Skill-based games – What are they?
Paweł Pietrasieński, Ph.D., SGH Professor
Contributor, Ozmen Center for Entrepreneurship
Co-Founder Reality Unit, LLC
Simple, easy to learn, but hard to master games
Rarely has a market niche been bestowed with such a profusion of names as skill-based games. Skill-based games, mobile Esports, cash tournaments, mobile competitive Esports, casual eSports, competitive games, paid competitive games, and real money games - to name a few, are all names of one genre.
Let us underline that skill gaming is the fastest-growing segment of mobile games. With a compound annual growth rate of over 31%, skill gaming will grow from $7B to $16B within two years. 14% of mobile games will be played as cash tournaments by 2024.
Skill gaming is potentially an expansive niche and can become mainstream. Before we start making conclusions about whether it is the “next big thing,” let’s discuss what a skill game is.
The multiplicity of names might suggest that casual eSports are something complex where these are simple games. Skill-based games are like hyper-casual games. Hyper-casual mobile games are easy to play, require almost no starting skills, have short sessions, and don’t expect users to understand complex mechanics and controls. While working on casual eSports games, designers focus on providing other fun in-between activities. It’s entertainment delivered while commuting, having a break at work, school, or waiting for something.
Although skill games are easy to enter, they’re also hard to master. The design of those games concentrates on providing a long learning curve for users. Easiness supplied in this way ensures the longevity of those games. Casual eSports is not a one-time experience- those games have “stickiness.”
The key to hyper-casual games is their simplicity in the narration. The game is usually based on one mechanic players can understand with a short introduction. Like parking a car, matching similar elements, and many more - as the skill games use different mechanics and cross the boundaries between categories. As an example of a skill game, we can take an arcade title - Atari Breakout Blitz. The game’s goal is to destroy bricks by hitting them with a ball that bounces on the paddle. That kind of gameplay doesn’t require much of an introduction for the players. The game takes a few minutes to finish - skill games are between a minute to 5 minutes long. The real fun with Breakout is when players start noticing that different types of bricks can score more points, that there are various power-ups and bonuses, and of course, the time might also help in achieving more points.
Types of skill-based games and innovative business models
Achieving simplicity of narration, which allows users to access the game without peculiar preparations, combined with short gameplay duration, is challenging. Therefore, skill-based game creators employ various game types. Already mentioned, arcade games can be listed as skill games. Also, trivia, word, and puzzle games are popular in skill gaming. The creators also use sports games but are “cutting” the play into smaller pieces, similar to highlights from matches. We can have a basketball game that focuses on shooting 3-pointers, a baseball game where we’re hitters. Sports games are also present in skill gaming in the form of fantasy sports, where players use real-life game data to create their teams. Furthermore, card games arouse discussions and even controversies - as those types of games are usually associated with gambling.
When we add to mentioned cards or other types of games a skill-based monetization model that allows users to pay entry fees and win real-life prizes (also cash awards), there will be questions about gambling. First, let us show the model of playing. Skill-based games are available as battles (1 vs. 1, 1 vs. many) or tournaments where users compete against each other. Before players can pay in battles with prize pools, they must train. Skill-based game platforms offer all the games in a practice mode. It serves both users and the platform. They first learn the games, understand them, and develop their skill while playing without risks (practice mode doesn’t require any monetary commitment). The platform understands users and learns from them to match them with opponents of the same level of skills. This “segmentation” aims to connect users with similar potential with comparable skills to ensure fair competition. Otherwise, players with a history of playing a certain game might dominate above those who are starting - like with The USA Basketball Men's National Team, which has 18 games won by 50 points and more.
Regarding the fact that real-time games require a steady internet connection, most skill-based games are asynchronous. It’s evident in tournaments, either brackets or with a ranking (table), that are played longer. With 1 vs. 1 battles, after one player finishes, the score is compared with another player with the same potential of skills. There’s also - a rare case - that players compete with artificial intelligence. Of course, it’s not AI that can learn new skills, it’s an algorithm with programmed rules, and players compete with it, and those who score better against the AI wins the match. Skill-based games can also be played in the form of 1 vs. many - here, players are “placed” in “battle rooms,” and best-of-room wins.
Players initiate the money turnover in skill-based games. They bet on their talents, knowing their capabilities and history in a game, and monetize their skills. The platform collects those fees, and the winning player collects the prize pool. The bets in skill gaming are low - they can even start from a few cents. The platform’s business is a service fee collected from a prize pool (rake). This model can be described as a challenge to earn.
Skills vs. chance
As we already mentioned, when players commit financially to games and collect real-life winnings, skill-based games might have a connotation with gambling. It’s not a secret that mobile games earn money from advertising or in-app purchases (IAP). The monetary commitment from players already exists in games, as IAPs generated more than $110B in 2022. Of course, we don’t suggest that IAPs make mobile games gambling. We’re just highlighting the existing financial transactions within games.
Skill-based games face scrutiny over gambling connections as the players commit financially to winning prizes. Let’s focus on the critical factor to understand the difference between gambling and skill gaming. The skill-based game outcome is based on players’ skills. Where in gambling, the win-or-lose conditions are determined by chance or luck. Skill gaming also rejects playing against the house, removing the house advantage, and focuses on the same starting conditions for every player. Therefore players use their talents to compete against each other.
Many examples show chess as a pure game of skills, in which the win is characterized by the player’s knowledge of defences and attacks, applying strategic thinking, and perceiving patterns. On the other hand, there are voices that the player making the first move has the winning advantage. We can also add something called the form of a day that can be countered by random events that players cannot predict. We make simplifications, which do not tend to overthrow chess as a skill game but to indicate the difficulty of whether a given game is a pure game of skill. Therefore, the stringent criterion, known as “any chance test,” disqualifies any randomization and can eliminate numerous games from the classification of skill-based games. Not only in card games - where we have randomization in decks dealt but also in puzzle games, where the boards are randomly generated.
Therefore, regulators also apply less strict criteria that measures the influence of the element of chance in a game. Predominance and material element tests examine, respectively, on a sliding scale, how close a game is to a pure game of skill and how the element of chance impacts the win. In both cases, skill gaming operators run several tests to present that games have learning curves. With time players gain more understanding of the gameplay and increase their skills.
Determining a clear demarcation line between a game of skill and a game of chance is challenging. Hence, those divisions should be considered within the context of game examples. We will pay closer attention to differences between skill games and games of chance in the upcoming blogs.
The codification of skill gaming, whereas the genre has so many terms that indicate this type of play is arduous. However, we’ll focus on definiens than definiendum - the genre description rather than the term itself. Regardless of the multiplicity of names, skill games are online (mobile first) games where the outcome predominantly relies on players' competencies, talents, skills, abilities, and strategic thinking rather than on chance or luck. Those games apply simple gameplay. Usually, the narration is based on one mechanic, which implies short (a few minutes) game durations. These games are structured as tournaments, where players bet on their own performance, allowing them to win real-life prizes.