Will brands start selling digital apparel in video games?

01 : 12 : 2017 Digital : Retail : Fashion
Sansar by Linden Labs Sansar by Linden Labs

Video games are not only a vehicle to advertise real-world goods, they also present a viable new marketplace for branded digital goods.

Peter Maxwell, senior journalist, LS:N Global

The video games market generates significantly more revenue than the music and film industries, according to the Entertainment Software Association, but unlike in music and film, most major brands have almost no relationship with the sector. It’s only recently that we’ve seen household names such as Tag Heuer and Gillette taking their first tentative steps into this area through various marketing initiatives, belatedly realising the opportunity to build brand recognition among gaming’s cohort of young, upwardly mobile consumers.

But while video games can undoubtedly be an effective marketing channel, for brands to really thrive in this space they need to start thinking bigger. Video games are not only a vehicle to advertise real-world goods, they also present a viable new marketplace for branded digital goods.

Sales of video game-related downloadable content and micro-transactions – where players purchase virtual goods for a small fee – are expected to reach £3bn ($4bn, €3.4bn) by the end of this year. Team-based multiplayer game Overwatch, which was released in May 2016, is just one example of the potential of this market. As of July 2017, players playing the game on video game consoles had spent £46m ($61m, €52m) on in-game items such as character outfits, according to SuperData.

Historically, such markets have been siloed off, with the game developer being the sole issuer of goods and the recipient of the revenue generated by their sale. Additionally, such items cannot leave the bounds of the game worlds in which they have been created, significantly limiting their potential value. Consider this in light of the recent consumer backlash against Star Wars Battlefront II, in which it would reportedly cost a player around £1,500 ($2,100, €1,800) to unlock all in-game items, or 4,528 hours of gameplay if the player opted to unlock them organically by earning in-game credits.

However, the notion of investing such a degree of time or money in digital items may soon make much more sense to people on both sides of the equation. In 2017, several organisations announced plans to create universal marketplaces for in-game objects that could potentially revolutionise how developers – and brands – generate revenue in this space.

The ability to create one avatar for all digital contexts could supercharge demand for third-party digital clothing.

The key commonality that runs through all of these proposals is the implementation of blockchain technology to verify the ownership and exchange of digital assets to make them a fully tradable commodity. As BLOCKv CEO Reeve Collins explains, the blockchain ‘introduced the notion of scarcity because that is really what the underlying technology of these tokens does, it enables you to have digital scarcity.’ The BLOCKv platform is designed to allow the creation of ‘smart digital objects’ that exist across a variety of contexts, meaning that you could transfer a virtual jacket from your video game console to your phone or a virtual reality (VR) store, and the platform would certify that it is the same item. ‘BLOCKv goods visualise differently depending on the device and environment, yet maintain their structural integrity, uniqueness and identity as cryptocurrencies,’ reads a white paper issued by the company. ‘This provides the open and freely available mechanism for collaboration across the industry and opens up vast new revenue streams with retailers and brands.’

While the ability to move functional items between games would require long-term technological evolution and developer collaboration, passive items such as accessories and apparel is an area ripe for immediate growth. Currently gamers generate a new avatar for each game, one which can only exist within the walled-garden of that title. And once a person loses interest in and subsequently stops playing a game, the in-game assets and attributes they have purchased become functionally worthless, meaning that players may be unwilling to spend large sums of money on a game they will play for a matter of weeks or months. ‘[Using the blockchain] we can create standards around how smart game objects work and you can import that character into another game that is also smart game object enabled,’ says Mike Jones of 8 Circuit Studios, a developer working in this area. ‘Now, when you go from one massively multiplayer online role-playing game (MMORPG) to another it would be possible to at a minimum carry the look of your character with you.’

If innovators like Collins and Jones are successful, the ability to create one avatar for all digital contexts could supercharge demand for third-party digital clothing. In this landscape, rather than a video game publisher such as Rockstar enabling Grant Theft Auto players to buy fake versions of Supreme and Palace products through an expansion pack – as they did in 2016 – it would make financial sense for both the fashion brands and the publisher to work together on creating an official digital merch drop, as the items would be just as ‘flippable’ as their physical counterparts. And the best part? No matter how many virtual miles you walk in them, those digital trainers will always be box fresh.

For more on the burgeoning relationship between gaming and fashion, read our Avatar Influence microtrend.