On this week's episode of Yahoo Finance's The Crypto Mile, our host Brian McGleenon speaks to Robby Yung, CEO of Animoca Brands. The episode delves into the transformative potential of web3 gaming and its role in driving mass adoption of digital ownership, NFTs, and blockchain-based royalty distribution. Animoca Brands, known for its diverse web3 investment portfolio, including The Sandbox, Opensea, Axie Infinity, and Decentraland, continues to pave the way for innovation in the blockchain gaming sphere. During the interview, Yung asserted that web3 gaming stands on the cusp of revolutionising the traditional gaming space, with the capacity to propel digital ownership into the mainstream.
BRIAN MCGLEENON: On this week's episode of Yahoo Finance's "The Crypto Mile," we are speaking to Robbie Yung, CEO of Animoca Brands. Now Robbie is here to discuss how Web3 gaming can act as a gateway to the mass adoption of such innovations like digital ownership, Web3 wallets, NFTs, and the automated distribution of royalties on the blockchain. Animoca Brands has a diverse Web3 investment portfolio that includes the Sandbox, OpenSea, Axie Infinity, and Decentraland.
Robbie, welcome to "The Crypto Mile."
ROBBIE YUNG: Glad to be here. Thank you.
BRIAN MCGLEENON: Well, it's good to see you. Can we just begin as a definition of what Web3 gaming is and how it differs from traditional computer gaming?
ROBBIE YUNG: In the game industry for the last more than 15 years, 20 years, the free to play model has been the predominant business model of gaming. And gaming, as you know, is the largest entertainment medium in the world.
BRIAN MCGLEENON: Just explain that. So the free to play model, is that--
ROBBIE YUNG: Correct.
BRIAN MCGLEENON: Online mobile gaming? You just access it and you play it for free?
ROBBIE YUNG: So regardless of platform, the free to play model is essentially where you can get into the game for free, but then you spend money in the game in order to buy virtual items to enhance your play, whether it's customizations, boosters, extend your play time, et cetera. So there's a constant ability to spend money in the game to make your experience better. But the upfront cost is negligible.
BRIAN MCGLEENON: OK. So that free to play model, that preceded the Web3?
ROBBIE YUNG: Yes. By more than a decade. Games like World of Warcraft, Eve Online, you name it. Magic the Gathering even has free to play versions.
BRIAN MCGLEENON: So what do the innovations of Web3, then, give a gamer that enhances their experience?
ROBBIE YUNG: So what many gamers didn't really think about during this whole period of decades of free to play was that those assets that they were purchasing, they didn't truly own. And this is true of many, many kinds of digital content. Frankly, there-- as people may be familiar-- if you buy an album on iTunes, you don't actually own it. You just own the right to use it. And if Apple loses the license for that IP, they take it away from your library, even though you bought it.
So you don't actually have digital ownership. But what blockchain allows you to do is through fantastic encryption and the ability to create digital scarcity. So you can-- through tokenization, we can create a unique digital item. It also means that I can track copyright. And so we've solved this conundrum that we've had in the internet world for the last almost 30 years, which is that digital rights management never worked. That's why we have all these streaming platforms around the world, because we can't control copyright effectively.
BRIAN MCGLEENON: So can you describe how this could be a revolution? Is it going to give more of the profit, more of the ownership rights back to the creators?
ROBBIE YUNG: 100%. 100%. Because now we have the ability for individual pieces of content to be transacted, sold, traded directly from the artist to the fan and even between fans. So in fact, what we're doing is revolutionary in a digital sense, but actually not dissimilar to how many of these entertainment industries ran for decades. It's just like me having a physical record, a piece of vinyl. I buy it. If I want, I can sell it in a second-hand shop. I can give it to you. And because it's a unique item, then it has value as it moves around. And now we can do the same thing with digital items.
BRIAN MCGLEENON: So how does this translate into the gaming industry? So we're talking about artists, musicians, films, and stuff like that. Digital property rights going back to the original creators. How do gamers, then-- how do they fit into all this?
ROBBIE YUNG: So the video game industry is over $200 billion a year now, and it's largely based upon revenues that are derived in this free to play model, where people are buying in-game assets. And so one of the reasons that we loved blockchain when we discovered it as a technology back in 2017 is that we felt gamers, as an audience, were absolutely going to understand the ramifications of blockchain immediately. Because here is an audience that buys in-game virtual currency and spends virtual currency to buy virtual items.
Billions of people around the world have been doing this for more than a decade on mobile, and a subset of them have been doing it for 20 years on other platforms. And all we're doing with blockchain is we're tokenizing that in-game currency. The only difference is that you actually own the stuff.
BRIAN MCGLEENON: So the big names in the gaming industry, are they moving into this space? Are they incorporating Web3 innovations into their experiences?
ROBBIE YUNG: Some of them are experimenting with it, and some of them are not. But I would caution against using the business development actions of the big game industry players as a litmus test for new technology. Because historically, the big incumbents are the last ones to adopt new platforms and new technologies. And we saw this happen with mobile.
So most of the companies that you think of together with mobile gaming-- whether it's King with Candy Crush, or Supercell with Clash of Clans or Clash Royale, or Rovio with Angry Birds-- none of these companies were a player in any kind of gaming prior to the new platform of mobile. And you don't really think of Electronic Arts and the other Activision as being huge mobile players. They came to mobile very late because they're the incumbents.
