Happy New Year, writes the president of Square Enix in a new letter (opens in a new tab), and now let me tell you all about the blockchain. The wider industry, or at least the respectable side of it, remains deeply skeptical of the value added to games by web3 technologies, but there are a few major outliers such as Ubisoft (which last year launched an ill-fated NFT experiment (opens in a new tab)) and above all Square Enix.
The huge Japanese publisher stands out not because of its interest, but because of how bullish it is (opens in a new tab) on the future incorporation of these technologies. A necessary context for Western readers is that the company has some successful mobile-oriented titles in Japan that use such technologies, so when it comes to use cases, it already has them.
The letter from Square Enix president Yosuke Matsuda begins by wishing everyone a happy new year before outlining some of the issues facing the world in 2022, including “rising inflation”, the Russian invasion of Ukraine, falling stock prices (especially in the technology sector), and the “dramatic weakening of the yen [ballooning] prices of imported raw materials”. The macroeconomic environment is not good, in other words, although Matsuda expects “conditions to improve in early spring”.
Matsuda briefly addresses the sale of three studios – Crystal Dynamics, Eidos-Montréal and Square Enix Montréal – plus various IP addresses to the Embracer Group last August. He writes that the goal was to “further concentrate our resources” as development becomes more complex, as part of which the publisher is embarking on a massive hiring boost for internal talent. This is put into the wider context of Square Enix believing that its Western and Japanese divisions operated independently of each other, whereas it now aims to be “One Square Enix”.
Now the bad news. Matsuda writes about the future opportunities Square Enix sees in the industry. The publisher apparently has “three focus investment fields” and “among these, we are most focused on blockchain entertainment, to which we have devoted aggressive investments”. Matsuda acknowledges the “volatility” of crypto markets and the “gloomy streak” of news stories about blockchain businesses, “including the scandalous bankruptcy filing of FTX in November”.
The macro picture with many of these crypto disasters is that national regulators are waking up to the space, and Matsuda says “we are hearing rumblings from some countries about early moves to regulate such businesses more strictly”. However, this is not yet the case in Japan, where in June 2022 that government signed the “Priority Policy Program for Realizing a Digital Society” which includes guidance on web3 technologies, NFTs and blockchains.
Matsuda says that Square Enix recognizes that there are some questionable things here, and 2022 was a very bad year for web3 technologies, but they still believe that this is part of the future. And unlike many crypto enthusiasts, as part of this it looks forward to “the creation of rules and a more transparent business environment” around blockchain stuff.
Then there’s a bit of a weird part of the letter where it feels like Matsudas might have had a sip of the Kool Aid, and in fact he’s returning to a theme that was already covered in last year’s letter. “If we consider traditional gaming to have been centralized, then blockchain gaming must operate based on a self-sustaining decentralized model,” writes Matsuda. “It’s that concept, that philosophy that I see as the key.”
Your guess is as good as mine. But then, all I want from Square Enix is another parasite Eve (opens in a new tab).
At the very least, Matsuda says he sees the conversation around blockchain moving from where it was in 2021, that is, driven by speculative investments, where the premise was that these technologies were primarily about revenue generation. But thanks to the broader turbulence in crypto markets, “there is now a trend to see blockchain technology as just a means to an end and to discuss what needs to happen to achieve the end of delivering new experiences and excitement to customers”.
Which, given that Square Enix seems to be all-in on these things, is at least a more positive approach. It could be argued that these technologies could offer desirable functionality for gaming, such as tracking every single weapon in a massively multiplayer game, but the only examples we see at the moment have the technology front-and-center rather than doing anything useful in the background.
Square Enix currently has “several blockchain games based on original IPs in development”, will reveal a few more this year, and is looking to invest in businesses making interesting blockchain stuff.
2023 marks 20 years since the merger of Square and Enix, a partnership that brought together arguably the two biggest JRPG studios around and has proven hugely successful. The company has continued to make great games, and perhaps the current jewel in the crown is the ongoing success and vitality of Final Fantasy XIV.
Square Enix’s attraction to the blockchain makes for a reflexive nervousness, but at least it recognizes that functionality for the player must come first if things like this are going to be incorporated into games. Gamers don’t like these technologies as they currently exist, and for good reason (opens in a new tab). Square Enix seems to be hinting that in the future you might enjoy one of their games built on such technology: but without knowing it’s in the background.
