Ubisoft clearly doesn't get NFT market, Quartz NFTs are bad business

Ubisoft's recent Quartz NFTs are disastrous PR nightmare that've been ridiculed by pundits, consumers, fans, and the press. Instead of reversing course, Ubisoft is doubling down.

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Ubisoft believes in NFTs and isn't giving up. The wildly unpopular Quartz NFTs are "just the beginning" of what's to come. Ubisoft has a grand vision in how its NFT platform will work out--despite not actually revealing said plan or discussing details. It's the gamers and consumers who "don't get it," one dev says.

In a recent interview with Finder, Nicolas Pouard, who has worked at Ubisoft's Strategic Innovations R&D lab with blockchain games since 2018, said this about NFTs:

• "I think gamers don't get what a digital secondary market can bring to them. For now, because of the current situation and context of NFTs, gamers really believe it's first destroying the planet, and second just a tool for speculation.
• "But what we are seeing first is the end game. The end game is about giving players the opportunity to resell their items once they're finished with them or they're finished playing the game itself.
• "So, it's really, for them. It's really beneficial. But they don't get it for now."

The bottom line: Ubisoft is trying to iterate on a speculative platform. NFTs are nebulous and no one video games company has outlined how exactly they work or what value they can offer players. There's lots of vague promises. It's not just consumers who don't know--Ubisoft doesn't know either.

There's comments about NFTs becoming a paradigm shift in video games. While most big players like EA and Square Enix are interested in NFTs, the market is still extremely unregulated and speculative.

Ubisoft's NFTs, for example, have little monetary value. Ubisoft clearly doesn't understand the NFT market and tried to use principles it learned from microtransactions and live games for this new emerging business model.

It's a simply supply vs demand issue. Ubisoft flooded the market with thousands of Quartz NFTs, which significantly diluted the value of its digital wares. Ubisoft is trying to merge the worlds of NFTs and in-game cosmetics together but the latter's business tactics don't stick.

• NFTs thrive from artificial scarcity. They are typically one-of-a-kind digital pieces of interactive artwork that theoretically can't be replicated (well, that is authenticated via original receipts). That's what gives them value. These NFTs are usually sold at auction and sometimes command hundreds of thousands or even millions in prices.

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Just look at how much Konami's limited-edition one-of-a-kind NFTs generated. Konami sold 14 NFTs at auction for $164,000.

Ubisoft circulated 6,000 NFTs and has made less than $3,000. That's a loss-maker waiting to happen. Ubisoft likely spent more money to animate the Ghost Recon Breakpoint NFTs than it earned from secondary sales.

Ubisoft is attempting to cash in on the play-to-earn market by combining mTX live service methodologies with NFTs. This results in a model that's like two magnets repelling one another.

• Business-wise, microtransactions are the opposite of NFTs. mTX needs to be widely available to everyone at all times. More access, not less, is what drives mTX revenues. Principles of wide availability, instantaneous delivery, and clearly, unrestricted purchases on a primary and trusthworthy market is what Ubisoft's entire multi-million games operation is built on.

"Also, this is part of a paradigm shift in gaming. Moving from one economic system to another is not easy to handle. There are a lot of habits you need to go against and a lot of your ingrained mindset you have to shift. It takes time. We know that," Pouard said.

Ubisoft too needs to go against its own habits if it wants Quartz NFTs to actually work.

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• The entire reason to support secondary markets is to make revenue from secondary sales. If everyone is trying to sell their NFTs and no one is buying, the market simply isn't valuable. The "it's for the players" assurance is irrelevant. This isn't for the players. It's a means of finding new engagement methodologies that could in turn lead to more monetization. Creating more value for players could result in more engagement, which results in monetization. The value proposition simply isn't there, at least monetarily. And like any publicly-traded company, Ubisoft's motivations here are for the investors.

• Quartz can supercharge FOMO. Fear of Missing Out one of the most powerful forces for any live service game. If a live game has done its job right, social pressures and hooks will reinforce this trend, which sees players returning and continuing to play because they don't want to miss out on in-game rewards like daily log ins, randomized items, etc. It's a big part of online games and it's extremely persuasive.

Read Also: Ubisoft is using NFTs to supercharge FOMO and live service engagement

• Ubisoft is trying to tap extrinsic, monetary rewards as a means to keep you playing over time. Don't want to miss out on that NFT drop? Play for 600 hours so you can get it and hopefully resell it for something.

By promising players the opportunity to earn money from in-game cosmetics, Ubisoft is laying out a value proposition that can't be ignored. Earn money by playing video games? Now that sounds great.

But if what you are earning isn't worth buying, then you've lost value and time. It used to be that Ubisoft games were played just to spend time (well, money too). The agreement was simple: You play a game, you give up some of your time, and you get entertainment back.

Now Ubisoft is introducing another unknown into the mix. The agreement looks like this: Spend time, earn something that might have external resale value, and rinse and repeat.

Quartz is expected to multiple things at once, all of which will feed into Ubisoft's cross-platform live service engagement model. Everything has been synergized to feed other parts.

1. Supercharging FOMO - Scarcity of NFTs will push gamers to unlock them
2. Earning money from NFT trades -Ubisoft Quartz NFTs can be traded and sold on third-party marketplaces like Rarible, and Ubisoft will receive a cut
3. More game sales - People may actually buy games like Ghost Recon Breakpoint just to unlock NFTs
4. Boosting engagement - Steep requirements like 600+ hour playtimes will keep users into the game for longer, which offers more chances to sell in-game items
5. New monetization point - Gamers may eventually be able to outright purchase Ubisoft Digit NFTs with cryptocurrency

This tactic isn't going anywhere: "We so strongly believe that what we are doing goes in the right direction. So, we will keep integrating," Ubisoft says.