The video-game industry has metaverse ambitions, too

HE PLANET is black, perfectly spherical, does not really exist, and is exactly 65,536km around (being the sixteenth power of two, a number any hacker worth their salt would recognise). A single 100-metre-wide road runs round it. All the real estate on the virtual planet is owned by the Association for Computing Machinery, an academic body.

The Association sells parcels of land to enterprising programmers wishing to develop them. Many do: their efforts are responsible for the houses, bars and skyscrapers that line the great road. At any given hour the road bustles with people, or at least, with their 3D avatars. Some are going to work, some are going on dates, many are just milling around in the way that people have done since the invention of streets. A few take their cars—like everything else in that world, really just bundles of computer code—out off the highway and “race [them] in the black desert of the electronic night”.

That is how Neal Stephenson, a science-fiction author, aptly described what he called the “metaverse”, in a tongue-in-cheek cyberpunk novel called “Snow Crash” (1992). Three decades later, the metaverse—a sort of immersive sequel to today’s text-and-picture-based internet—has been anointed as Silicon Valley’s latest Next Big Thing. Microsoft is integrating virtual-reality offices and avatars into its “Teams” remote-collaboration software. Mark Zuckerberg, the founder of Facebook, is so enamoured of the concept that on October 28th he renamed the firm “Meta” to signal its focus on this new “north star”.

It sounds like west-coast techno-utopianism. But some glimpse of the potential could be seen on November 8th, when Roblox, an online game with 200m monthly users, reported its quarterly results. The number of daily players rose 31% year-on-year, to 47.3m, propelling revenue to $509m. David Baszucki, Roblox’s co-founder and boss, said that the firm had predicted the rise of what is now called the metaverse when its first business plan was written 17 years ago. In 2020, when it was still privately held, Roblox was valued at $4bn. Today it is listed and worth $68bn, not least thanks to an over-60% bump in its shares in the past month.

For metaverse enthusiasts like Matthew Ball, a venture capitalist, online games such as Roblox—and “Minecraft”, “Fortnite”, “Animal Crossing” and “World of Warcraft”—serve as proof that immersive virtual worlds can be popular and profitable. According to Newzoo, a market-research firm, consumers spent $178bn on video games in 2020. Besides blasting each other, many gamers use them to keep in touch with distant friends. And they are already happy to spend cash on virtual property. Newzoo thinks around 75% of the industry’s revenue comes from games that allow the sale of virtual goods, for example powerups or clothes for players’ avatars.The video-game industry has been experimenting with virtual worlds for decades, says Raph Koster, a veteran designer, exploring how players use them to socialise, create and run entire economies based on virtual goods. Interest waxes and wanes as each generation’s ambitions bump up against technical limitations, he says. But now that the subject is in the air again, some metaverse enthusiasts reckon that the benefit of all that experience might let video-game firms like Roblox, Epic Games and Unity beat the tech titans to the punch.

Roblox is both a game and a platform. In the same way firms such as Squarespace provide tools that allow tech neophytes to create websites, Roblox comes with a set of easy-to-use programs that let punters build and monetise their own 3D games and experiences. “Piggy”, for instance, is a user-created horror game inspired by “Peppa Pig”, a cartoon. In “Adopt Me”, users rear, collect and trade exotic virtual animals. (The latest craze is programmes based on “Squid Game”, a Netflix series.)

“Every experience is built by our community,” says Manuel Bronstein, Roblox’s chief product officer. The firm busies itself handling behind-the-scenes problems, providing server space and infrastructure to support its users’ creations. It has its own currency, called Robux, which is paid for with real cash. Users can spend it in what is, in effect, an app store that sells the powerups or cosmetic items like shirts, hats or pairs of angel wings which avatars need to stand out. The developers of those virtual items get a cut—around 27%—from each sale.

The game’s popularity has led to other firms offering experiences within Roblox as a marketing strategy—a simple but effective way to merge the digital and the real. Users can wander round a virtual version of the Starcourt Mall, a place in “Stranger Things”, another Netflix series. In May one user resold a virtual copy of a real Gucci handbag for around $4,100. On November 15th Roblox announced grants worth $10m to develop educational experiences, including a simulated trip to the International Space Station.

Mr Baszucki is not the only boss in the games industry with metaversey ambitions. Tim Sweeney, chief executive of Epic Games, the privately held firm that develops “Fortnite”, has been a fan of the idea since he wrote “Unreal”, an early multiplayer 3D-shooter, in 1998. Like “Roblox”, “Fortnite”—which is, at least on the surface, a straightforward action game—has been flagged as an early example of what a metaverse might look like. “We don’t see ‘Fortnite’ as the metaverse,” says Marc Petit, a vice-president at Epic, “but as a beautiful corner of the metaverse.”

Also like Roblox, it has seen crossovers from the real world. In 2019 “Fortnite” hosted a virtual space battle to promote “Rise of Skywalker” (the “Star Wars” film, in turn, referred back to the in-game event—very meta). In July Ferrari uploaded a virtual version of one of its luxury sports cars into the game for players to drive around. It is not quite the same as renegade hackers racing virtual cars in the “black desert of the electronic night”. But it is not a million miles away, either.

The best-known uses of “Fortnite’s” virtual world have come from the music industry. In 2020 Travis Scott, a rapper, hosted a virtual concert. The malleable physics of the digital world allowed him to do things no amount of stagecraft could accomplish in reality. His hundred-foot-tall avatar, wreathed in lightning, danced and stomped through the game’s pixellated universe, shaking the ground with every step. Around 12.3m people attended, around 60 times more than can fit onto the fields of Glastonbury, a big music festival.

The second prong of Epic’s strategy, besides “Fortnite” itself, is to sell pickaxes in a gold rush. Here it is in competition with Unity, a firm founded in Denmark in 2004 and which went public last year. Both firms sell sophisticated software “engines” that were originally designed to power video-games. Now they are touting them as pieces of general-purpose simulation software that they hope will become a common language in which 3D worlds are built, in the same way HTML underpins websites.

They are already partway there. Games engines are finding uses outside the gaming business. Architectural firms, for instance, use them to build virtual versions of buildings to dazzle clients before construction. Some use them to help manage the build itself. A collaboration between Epic and Cesium, a startup that maps cities and landscapes, allows virtual copies of real cities such as Melbourne or Detroit to be dropped into Unreal, the engine that powers “Fortnite”.

Mr Ball points out that much of “The Mandalorian”, a “Star Wars” TV show, was shot within a virtual world generated by Unreal. Since they are built with the same software, he writes, “audiences could freely investigate much of these sets [in an Unreal-powered world]”—a metaversey twist on charging fans for tours of film sets. Unity recently paid $1.6bn for Weta Digital, a visual-effects studio founded by Peter Jackson, who directed the special-effects-heavy “Lord of the Rings” films. It also unveiled Metacast, a piece of software designed to broadcast sports events into virtual worlds. The firm showed off a mixed-martial-arts bout that viewers could watch from any angle—even the point of view of one of the fighters.

Whether the games firms can compete with the tech titans remains to be seen. Meta’s annual revenues, at $86bn in 2020, make it half the size of the entire gaming industry by itself. But Mr Ball points out that big changes in technology often lead to the rise of new players despite the efforts of old incumbents. And, besides experience, the games industry has plenty of ready-made early adopters for whom virtual worlds are already an established cultural norm. “You have at least two generations of kids who’ve grown up playing online games,” says Mr Bronstein. “Navigating a 3D environment. Hanging out in a virtual world with friends. This stuff is commonplace for them.”

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An early version of this article was published online on November 17th 2021

This article appeared in the Business section of the print edition under the headline “If you build it”