‘Animal Crossing: New Horizons’ and the limits of today’s game economies

“Animal Crossing: New Horizons” is a bonafide wonder. The game has been setting new records for Nintendo, is adored by players and critics alike and provides millions of players a peaceful escape during these unprecedented times.

But there’s been something even more extraordinary happening on the fringe: Players are finding ways to augment the game experience through community-organized activities and tools. These include free weed-pulling services (tips welcome!) from virtual Samaritans, and custom-designed items for sale — for real-world money, via WeChat Pay and AliPay.

Well-known personalities and companies are also contributing, with “Rogue One: A Star Wars Story” scribe Gary Whitta hosting an A-list celebrity talk show using the game, and luxury fashion brand Marc Jacobs providing some of its popular clothing designs to players. 100 Thieves, the white-hot esports and apparel company, even created and gave away digital versions of its entire collection of impossible-to-find clothes.

This community-based phenomenon gives us a pithy glimpse into not only where games are inevitably going, but what their true potential is as a form of creative, technical and economic expression. It also exemplifies what we at Forte call “community economics,” a system that lies at the heart of our aim in bringing new creative and economic opportunities to billions of people around the world.

What is community economics?

Formally, community economics is the synthesis of economic activity that takes place inside, and emerges outside, virtual game worlds. It is rooted in a cooperative economic relationship between all participants in a game’s network, and characterized by an economic pluralism that is unified by open technology owned by no single party. And notably, it results in increased autonomy for players, better business models for game creators, and new economic and creative opportunities for both.

The fundamental shift that underlies community economics is the evolution of games from centralized entertainment experiences to open economic platforms. We believe this is where things are heading.

This progression will be facilitated by the introduction of peer-to-peer transactions, i.e., the trading, selling and buying of digital goods and services via an open marketplace, all approved by a game’s creator. As such, we don’t see games as simply products, services, art or even social networks. Games unquestionably can be and are all of these things, and more. But we see them first and foremost as economies — for good reason.

Take a step back and consider what’s happening in Animal Crossing with regard to community and economic activity. What may initially look like cohesive, healthy behavior is actually fractured and fraught with friction.

A case in point: Nookazon, an Amazon-like website that facilitates in-game trading and selling, receives millions of clicks a day. Nookazon creator Daniel Luu has said the site is a “huge time sink,” necessitating late hours of work after his normal day job. Beyond the site’s core functionally, he has also had to build and maintain a custom moderation system to mitigate scams. And he’s reached the user cap on Discord, the external messaging service Nookazon’s service relies on, thereby limiting the growth of his service.

Despite adroitly maneuvering around the inability to fully integrate his service into the game, the process of trading and selling items is convoluted due to Animal Crossing’s closed design. With Nookazon being an unofficial community project, Luu is not economically compensated by Nintendo for his contributions, despite adding experiential value to the game.

To help support the site’s continued development, Nookazon now offers the ability for users to become patrons. Included in the patron tiers are rewards such as automated item re-listing, custom URLs for users to more easily promote their items and voting power to have a voice in the site’s future features. These are all unquestionably useful community features that would benefit everyone. Yet the rewards are set up to create tiers of privilege, thus engendering community and economic disequilibrium as paying members gain explicit marketplace advantages.

Consider, too, Nookazon’s existential uncertainty. What if the site is forced to shut down, can’t financially sustain itself or can’t deal with a large influx of scams? The economic stakes are presumably low (the service is free and Luu can pull the plug if necessary), but the project was created and is nurtured by a passionate community. It is a labor of love that helps 140,000 people (Discord’s user limit). Losing it would be a disservice to everyone.

The player community is potentially affected as well. As players continue to earn and create items, and trade them on Nookazon— or possibly become patrons, too — they are putting down temporal, emotional and financial roots in very loose ground. Like Luu, they aren’t economically rewarded for the contributions they bring to the community.

All of this friction and uncertainty points to a gross creative and economic misalignment between the game’s developer, its players and those that offer goods and services to the community.

The start of community economies

If we take a historical look at the games industry, we see that the community and economic activity that’s emerged around Animal Crossing actually isn’t new. Popular games such as World of Warcraft, Ultima Online, Diablo II and EverQuest have had similar community behavior organically emerge and persist for years — in some cases, for a decade or more.

This resilience brings into focus the undeniable player demand, and in some cases, need for such community-driven efforts. The question raised then is, “Why haven’t more games empowered their communities to meet the demand?” After all, player communities are the lifeblood of games.

