Tuesday, November 2018
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Blockchain Creates True Digital Assets
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Blockchain Creates True Digital Assets

As I wrote about earlier this year here, Blockchain and Intellectual Property (IP) are a likely pairing. The gaming industry has exploded, particularly with respect to digital games. GameStop earns billions annually from reselling physical games – which are only 24% of all games sold. The remaining 76% are digital games, and the trend is moving further to digital games. Steam, the primary digital games distribution engine, is now holding all the power in personal computing games. When consumers ‘buy’ a digital PC game it really amounts to a lease (but costs the same as buying) because they cannot transfer that game – so consumers are really trading their ownership rights to Steam in exchange for convenience.

I recently learned about Equiti Games, a New York company that is creating a new standard for ownership of digital games, as “true digital assets” by using universal and open licensing. I spoke with Equiti Games Founder and CEO Tony Caputo to learn more about what they’re doing, what they’ve learned along the way, and what tips they have for other startups.

Happy young man at home playing video games

Mary Juetten: Where are you based and when did you start?

Tony Caputo: We are Equiti Games based out of Katonah, NY – just north of NYC.  We also have a small team in the Bay Area. The idea started percolating in early 2017, and we really started ramping up the company more fully in October 2017.

Juetten: What problem are you solving?

Caputo: We are bringing back ownership to digital games with the ability to give your game to a friend or sell your game after you’re done playing it. We are also addressing game publishers’ loss of revenue to gray markets by giving developers a percentage of pre-owned game sales. GameStop earned over $2B in pre-owned sales in 2017 and game developers made nothing.

Juetten Who are your customers and how do you find them?

Caputo: Our end consumers consist of three main categories: gamers, game developers, and third-party marketplaces. Gamers are mainly on social media groups, game news sites, streaming platforms, and game communities. We keep in touch with a network of game developers and publishers that we already know from experience and are reaching out to new developers by compiling public listings of game catalogs and developers. We reach out directly as well as through game conferences and our personal network. Lastly, we work with third-party marketplaces through game community sites, which are spread organically through different webs of social and gaming networks.

Juetten: How did past projects and/or experience help with this new project?

Caputo: I founded leaptrade.com back in 2011 as a reaction to gamers getting ripped off by retailers when they would trade in their games.  For example, trading in your $50 game, getting $25 from the retailer, and have them turn around and put it back on the pre-owned shelf for $55.  Leaptrade is a P2P game trading platform for physical games (discs and cartridges), allowing gamers to get the real value for their games ($50 instead of $25 from a retailer), save money and play more games.

Building Leaptrade gave me invaluable experience with how marketplaces work, managing a virtual economy, and what users are looking for when buying and selling pre-owned games. Running a virtual resale marketplace using digital currencies has led me to appreciate what makes secondary game markets different from a consumer’s perspective, and how much rides on maintaining loyalty through well-balanced incentives.

Juetten: Who is on your team?  

Caputo: I have a co-founder, Nicole Allen, who is the Director of Developer Relations. Nicole is experienced in the media and social aspects of the gaming/tech industry and has also curated her own personal brand, Nixie Pixel. Plus, I have a group of very talented people rounding out my team.

Juetten: Did you raise money?

Caputo: Yes, we’ve raised $750k so far, and recently won the Founders World Championship which includes a prize of $1M in investment and another $1M in services – bringing our current total to $1.75M. Details of the contest are available here. We are also conducting a private token sale.

Juetten: Startups are an adventure– what’s your favorite startup story?

Caputo: One of my favorite stories is how we started working with our first game publisher, an indie game distributor called tinyBuild. We had wanted to get input on our platform as early possible, but we didn’t have a website up, our marketing material wasn’t finalized, and we hadn’t even moved into our office, but we figured why not give it a try? We were big fans of tinyBuild because they had spoken out about the issues we were trying to solve with grey market game sales. After just one phone conversation, the technology and the concept was so compelling that Luke Burtis joined up immediately. With the current set of tools limiting available platforms, Luke couldn’t run his business the way he wanted to and we were the only platform providing any sort of viable alternative. The result of Luke coming on board was that we got first-hand insight into the problems facing indie-game publishers, which in turn allowed us to fine-tune our platform to solve for industry-specific pain points.

Juetten: How do you measure success and what is your favorite success story?

Caputo: For us, success means changing the industry. As far as my favorite success stories involving entrepreneurs and companies with a vision, I think Tesla is a really good one. We may not remember now, but Elon Musk took a big risk building high-end electric cars. It was a niche market, few people thought it would be successful, and people presently continue to question the financial prospects of his companies. Elon builds a lot of things that you wouldn’t do if you’re just trying to make a lot of money, but he proved that people needed and wanted electric vehicles. In this way, I think that success is measured by effecting underlying change: while the Tesla company could fold, electric cars have become widely popularized. Tesla created a technology that anybody can use.

Juetten: Any tips to add for early-stage founders?

Caputo: Move the needle forward every day. Even if you feel like it’s not perfect, get something out there. You have to break the fallacy that a startup has to look like a well-established company because you need to move forward, gain traction, and get to the next step. Things are never perfect, and you are never going to be as ready as you want to be. People will be excited about what you’re doing and will cut you some slack. People want to believe in what you are doing so be genuine and execute on something every day. If you’re putting yourself out there, then you can adapt to the feedback you are getting. If you can already tell a strategy isn’t working well, you should change and adapt quickly to find one that works better. When you’re a startup, you need to hold true to your core vision, but one of your key advantages over larger or more established companies is being able to change and adapt the execution of that vision, so take advantage of that.

Juetten: And of course, any IP horror stories to share (they can be anonymous)?

Caputo: Be careful who you partner with. If you’re a startup, you don’t really have litigation available as an option, especially against entrenched interests. Share enough for people to be excited, but hold back some of the things that are really important. Keep key aspects about the IP reserved, and if someone tries to follow you, then will have to play catch up. While people generally are kind and honest, unfortunately there are people that do take advantage, and we have heard of cases where they rake you over the coals for a deal, and if you don’t accept it take your property and compete against you.

Juetten: What’s the long-term vision for your company?

Caputo: Changing the industry for the better. Bringing back ownership to gamers and control to developers in such a way that enables the best parts of the industry to thrive, like student funds. We would like to see developers and innovators have the flexibility to build and create unique digital products like limited editions where a developer could sell three editions of every game, two are limited and one is platinum. We look to progressively break down barriers at the level of game distribution to have more than just five game clients to choose from. We are currently locked up in digital boxes, mobile games, for example, are completely dominated by the main app stores on each platform. A path forward could be a more open way that Microsoft, Sony, and their consoles all interact through an interoperable medium. For us, the future is an open and universal licensing network, where I can buy the game and play it on any console, pc, or mobile device. In our model, digital creators can develop content for games, items like skins and avatars. These digital creators would be rewarded for the content they produced, and could make a living by selling their digital work to the gaming ecosystem. At the same time, we want to maximize creativity while not taking control away from the developer, who we reward for allowing others to build upon their innovation. In summary, we’re building an open licensing framework that tears down walled gardens, and, like with electric cars, people just don’t realize there’s more money to be made using an open model.

My hope is that these stories about real founders, that are not creating Unicorns, can inspire and help other founders. If you have an interesting journey to share, particularly with IP considerations, please reach out on Twitter @maryjuetten. #onwards.

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