people.”

Many of the firms investing in virtual land have grandiose ideas about how pivotal the metaverse might be in the future, if only because it means that getting in on the ground floor will make them fabulously rich.

  • “Imagine if you came to New York when it was farmland, and you had the option to get a block of SoHo,” Michael Gord, a co-founder of the virtual real estate firm The Metaverse Group, told The New York Times last fall. Gord’s company spent more than $2.4 million last year on a single 116-parcel plot in Decentraland’s fashion district.
  • “There’s plenty of people that also think bitcoin’s a scam,” Janine Yorio, CEO of virtual real estate investor Republic Realm, told Motherboard last month. “Meanwhile, the crypto investors are driving around in Lamborghinis and living their best lives.”
  • Republic Realm already operates a shopping center in Decentraland called Metajuku, a nod to the Japanese fashion district, and sells private villas to wealthy clients inside The Sandbox.

But who is this really for, and why is it so valuable? Many of these companies pouring money into virtual real estate seem to be at odds with the actual platforms providing the technology and infrastructure to support it. And of course, these platforms are happy to take their money if it helps fund their vision for a decentralized future. Sychov told me Somnium takes a 7.5% cut of aftermarket NFT sales on the marketplace.

But how valuable is an Adidas-themed virtual shoe shop in Metajuku if the only other users in Decentraland aren’t actually playing the game and instead simply checking the value of their NFT villa on OpenSea so they can flip it for a profit? “Virtual land is just a small piece,” Sychov told me. “It will stay in the spotlight and be relevant for a certain period of time, but I don’t think we’ll see the hype because virtual land costs something only if it’s useful to people.”

— Nick Statt

A version of this story also appeared on Protocol.com. Read it here.

Overheard

“When people get stressed out and burned out, you can’t really treat it. They need to take a big chunk of time off, and even then, they come back frazzled. We’re looking at how we can prevent this in an ongoing way.” —Rob Cunningham, the CEO of midsized game studio Blackbird, discussed the company’s move to a four-day workweek with The Washington Post. He said the move “saved” the company following a shift to remote work.

“I think there’s going to be a lot of mutual respect there and I think Activision will be able to continue doing what they do best. That’s also what’s most important to us at the end of the day, whatever form that takes for us and our company. So I would not turn anything down, as long as our freedom was still respected.” —PlatinumGames CEO Atsushi Inaba spoke to VGC about Microsoft’s Activision Blizzard deal and the prospect of getting acquired during an era of intense consolidation in the game industry.

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In other news

Horizon Zero Dawn joins an exclusive club. Guerrilla Games’ adventure title has joined the rare ranks of PlayStation exclusives to pass 20 million units sold, Sony announced last week. The sequel, Horizon Forbidden West, is getting rave reviews and releases on Friday.

Dutch regulators continue fining Apple. The iPhone-maker has now been hit with a total of €20 million in fines over the past month for failing to abide by app store regulations in the Netherlands. Apple outlined new rules for dating app-makers, but regulators say the terms are unreasonable.

Wordle is not actually getting harder. The daily viral guessing game is using the same bank of potential words, even after getting acquired by The New York Times, The Verge reported. Perhaps you, like us, have just had some bad days.

India bans Garena Free Fire. The popular battle royale shooter is among more than 50 apps banned by the Indian government over links to China. India is Garena Free Fire’s biggest market, and the ban could pose serious complications to its business.

VFX veterans form a new game studio. The crossover between gaming and Hollywood continues with Blinkmoon, a new developer formed by VFX artists Mohsen Mousavi and Hugh Behroozy and game developer Troy Dunniway.

CNN’s streaming strategy is in shambles. CNN+ was supposed to be the network’s path to a streaming future. Then Jeff Zucker got ousted, and things went sideways.

Some NBC shows may disappear from Hulu. Comcast is reportedly nearing a deal to boost its own Peacock streaming service.

The Foo Fighters Super Bowl VR show didn’t go as planned. The lobby crashed, leaving many fans stranded, and the whole experience wasn’t nearly as immersive as it could have been, according to Kent Bye.

New-release fatigue is real

The new-game release calendar has been jam-packed since last fall, and some of the biggest releases this year are slated to come in the next two weeks. This is partly by accident; COVID-19 delays inadvertently created an unusual swell of big product drops concentrated in the first few months of 2022. But it’s creating a very real sense of fatigue among players (me included) who struggle to devote enough time to new releases before the next big thing takes over the gaming zeitgeist.

This week, Sony is releasing Horizon Forbidden West, and a few days later FromSoftware will drop Elden Ring. Both games were delayed and are now going head-to-head against Destiny 2’s The Witch Queen expansion next week and competing with Sloclap’s Sifu, Techland’s Dying Light 2 and three new Pokémon games released since November.

As Polygon reported earlier this month, these effects might go beyond the pandemic, with game developers less concerned about releasing products into traditional summer and holiday release windows as more and more of the industry turns to digital distribution. One easy way to cope: Wait on new games and finish what you start. I’m currently playing Sifu, as well as the excellent indie card game Inscryption and Acid Nerve’s Death’s Door. I’ll get around to the new stuff when I can.

— Nick Statt

Thoughts, questions, tips? Send them to entertainment@protocol.com. Enjoy your day, see you on Thursday.





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