Gabe Leydon’s Limit Break has $200M to make a new kind of blockchain game
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Gabe Leydon was a pioneer of free-to-play mobile games at Machine Zone, which was sold for $600 million in 2020 to AppLovin. Now he’s back with Limit Break, a blockchain game company with $200 million in funding.
Leydon left Game of War maker Machine Zone in 2018 to explore cryptocurrencies. His initial attempts didn’t work out, but in August 2021 he teamed up with his Machine Zone cofounder Halbert Nakagawa to create a game with a new kind of blockchain-based business model dubbed “free to own.”
“Our focus is on a what I believe is going to replace ‘free to play’ with something I call ‘free to own’ games,” Leydon said in an interview with GamesBeat.
That’s a big statement, as free-to-play has become the dominant business model in games, generating $120 billion in annual revenues, or more than half of all game revenues. Pioneered in Asia with online PC games, free-to-play caught on worldwide with social and mobile games, and it expanded the reach of gaming tenfold to billions of people.
So Leydon’s claim is a big one, and it starts with non-fungible tokens (NFTs) on the Ethereum blockchain. Limit Break uses NFTs to authenticate unique digital items using the digital ledger of blockchain. But in contrast to other models where game companies presell NFTs before they launch their games, Limit Break will give away the NFTs to fans. Leydon calls this a “free mint game.”
Leydon believes this will avoid the scam-like behavior where companies sell NFTs first and then fail to deliver games. Rather, by giving away the NFTs, Leydon believes he can turn fans into the best advocates for an upcoming game, where the fans evangelize the game in a viral way. It will be so appealing for fans to start from zero value that Leydon believes the model will wipe out free-to-play and NFT presales alike.
These digital items would normally be something that a company alone sells. But in this case, the company shares those items with early fans. It also keeps a percentage of the digital items for itself. Fans are free to sell their items on NFT marketplaces such as OpenSea. If the price rises for the NFTs, then Limit Break can sell some of its own NFTs alongside those sold by the fans. And so it can generate revenues, Leydon said.
Leydon isn’t sharing his full plan yet, as he doesn’t want others to copy him. But the promise of the business was so strong that Leydon was able to raise $200 million last year for Limit Break. The investors include Buckley Ventures, which is headed by Josh Buckley, founder of MinoMonsters.
Other investors include Paradigm, FTX, CoinBase Ventures, Shervin Pishevar, Anthos Capital, SV Angel and Standard Crypto.
“We have the perfect partners, perfect investors, and perfect team in place to bring the gaming industry into a new era,” said Leydon.
Some of the investors previously supported Machine Zone, such as Pishevar and Anthos Capital.
“Web3 gaming has enormous potential, yet remains misunderstood especially in the gaming space. Paradigm is excited to back Limitbreak to help realize that potential,” said Matt Huang, cofounder at Paradigm, in an email to GamesBeat. “Gabe, Hal, and the rest of the team are truly deep, orthogonal thinkers who have a unique vision for the potential of Web3 gaming. Their track record in mobile gaming speaks for itself, and we believe they’ll make a similar mark in Web3.”
In an email to GamesBeat, Buckley added, “Gabe is one of the best game designers and marketers in the world. He and Hal helped shape today’s mobile gaming industry, pioneering new design, and marketing techniques that have influenced an entire generation of developers. There are over 2.5 billion mobile gamers out there today, and Limit Break has the opportunity to onboard them into crypto. I’m thrilled to be investing in this round and supporting Gabe and Hal in building Limit Break.”
Alok Vasudev, at Standard Crypto, said in an email, “We’ve spent a lot of time in crypto gaming, looking for the best ideas and teams. We learned a lot and proved a lot about crypto gaming in the last few years. But the bridge we needed to build was better design…not just around the game but the business model. That’s where nobody comes close to Gabe, Hal and Limit Break.”
He added, “They’re already legendary gaming entrepreneurs. The Limit Break team pioneered free to play and — after years studying crypto — they are fixated on the future of gaming as free to own. They’ve proven an ability to take unorthodox approaches that get adopted as the right way. This is because they really are students of psychology and sociology who have a next level view on what makes games compelling to not just play but also be a part of.”
Vasudev said the future of gaming, without a doubt, will incorporate crytpo.
“Because crypto frees everyone – creators, enthusiasts, the average player – from the restrictive duopoly of the app stores,” Vasudev said. “Crypto transforms the economic potential of game creators while converting gaming enthusiasts from consumers into owners of digital assets that they control. This is going to incentivize and enable innovation like never before. Entire new economies and spaces for self expression are going to get created around crypto gaming. That’s why we believe crypto gaming companies are going to be some of the largest companies in tech and media, and we think Limit Break is going to be one of them.”
And Limit Break gave away its first batch of NFTs earlier this month on OpenSea under the name DigiDaigaku collection. Those NFTs of anima-style young women characters are selling on the marketplace for around 4 ETH, or $1,490. That tells you that the players who obtained the 2,022 NFTs believe they will become valuable.
This is exciting stuff for Leydon, who left when the crypto future was a lot more murky. Leydon cofounded Addmired in 2008 to make social apps, and he pivoted into free-to-play mobile games in 2009 as the iPhone took off. Leydon invested heavily in a new game, a real-time messaging technology, and a chat translation platform that helped the company’s mobile games go viral.
In 2012, Machine Zone launched Game of War: Fire Age, as a real-time strategy game on mobile. It took off, and the company followed up with Mobile Strike and Final Fantasy XV: A New Empire. Those games generated more than $4.5 billion in revenues from 2014 to 2018, according to Sensor Tower.
