I will be starting a devil’s advocate series with ICO teardown for investors who are clueless on the risk and returns on a myriad of industries that have jumped onto the ICO wagon. Having worked in market intelligence as an analyst will apply this same analysis to the numbers claimed in ICO white papers and see how some of them may have exaggerated their claims.
For more information on the ICO, click here. The ICO crowdsale is taking place now and will end in Jan 2018.
What is Game Machine ICO all about?
Good question. If you are not a gamer, or one who has a penchant for games, well I don't blame you.
Game machine wants to develop their own blockchain to do the following for the Video Games industry. It is a complete ecosystem that covers both developers and gamers.
• Game Machine Client — a miner and the program for gamers.
• Rise Machine — the platform for ICO crowd funding of games.
• Ads Machine — the advertising exchange for a game industry.
• Exchange Machine — the crypto exchange for gamers.
One of the chief problems I have with such a business model is its lofty goals. Gamers are the miners of this proprietary blockchain system where the tokens can be used to redeem in-game purchases. These tokens will be called GMIT tokens. There is a caveat listed in the white paper as a warning.
They also spelt Ethereum wrongly. White papers are like the prospectus of an IPO. If the spell check isn't working you start to suspect that something is wrong somewhere.
Game Industry is a closed platform system
One of the things I hate about ICOs claiming the big picture is that they don’t understand how the industry works. Every game created these days are based on a specific platform for delivery and purchase. When you don't have your own platform then integration into a third party platform would be impossible. For example, console games (which is not the target market of GMIT) is closed to developers who have signed on to develop for either Sony, Nintendo and Microsoft. The same applied to iOS and Android games.
Game machine claims to have the ability to connect different platforms from iOS, PC, Android, etc to their ecosystem through APIs. Now let’s get this right. Games work on a platform based system and you don’t try to game the system by offering a different in-game purchase model. The platform in this context is the distribution of the games app where developers sell their wares and gamers buy their games. If it ain't broke why fix it?
In a closed platform like Xbox, Playstation, iOS and to a lesser extent Android, in-game purchases are made within the platform and not outside of it. For example, Apple will never allow in-game purchases to take place outside their iOS ecosystem. The reason being a selfish one. They also fail to mention the salient points in which gamers would mine Gamefuel tokens if they aren’t worth anything to begin with. Android games can be side-loaded by checking the settings menu but there is no compelling reason to do this unless the game itself has been banned from the Google playstore. Side-loading games on iOS can only be done via jailbreaking the iPhone or iPad but that market unfortunately is a fraction of the total games market.
It is a chicken or egg issue. You need to start at a point which you can build on but because the game machine ecosystem isn’t an attractive option for all gamers, why would anyone mine a token that is only viable on the PC platform. Developers have to create a game that is so intense and addictive that gamers are willing to mine these tokens to support the games. But you haven't yet address the issue of which platform in which the game will work on.
Gamemachine’s white paper states that it intends to tap the mobile games industry. For this, it has to be some kind of joke as these platforms are closed distribution systems and not open to third party payment of in-game purchases. Google and Apple do not want people to buy in-game items outside their payment system. Do you see either Apple or Google offering Paypal purchases on their games appstore? Even in China, the mobile platform is closed to the outside world. And China is the next behemoth of the video games market.
So the only viable market is on the PC platform, and to an extent, the MacOS platform as well. If you look at the PC game market, it’s only 23 percent of that US$109 billion so let’s round this market up to include the PC browser games market which is at 4 percent (refer to the top chart). So the total market would be in the ballpark of US$30 billion and not the 100+ billion they claim to be targeting.
Another note is that Steam is by far the default game shop for PC based games. If Steam isn’t onboard on the game machine ICO from the onset, there is no way this ICO is going to gain traction in the claimed time frame. PC gaming remains the most viable if game machine were to launch one on the platform.
There is no reason to suspect that it can’t be done but the goals as I have said earlier is lofty.
ICO for Gamers is difficult to convince
In the white paper the expenditure for the next year will be broken down to this.
So if they don’t hit their goal to fund this venture, will they return the money? If they get far less than they bargained for in the ICO will they put out a product worthy enough for PC gamers? These folks are not in the content development space so I have doubts.
I didn’t touch on the Advertising model of Gamemachine named Ads Machine. I don’t think this model can disrupt the current one with fair value. In-game ads are the bread and butter of Free-to-play games. If you can’t disrupt a current model by offering better value to advertisers, then there is no reason that it will work.
For developers, there is no real incentive to get a game to work on GMIT tokens if they don't already own part of the market.
Conclusion
Would I put money into this ICO? Definitely…..NOT.
Here is the rule to investing in ICOs. When they don’t have a service or product and they need the money to develop this, treat it like a Kickstarter investment. If the product or service doesn’t materialize, you should not lose sleep over it.
Holding on to your cryptos will mean it will appreciate in value far more over the return in investment through this ICO. No ICO can promise such a return on investment that is equal to what Ethereum and Bitcoin is experiencing.
Game machine also takes cash investments but why would you do that? If you had the cash, you will be better off investing in cryptos. Right?
What game machine wants to do is akin to scaling Mount Everest without an oxygen mask. It can be done but when you have so many factors in place to prevent you from finding success, why risk it?