There has been some progress with regards to community contributions. For example, Counter-Strike: Global Offensive allows players to create and sell content. But the economics are opaque and participation is limited. In other cases, such as Roblox, rich community-driven economies are allowed to flourish. But due to their centralized, inherently siloed nature, these models do not benefit the games industry as a whole.

We believe that greater adoption hasn’t occurred due to three related factors: technology, game design and cost. To wit: rich marketplaces offering digital goods have limited value if players don’t have true ownership (versus simply a license to use them) of their digital assets, and fixed verifiable supply, i.e., arbitrary copies can’t be made.

Until games are purposely designed to empower their communities to contribute to their economies with user-generated goods and services (e.g., Nookazon acting as an official marketplace for Animal Crossing), we’ll continue to see friction via poor user experiences and increased developer overhead.

An open, universal solution

A piecemeal approach to addressing these issues is possible, but virtually guaranteed to be slow, inefficient, and importantly, not work for the vast spectrum of players, developers and creators that make up the full games community. We believe a holistic, infrastructure-level solution is necessary.

The infrastructure must be open, transparent and secure. Critically, it must also have well-designed economic protocols built into it that work to align the creative and economic interests of developers and their communities, rather than splintering them. We can look at the internet itself to see why.

It’s been said that the “original sin” of the internet is advertising. Because good economic models and payment capabilities were not built into the internet’s core infrastructure, advertising has become a standard business model for many on the web. This has led to poor user experiences on websites, massive privacy concerns and an unbalanced playing field due to prohibitive ad costs. If this all sounds familiar, it’s because it mirrors the foundational challenges that Nookazon faces.

Though the games industry as a whole continues to grow in terms of size and revenue, there is an underlying tension that exists due to the aforementioned misalignment — the greater consequence of which is lost opportunities, as the creative and economic power of the community is unable to realize its full potential. As such, we believe a comparable original sin of games is not natively supporting community economies.

To be clear, community economies are not intended to disrupt or displace existing game industry dynamics. They also do not apply to all types of games. Rather, they are intended to be complementary, by providing a parallel, community-centric economy that’s designed to be more equitable, sustainable and inclusive. They are fully compatible with existing business models, and also allow for new hybrid ones to emerge.

In the near term, we believe these complementary revenue streams will be rooted in player-driven activities — such as the trading and selling of earned digital goods — versus the selling of developer-created content or services. For players, the game experiences they know and love will largely look the same. But what they will gain is the right to buy, sell and trade the digital goods they’ve earned and bought, enabling them to earn real income and become active participants in a game’s economy.

Looking farther down the road, we envision a new genre of games where the economic role of game developers evolves from being a merchant or vendor of digital goods and services as they are today, to something more akin to a bank, creating and managing sophisticated, dynamic virtual economies that have real-world relevance.

This new class of games would not just incorporate community economics, but would be deliberately designed around it — similar to how some modern games are designed with streamers and esports in mind. Doing so would fold in the economic activity that’s currently happening outside of a game’s virtual economy, allowing developers to capture vital revenue that can be used to support their games. It would also help ensure their players are not exposed to scams and fraud through secondary markets that have no official oversight.

As for player communities, they will have the freedom to offer in-game services, create and sell custom content, establish new marketplaces and much more. The creation of virtual companies owned and operated by the community is even possible. By giving players a means to leverage their creative abilities, help others and earn real income — all from within a game — players will become true virtual citizens and play an integral role in the game experience itself.

Games as economic platforms

Technology has optimized game developers’ ability to create, distribute and operate virtual worlds of all sizes. But the basic economic model in games has remained at a relative standstill: developers create, players pay. The transaction has been one-way — largely because there hasn’t been a viable path for it to be anything but — despite the emergence and proliferation of community-driven efforts like Nookazon.

The journey from today’s unidirectional economic model for games to one that fully embraces community economics is a long one, and there are many challenges to address along the way. Fortunately, progress on the building blocks needed to power such games — e.g., digital property rights, new payment systems, decentralized and automated marketplaces, innovative game designs, community-centric economic models — is well underway. Moreover, this next-generation infrastructure will be powered by communities, not companies.

The shift to games as economic platforms will be neither swift nor cinematic. But like all true change, it will be profound. This is our chance to thoughtfully undo the original sin of the games industry and allow projects like Nookazon to meaningfully contribute to the livelihoods of game developers, player communities, and all others pulled into a game’s economic and creative gravitational pull. This is the potential of games as economic platforms and the promise of community economics.