Happy New Year, writes the president of Square Enix in a new letter (opens in new tab), and now let me tell you all about the blockchain. The wider industry, or at least its respectable side, remains very skeptical about the added value of web3 technologies for games, but there are a few big outliers like Ubisoft (who launched an ill-fated NFT experiment last year (opens in new tab)) and especially Square Enix.
The huge Japanese publishing house does not stand out for interest, but through how bullish it is (opens in new tab) on the future integration of these technologies. A necessary context for Western readers is that the company has a number of 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 problems the world faced in 2022, including “high inflation”, the Russian invasion of Ukraine, plummeting stock prices ( especially in the tech sector), and the “dramatic depreciation of the yen [ballooning] in other words, although Matsuda expects “conditions will improve in early spring.”
Matsuda briefly discusses the sale of three studios – Crystal Dynamics, Eidos-Montréal and Square Enix Montréal – plus several IP 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 massively seeking in-house talent. This is placed in a broader context where Square Enix believes its Western and Japanese divisions operated independently, when it now wants 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 areas” and “most of which we’re focused on blockchain entertainment, to which we’ve made aggressive investments.” Matsuda acknowledges the “volatility” in crypto markets and the “bleak array” of news stories about blockchain companies, “including FTX’s scandalous November bankruptcy filing”.
The macro picture with many of these crypto disasters is that national regulators are waking up to space, and Matsuda says “we are hearing rumblings from some countries about early steps to more strictly regulate such companies.” However, this is not yet the case in Japan, where in June 2022 the government signed the ‘Priority Policy Program for Delivering a Digital Society’, which includes guidelines for web3 technologies, NFTs and blockchains.
Matsuda says Square Enix recognizes there’s some dodgy stuff here, and that 2022 was a really bad year for web3 technologies, but still thinks it’s part of the future. And unlike many crypto enthusiasts, as part of this it looks forward to “creating rules and a more transparent business environment” around blockchain stuff.
Then there’s a slightly weird bit of the letter where it feels like Matsuda may have had a sip of the Kool Aid, and indeed he returns to a theme already addressed in last year’s letter. “If we view traditional gaming as centralized, then blockchain gaming should operate on a self-sustaining decentralized model,” Matsuda writes. “It’s that concept, that philosophy that I think is key.”
Your guess is as good as mine. But then, all I want from Square Enix is another Parasite Eve (opens in new tab).
If anything, Matsuda says he sees the conversation around blockchain shifting from where it was in 2021, i.e. driven by speculative investment, where the premise was that these technologies were primarily about monetization. But due to the wider turbulence in crypto markets, “there is now a trend to view blockchain technology as merely a means and discuss what needs to be done to get to the end of delivering new experiences and excitement to customers.”
Which, given that Square Enix seems to be all-in on this sort of thing, is at least a more positive approach. It’s plausible that these technologies could provide desirable functionality for games, such as tracking each individual weapon in a massively multiplayer game, but the only examples we’re seeing right now have the technology at the center rather than doing anything useful in the background.
Square Enix currently has “several blockchain games based on original IPs in development,” will reveal more this year, and is looking to invest in companies making interesting blockchain stuff.
2023 will mark 20 years since the merger of Square and Enix, a collaboration that arguably merged the two biggest JRPG studios out there and has proved wildly successful. The company has continued to make great games, with perhaps its current jewel being the continued success and vibrancy of Final Fantasy XIV.
Square Enix’s appeal to the blockchain reflexively gives one the creeps, but at least it recognizes that functionality for the player should come first if this sort of thing is to be incorporated into games. Players don’t like these technologies as they currently exist, and rightfully so (opens in new tab). Square Enix seems to suggest that you might enjoy one of their games built on such technology in the future: but without ever realizing it’s in the background.