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 the respectable side of it at least, remains deeply sceptical of the value added to games by web3 technologies, but there are a few big outliers such as Ubisoft (which last year launched an ill-fated NFT experiment (opens in 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 new tab) about the future incorporation of these technologies. Some necessary context for western readers is that the company has some successful mobile-oriented titles in Japan that do use such technologies, so when it's talking about 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 "soaring inflation", the Russian invasion of Ukraine, stock prices plunging (especially in the tech sector), and the "dramatic depreciation of the yen [ballooning] prices on imported raw materials". The macroeconomic environment ain't great, in other words, though Matsuda expects "conditions to ameliorate in the early spring".
Matsuda briefly addresses the sale of three studios—Crystal Dynamics, Eidos-Montréal, and Square Enix Montréal—plus various IP to the Embracer Group in August of last year. He writes that the goal was to "further concentrate our resources" as development becomes more complex, as part of which the publisher is on a massive hiring push for internal talent. This is put in a wider context of Square Enix believing its western and Japanese divisions operated independently of one another, whereas now it 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 those, we are most focused on blockchain entertainment, to which we have devoted aggressive investment". Matsuda acknowledges the "volatility" in crypto markets and the "somber string" of news stories about blockchain businesses, "including the scandalous bankruptcy filing of FTX in November".
The macro picture with a lot of these crypto disasters is that national regulators are waking up to the space, and Matsuda says "we hear rumblings from some countries of early moves to regulate such businesses more strictly". This is not yet the case in Japan, however, where in June 2022 that government signed-off on the 'Priority Policy Program for Realizing a Digital Society' which includes guidance about web3 technologies, NFTs and blockchains.
Matsuda's saying that Square Enix recognises there's some dodgy stuff here, and 2022 was a very bad year for web3 technologies, but it still thinks this is a part of the future. And unlike many crypto enthusiasts, as part of this it's looking forward to "the creation of 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's maybe had a sip of the Kool Aid, and indeed he's returning to a theme already raised 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 is that concept, that philosophy that I see to be key."
Your guess is as good as mine. But then, all I want from Square Enix is another Parasite Eve (opens in new tab).
Matsuda does at least say that he sees the conversation around blockchain moving from where it was in 2021, which is to say driven by speculative investment, where the premise was that first-and-foremost these technologies were about monetisation. But thanks to the wider turbulence in crypto markets "there is now a trend to view blockchain technology as a mere 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 this stuff, is at least a more positive approach. It's arguable that these technologies could offer desirable functionality for games, by for example tracking every individual weapon in a massively multiplayer game, but the only examples we're seeing at the moment have the tech front-and-center rather than doing something useful in the background.
Square Enix currently has "multiple blockchain games based on original IPs under development", will unveil some more this year, and is looking to invest in businesses creating interesting blockchain stuff.
2023 marks 20 years since the merger of Square and Enix, a partnership that yoked-together arguably the two greatest JRPG studios there were and has proven enormously successful. The company has continued to make great games, with perhaps the current jewel in the crown being the ongoing success and vibrancy of Final Fantasy XIV.
Square Enix's attraction to the blockchain does reflexively give one the jitters, but at least it recognises that the functionality for the player must come first if stuff like this is to be incorporated into games. Players don't like these technologies as they currently exist, and with good reason (opens in new tab). Square Enix does seem to be suggesting that, in the future, you might enjoy one of their games built on such tech: but without ever realising it's in the background.