Machine Zone advertised heavily, using stars such as Kate Upton, Mariah Carey, and Arnold Schwarzenneger, to find the thin slice of players who would spend money on games. Usually, that was no more than 5% of all mobile game players. Leydon was a hard-charging competitor, suing Kabam and one of its employees once after an argument revealed the employee knew some Machine Zone secrets.
Leydon became so enamored of his company’s real-time messaging technology that he groomed it as a separate business, dubbed Satori. Arguments with the board over which business to emphasize reportedly led to Leydon’s departure, and after he left Machine Zone focused on games again. (Leydon declined to say why he left). Meanwhile, Machine Zone — dubbed MZ — was acquired for $600 million by AppLovin in 2020.
Leydon said he took a lot of time off and then returned to business in 2021, when everyone was talking about NFTs and the success of Sky Mavis’ Axie Infinity game, which promoted “play-to-earn” models. In that game, players had to spend money to acquire characters upfront, spending hundreds of dollars. They could level those characters up, making them more valuable, and sell them for a profit. That sent hype through the crypto and NFT markets, enabling Sky Mavis to raise $152 million at a $3 billion valuation in October 2021.
But when Leydon, as well as others, looked at the model, he saw flaws. Lots of Axie Infinity “scholars” were borrowing money — often from guilds like Yield Guild Games — to play the game, and they were all motivated to sell their characters once they became more valuable. At first, it worked wonders, with poor players in the rural Philippines making several times minimum wage in a given month from playing.
New players bought the characters, but the buyers became scarce as fewer new players joined the game, the economy sank like a Ponzi scheme and the NFT prices cratered. Play-to-earn games structured like this ran into hard times, particularly in the latest crypto and NFT “winter.”
According to Leydon, the few “play-to-earn” games that achieve some success inevitably morph from
“play-to-earn” to “play-to-sell” as player-investors crash markets and dump the increasingly worthless
NFTs and cryptocurrencies that once held these carefully contrived economies together.
Having watched that, Leydon came up with the “free-to-own” model, where his company mints NFTs and gives them away for free. Since they start at zero, rather than at a deficit, players aren’t as motivated to make their money back right away and they can stay advocates for the game much longer.
The company’s name was inspired by the “Limit Break” combat sequence popularized in RPG games like the Final Fantasy series. Leydon, who broke into the gaming industry as a game tester in the 1990s, built Limit Break around his vision for fun, interactive Web 3 gaming, and seeks to fill a major void in that nascent space.
“People talk about Web 3 gaming like a futuristic inevitability,” said Leydon, “it’s not. It requires people to
properly design and build it. And those people work at Limit Break.”
With his first NFTs out in the wild since August 9, Leydon is willing to talk about the idea, which he believes others will copy. The company has grown to 50 people, and about 80% of them are former Machine Zone employees. The team is distributed remotely, with some in Park City, Utah.
Leydon said, “With free-to-play, developers have this long period of making a game in the dark, and they don’t know what people are going to do. They launch it and hope people spend.”
By contrast, with free to own, Leydon said, “The developer builds a big audience of people who are excited about the game and owning part of it. They become advocates for the game way before the game comes out. They all hope it succeeds because they own these assets.”
Leydon said the simplicity of this model is one reason why the company was able to raise so much money.
“If you match free to play up against free to own, there’s no way for free to play survive,” Leydon said. “I don’t see how anybody goes back to free to play after that. Free to play is download the game for free by a bunch of virtual items that you can’t own essentially. We’re completely reinventing the game industry.”
Right now, Leydon’s plan is to launch the game on the web. That means it won’t be immediately available on the mobile app stores, where most of the downloads happen. That’s a weakness that Leydon believes can be overcome. But it’s definitely a risk.
Asked how developers make money, Leydon said the devs keep a percentage of digital items for themselves and sell them at market prices later on. New players can buy from either the early players or the company. Leydon also said the initial NFT assets can become the “factory for future assets,” meaning they can be used to generate more NFTs.
“The game developers still have control over the game economy at the end of the day,” Leydon said. “You have more alignment between the player base and the company.”
The company’s goal is to develop a vibrant community of fans, and it will start a Discord channel for that. One advantage of this model is that fans don’t have to worry they will be ripped off by paying for an asset first and then waiting for a game that may never come.
While hardcore gamers in the West have expressed their dismay over NFTs as scams, Leydon thinks they’re wrong, just as they were wrong about free-to-play games. But he does see the need to earn their trust, and that’s why he is not asking for their money upfront.
“We’re going to be a very serious organization that tries to win this space. So I see it as the exact same beginning of Facebook and the iPhone,” Leydon said. “You remember how people said nobody would ever pay more than 99 cents for an app?”
Leydon isn’t saying how he plans to do so, but he said the intention is to be No. 1 on mobile again. He noted that he has learned lessons from Machine Zone, and he isn’t going to expand so quickly this time.
“Oh my god. I’m having so much fun,” Leydon said. “When you look at the group that we put together for Limit Break, these are people that that made three number one games in a row and we’re not talking about accidents here.”
As for the game, Leydon said it will be revealed later on. Leydon said he is excited and it feels like blockchain games are just like the beginning of free-to-play on mobile. While the characters are cute anime women, Leydon said it’s not a “girlfriend” game, and he noted that the team is know for making massively multiplayer online games.
“It’s a brand new model,” Leydon said. “No one has done this before and I think that is really important. I’m really proud of the team and what we have come up with.”
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