BRIAN MCGLEENON: And do you think they're a bit reticent because if they allow their digital assets that you can earn within their game, would they allow those to be portable to other games and stuff like that? Or would they be very protective and silo those assets?
ROBBIE YUNG: So the software industry has been based on the siloed model since its inception. And so I think it's very hard for the software industry to think about how to embrace other forms of intellectual property prosperity, if you will. And what we're advocating in Web3 is largely an open source movement. It's the idea that we can all progress the industry much faster by sharing and by taking advantage of the shared network effects. But maybe let me show you-- let me give you an example of how this works in practice.
So let's say you and I both have two Web3 games that are driving games. We both have tracks and cars and things like that in our games. Why would we want to share with each other? The traditional thinking would say that, OK, if a player brings cars from your game into my game and just plays in my game, then I took a player from you. You lost a player. It's a zero sum thinking in terms of.
But actually, what's happening in Web3 is because we can track royalties on any trades that happen on digital items-- not just on the primary sale, but secondary, tertiary sales, et cetera-- it means that actually, when that car that came to my game gets sold later on, even if it gets sold in my marketplace, you will still get a royalty, because you get a creator royalty. And what's happened is because that car is playable now in two games, that car has more value. So the probability is it might transact for a higher price.
And so actually, you and I both benefit. I get the marketplace fee. You get the creator royalty. So because we share, we can actually generate more business, because we've created more value for those cars. And at the same time, it's reciprocal, because players who buy cars from me will also want to drive on your tracks in your game.
BRIAN MCGLEENON: Let's talk about digital ownership in general. And you know, the importance of that and also the importance of that reaching a critical mass of people understanding that digital ownership is important. So why do you think it is important?
ROBBIE YUNG: I think first, ownership is very important. Digital ownership is something that we've never had before. If you think about where we are at this moment in time, we spend most of our waking hours online. In Asia, where my company is headquartered, the average person spends nine hours of their day online. And that is a good portion of your waking day. And most of that time, we spend as digital serfs being farmed for our data. Because most of the big tech companies-- big, centralized tech companies who control social media platforms, et cetera-- are all harvesting our data and exploiting that data for profit.
And in exchange, we get a certain amount of "free services," which are not free if you include the cost of our data. But we don't actually have any agency over that data. We don't get any share of the profit that's made based upon the usage of that data. And so in a Web3 context, the idea is that we can have true digital ownership over all of this information. And so what that means is that we will actually have a stake in the networks that exploit that data. So if you have a very successful application on the Ethereum network, and I own Ethereum tokens, then the value of the network increases as I contribute my data to that network.
And so because I have a stake in it, I will get something back in exchange for my contribution. Everything on the internet today before Web3, we value essentially at 0, because it's infinitely copyable. And so we can't actually build any asset value there. And so we think about real estate, we think about all these other asset classes, and that's where all the asset value is being built. And yet, nine hours of our day is spent in digital space. Why can't we build asset value there? And now with Web3, we believe we can.
BRIAN MCGLEENON: What's the connection between Web3 gaming and the metaverse? You've invested in a product called the Sandbox, right?
ROBBIE YUNG: Correct. Yes. So we have a subsidiary called the Sandbox, and the easiest way to characterize the Sandbox is picture in your head something akin to Minecraft, but in a Web3 context, where everything that you create with these virtual LEGO-style bricks is ownable. And so these are all digital assets that are minted on the blockchain. And so you can own them, and you can monetize your creations if you want to be a professional builder and build them for other people, or you can just build them for fun and play.
BRIAN MCGLEENON: Are there any sort of commercial entities any corporations that are becoming interested in that space?
ROBBIE YUNG: Absolutely. Everything from entertainment-- celebrity brands like Snoop Dogg or Paris Hilton-- to corporates like Gucci and Adidas and LVMH.
BRIAN MCGLEENON: Demographics-wise, younger people are using these things. But are you seeing more of a spread of people using Web3 gaming? Or--
ROBBIE YUNG: I guess, define younger. Younger than me, but I'd say in terms of average Web3 demographics at this moment in time, in the early adopter community, I'd say the ages 25 to 45 would be your average.
BRIAN MCGLEENON: So just to leave us, what do you think are those developments that are happening at the moment that's going to give it the potential for more growth?
ROBBIE YUNG: I think it's always driven by innovations in applications, which is a nice generic for games, Fintech, health care, education, you name it. Because we're all contributing to the adoption of blockchain as core infrastructure technology. But the more that we do that, the more we're also promoting this interconnected world of interoperable applications. Because the beauty is once you start to build all this stuff on blockchain infrastructure, then you can actually connect these seemingly disparate things.
BRIAN MCGLEENON: And port them from one place to the next.
ROBBIE YUNG: Correct. Because for example, I sell somebody an in-game item-- a car in the game. And there's no reason that they can't take that car, then, to a DeFi lending protocol and put it up as collateral for a loan. And then they use that loan to pay their insurance premium at another insurance company that also uses tokenized assets.
BRIAN MCGLEENON: Now, is that hypothetical, what you just said? Or is there some--
ROBBIE YUNG: The insurance company part is, but you can get a DeFi loan for one of our cars.
BRIAN MCGLEENON: That is amazing, actually. Robbie Yung, CEO of Animoca Brands. Thank you very much for coming on this week's episode of Yahoo Finance's "The Crypto Mile."
ROBBIE YUNG: Thank you very much.