Father of “Fallout” video game franchise founds Steam rival in San Diego
Brian Fargo, the video game executive behind the hugely successful post-apocalyptic “Fallout” franchise, has founded a new tech startup in San Diego.
The upstart, called Robot Cache, is building the first online store where gamers can sell “used” copies of their digital computer games once done playing. At first blush, the concept is hard to fathom. Digital games don’t get scratches and aren’t missing their jackets. Is there such a thing as a used digital game?
So far, the answer to that has been a resounding no. A game purchase today only gets users a license to download a digital copy, just like buying albums on iTunes. That means once a game is purchased, there’s no going back. It’s a bummer for gamers who like to cycle their stash once they master — or get bored with — a game. Back in the days of discs or cartridges, a trip to GameStop to pawn off some old titles could result in a few extra bucks to buy the latest thing.
Lee Jacobson, the ex-Atari executive who now leads Robot Cache as CEO, said old digital games become worthless to those who buy them once interest dwindles.
“They become digital dust in a digital library,” Jacobson said.
But now Robot Cache, whose platform is still in development, has filed patents on a “transfer of digital rights” technology that allows the startup to resell digital goods. It’s one of many tactics the startup is using to attract gamers and game developers to its platform, which is entering an arena dominated by multibillion-dollar game site Steam, the go-to spot for buying digital games online.
Robot Cache has signed on over 50 game publishers so far with a total of over 1,000 games under contract. Jacobson said that includes prominent game makers THQ Nordic, Deep Silver, and Paradox in Europe, a key market for PC gaming. The startup has also preregistered 20,000 customers.
How it works
The concept for the company came from a conversation between Fargo and Jacobson about blockchain, a technology pioneered by the cryptocurrency craze that’s now maturing into new applications.
“We said, ‘Let’s use blockchain to invent a digital resale model that can take out GameStop — or certainly give them a run for their money,’” Jacobson said.
The company, officially founded in early 2018, uses the blockchain-based Ethereum network to execute smart contracts with the sale of each game, allowing the game rights to travel in a trackable, verifiable way.
For gamers, this means they can get a 25 percent refund on “used” games by listing the licenses on the Robot Cache website. The startup then shuffles the used license into a pot with new copies of the same game. Every other game sale is a used license until none remain, then Robot Cache goes back to selling new copies. Users, of course, won’t know the difference between a “used” game license and a new license. It’s all the same.
How to get game developers on board
The sales pitch is that Robot Cache’s model is attractive for game publishers because the startup only takes a 5 percent cut of every sale, including on new copies. That compares to Steam’s 30 percent cut, which is an industry standard today (much to the chagrin of game developers).
For super successful games like PlayerUnknown’s Battlegrounds, which earned over $1 billion in revenue last year, the 30 percent cut can sting.
Michael Witz, co-founder of Redemption Games in Carlsbad, said Steam’s model is also tough on indie developers who struggle to compete.
“In an ideal world, a developer could build a game and flip a switch that would put that game in the hand of every gamer,” Witz said. “But that’s not what happens. (Companies like Steam) gather the gamers together and own the distribution channels. Then they turn on the toll booth.”
Redemption makes mobile games, so it doesn’t list on the Steam platform. But a 30 percent cut has been adopted by most other game distribution platforms, including Apple and Google.
“If you’re a smaller developer that doesn’t have a huge hit game, that toll is very expensive, and it takes away dollars that could otherwise be put into building a game,” Witz said.
Could Robot Cache really compete with Steam?
Until very recently, Steam has had a monopoly on selling PC games online. The company rakes in high commissions from game makers, reportedly bringing in $4.3 billion in 2017 revenue. They’re a powerhouse that even Jacobson doesn’t expect to touch.
“We know we’re not going to put Steam out of business,” Jacobson said, laughing.
And Witz agrees. Any company playing in the same arena as Steam will have a tough road ahead.
“All the players already have their accounts set up on Steam,” Witz said. “They’ve downloaded the software; they have their game library there, there’s social connections built into it and a strong network effect that helps keep Steam dominant.”
But the market may be big enough to support new players. That hypothesis is gaining some traction in recent months, as another storefront is challenging Steam’s reign. Epic Games, the maker of the blockbuster game Fortnite, announced a new storefront late last year. They’re undercutting Steam’s revenue share, too, taking only 12 percent.
“That’s the biggest chink in the armor that suggests maybe Steam’s dominance could be taken down,” Witz said.
Robot Cache, which is offering game publishers 95 percent of their sales revenue, has designed several other ways to make money.
The startup designed a one-click button on their website that allows gamers to open up their computers to cryptocurrency mining in exchange for store credit, which customers can use to purchase games. The concept makes sense, as players often have souped-up computers that can handle crypto mining when not used for gaming. While users have to pay electricity costs to run their machine while mining, the tool can passively earn them enough credit to buy a free game per month. The gamer gets 85 percent of the mining proceeds as credit, while Robot Cache receives the remaining 15 percent to pocket.
Robot Cache is planning a beta launch in the second quarter of this year, which will give a limited group of gamers early access. While Fargo does not lead daily operations, Jacobson said he’s still very involved with the startup as chairman of the board.
The startup raised $11.5 million in a Series A round last April and is currently raising a $20 million B round. The capital will partly be used to line up content deals with developers, hire more staff and find more customers.
Robot Cache currently employs 13 people at its Sorrento Valley headquarters.
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