Hey folks!

Welcome back to Edition #2 of The SEG3 Report.

It’s been a busy week in UGC, with some significant developments from both Epic and Roblox, as well as another Premier League club dipping their toes into web3. Enjoy!

Here’s what you need to know this week:

• Epic delivers it’s State of Unreal Keynote

• Roblox launches $35 million Creator Fund

• Newcastle launch digital collectibles with Quidd

Without further ado, let’s get into it…

Epic deliver an Unreal Keynote

Epic unveiled a raft of updates during their GDC keynote last week including; 

• Enhanced discoverability of games by linking to social media channels

• That they’ll start building future battle royale seasons from 2025 (yes please!)

But the main thing that caught my eye - the rollout of Lego assets to all developers across UEFN (Unreal Editor for Fortnite).

Why it matters

Many have brought their IP into Fortnite, but it’s hard to see a better IP alignment than the building blocks of Lego. I mean, come on!

But away from the clear match, the work of Epic & Lego is worth delving into for the fact that it clearly showcases a trend.

Younger generations want more flexibility to be creative with your brand & IP. 

And if you can convince the legal & brand teams to loosen the grip on it, there can be incredible rewards.

Now in this example, by no means are creators allowed to do whatever they want with the Lego IP (in fact, there are slightly more restrictions on what developers can and can’t do with the assets than usual), but in return for giving the developer & creator community access to the Lego assets, they’re now benefitting from:

Ongoing, free marketing; every UGC game that is now created with Lego assets builds their brand (excuse the pun!), and they aren’t having to lift a finger to do it. Work smarter, not harder.

A completely new revenue stream; the need to diversify revenue streams has never been more apparent for many traditional brands (shameless plug: we’ll discuss how to innovate business models a bunch @ SEG3 London this June 27-28). Lego, by thinking outside of the box, have now guaranteed themselves 15% of any revenues generated that leverage their assets in their world.

Now, this will inevitably need to be an evolution, given most sports & entertainment brands rely so heavily on monetising their IP, so surrendering some control is a hard concept, especially for what that would mean to the bottom line in the short term.

I do however see this trend as terminal given the brand growth and net new revenue generation opportunities that co-creation around your IP offers vs today’s model, so certainly feels like a smart hedge to make for the long-term sustainability and relevance of your brand.

Roblox launches $35 million Creator Fund

Not to be outdone by their counterparts at Epic, Roblox provides a further $35 million to expand on the type of content Roblox supports, now going beyond gaming and into short-form videos. This means that in addition to distribution of funds to innovative projects on its gaming platform, IP holders and creators outside of gaming will be able to join the programme too.

Why it matters

Roblox are in the content business, and there’s always a thirst for new content. Just think about how many experiences are launching on a daily basis!

As much as they’re best known as a games platform, there is no doubt they are really becoming the hub for social interaction amongst Gen Z & Gen A, which means that being able to supply a variety of content (and ways to interact with said content) will help to accelerate the migration of audiences from traditional social channels to these immersive social environments.

And for those content creators, why wouldn’t you want to experiment?

Between Roblox (~$741m), Fortnite ($320m) & Minecraft (~$100m), there was over $1 billion paid out to creators in 2023. If you’re a creator, with an audience, or wanting to build one, the economics are fast becoming much more attractive to build on UGC game platforms than traditional socials.

Expect to see more creators building games, experiences & content specifically for Roblox as their primary channel. It’s a shift that’s already started, with the likes of Misfits launching a games studio last year.

Another thing to note is that the fund also specifically calls out IP holders from outside of gaming. Now, that’s quite a few of you who read this report.

Sports & entertainment brands are far better known for their content creation than creating games, and given there is a focus on attracting IP holders and helping them to develop more ‘short form video’ for the platform, this feels like it could be a way for brands to test the waters, engage with Roblox’s hard to reach audience and then expand into games that Roblox is better known for.

So if you’re looking to build some new & innovative content, and looking for the right distribution channel, Roblox might be the place to look.

Just 12 Weeks Until SEG3 London!

And we’ll be sharing our first wave of speakers tomorrow! Be the first to hear…

Meet the global innovators from across sports, digital entertainment, and technology whilst getting actionable insights into how you can leverage web3, immersive and interactive platforms to deliver next-generation digital products & experiences.

Newcastle partner with Animoca Brands subsidiary, Quidd

Newcastle United and Quidd, the digital collectibles and NFT marketplace and subsidiary of Animoca Brands, announce a multi-year partnership as the club's first official digital collectible partner.

Why it matters

It means a web3 brand may want to sponsor your front of shirt again… just kidding!

However, it does signal a return of confidence among web3-native brands amid improving market conditions. That said, I wouldn't expect to see as much interest in licensing partnerships like this unless they're the first step in a broader strategy.

Digital collectibles have been the entry point into web3 for many sports organizations, with Manchester United and McLaren notable for their successes. It appears Newcastle is also taking this well-trodden path.

It's no surprise, given the deeply ingrained collector mentality among sports fans, both young and old. Leveraging this, if done correctly, is a proven approach.

I'm intrigued to follow the progress of this partnership for a few reasons:

• How they do with their upcoming first launch; £0.79 is a low entry point, but does mean that a sizeable number of packs likely need to be sold for the economics to add up.
  

• How it’s marketed to the fans; the press release referenced ‘NFT’s’, which from a quick glance at the twitter comments, the average football fan still has a healthy amount of scepticism towards given events a few years back. Of course technology is just the vessel, and the Animoca team is one of the most experienced around, so I’m sure the products & experiences they deliver will be worthy of 2024.
  

• How this fits into the wider corporate strategy of Newcastle; the big question for me - is this laying the foundations for a wider web3 / digital innovation push from the club, and if so, how?

Newcastle, for evident reasons, has been focusing on Saudi Arabia as a key growth market. The country has been notably active in developing infrastructure and implementing favourable legislation to establish itself as a hub for web3 and gaming, with Animoca also contributing to the development of NEOM.

With that context, I would expect—and hope—that there are several initiatives in the pipeline to build upon this initial partnership and leverage Animoca’s extensive ecosystem to aid Newcastle in innovating across various business areas.