Produced by | Shirasawa Research Institute
Yesterday, Japanese video game developer Square Enix announced that it is selling some of its studios and more than 50 game IPs – including legendary studios Crystal Dynamics, Eidos-Montréal, Square Enix Montréal, as well as well-known game IPs such as Tomb Raider, Deus Ex off siege, and Final Fantasy – to focus on blockchain, artificial intelligence and cloud technologies.
The studios and assets will be acquired by video game publisher Embracer Group for a deal valued at about $300 million, which is expected to close between July and September.
According to Square Enix's filing, the proceeds from the sale will enable it to "launch new businesses by advancing investments that include blockchain, artificial intelligence and the cloud." It also said the sale will allow it to improve relations between its Tokyo and overseas divisions, with the goal of "maximizing global revenue" from future game releases.
However, many gamers are puzzled by Square Enix's "riot operation" of selling popular IPs, and they are not cold to Square Enix's strategy theme for 2022 - blockchain games.
Square Enix's blockchain history
Square Enix is a Japanese video game developer specializing in fantasy games, with a large number of popular IPs, such as Final Fantasy, Tomb Raider, Deus Ex, etc., and in recent years, such as "Neil" and "Strange Life", which have also been highly acclaimed, laying its leading position in the game industry. While the quality of Square Enix's game masterpieces has shown a certain downward trend in recent years, it seems to have a new goal, which is to enter the blockchain industry.
Yosuke Matsuda, President and Board Representative of Square Enix, has repeatedly expressed interest in NFTs, blockchain games, and metaverses in the last year or two.
In his 2022 New Year's Letter, Yosuke Matsuda highlighted NFTs, which had become the global focus in the previous year, arguing that while current NFT trading is somewhat "overheated" and speculative, there has been a price correction as they become more common: "2021 is not only the first year of the metaverse development, but also the first year of NFT, as in this year, NFTs have received enthusiasm from a rapidly expanding user base. However, we do observe examples of overheated trading of NFT-based digital commodities with some speculative overtones. This is obviously not an ideal situation, but I would like to see the right result in the end – digital commodity trading is becoming more and more common among the public. ”
As for blockchain games, Yosuke Matsuda believes that token-based games can provide incentives not only for players, but also for those who create in the game: "Whether it is a single-player game or an online game, traditionally involves a one-way process, and creators like us provide games to players. In contrast, blockchain games enter the growth stage from the initial stage, built on the premise of the token economy, and therefore have the potential to achieve self-sustaining growth of the game. Advances in the token economy are likely to drive this trend further. I think the play-to-earn concept that gets people excited is a good example... Going forward, blockchain gaming, or decentralized gaming, will be a major strategic theme for Square Enix in 2022. ”
Back in 2019, Square Enix entered the blockchain space, and that year, it participated in Animoca Brands' $2.01 million funding round for its virtual world game The Sandbox, and although the share was not disclosed, Square Enix actually received SAND tokens and future equity notes. SAND is a trading token used throughout The Sandbox ecosystem that will be used by gamers, creators, and publishers, and allows content creators and players to exchange assets and game content.
Screenshot of The Sandbox creation mode, from Animoca Brands
In May 2021, Square Enix announced its entry into the NFT market by partnering with Double Jump.Tokyo, a leading Japanese blockchain company, to release an NFT digital collection card for the mobile game King Million Arthur. The NFT series is based on the blockchain LINE Blockchain developed by Japanese social giant LINE, which buyers can manage directly in the LINE wallet. However, these NFTs are not combined with gameplay, but only as digital artwork. But that didn't stop Japanese players from collecting, and the NFT, which sold out twice with the "Million King Arthur" IP, sold out twice.
In April this year, Square Enix released the latest developments through the teaser website originally established for the Million Arthurian NFT, combined with the launch of the LINE NFT market, it will continue to release the series of NFTs in the future and integrate NFTs into the game content.
Troubled by big game manufacturers like Square Enix
After flipping through the comments about Square Enix selling game IP to increase investment in blockchain, we can find that many gamers are puzzled by the "riot" of Square Enix selling masterpieces, in addition to the fact that these high-quality games have not been produced for a long time, part of the reason is still not buying NFT (or cryptocurrency).
In early December, when Ubisoft launched its own NFT publishing platform Quartz among game manufacturers, it was met with a tidal wave of resistance from players, even though Ubisoft had promoted NFT's energy-efficient blockchain Tezos based on the PoS consensus mechanism in advance.
In simple terms, Ubisoft's games will be released on Quartz and can be traded in the NFT Marketplace on the Tezos blockchain, where players can sell their equipment and take assets out of the game after playing the game. Currently, only the PC version of Ghost Recon: Breakpoint has been released with an NFT, which players claim for free by completing different missions in the game. We can see a list of transactions for Ghost Recon: Breakpoint NFTs on The Tezos-based Rarible.
Ubisoft, the first to truly incorporate NFT into AAA games, encountered Waterloo in terms of trading volume. According to Twitter user Liz Edwards, two weeks after the launch of ghost recon: Breakpoint NFTs, there have been only 15 transactions on the third-party NFT market, only 1% of the total number of issues at that time. Players have demonstrated in action that selling in-game items as NFTs is not welcome.
But Ubisoft didn't back down. Nicolas Pouard, vice president of Ubisoft's Strategic Innovation Lab, said in an interview: "We're really beneficial in doing that. But [gamers] don't understand now that players have to overcome a lot of habits and change a lot of deep-seated mindsets. This takes time. ”
Current player attitudes toward NFTs are polarized: proponents argue that NFTs not only allow players to use the same props in different games, i.e. interoperability, which is tempting. Taking a longer-term view, NFTs will make the concept of a "metacosmum" a reality; opponents argue that the NFT market has entered an era of "irrational" prosperity, full of "hype" and "speculation", while NFTs are wasting energy.
Ubisoft, Square Enix, EA, Sega and other game manufacturers have laid out NFTs, so where is the "charm" of integrating NFTs into games?
The first is the ownership that the NFT gives the player. Most traditional games will point out in the User Code of Conduct Clause that the player only has the right to use, not to own the game account and the items in it. When the game is shut down, the player's account cannot be traded, and the recharged money cannot be retrieved. And once players own game assets in NFT form, regardless of the game's development, the assets are always stored in their digital wallets and can be freely traded.
The second is security, transparency and anonymity. This is the main advantage, through the use of blockchain, gamers can safely and reliably trade their game assets. All transactions are publicly visible on the web, and the gamer's transaction history is recorded, providing an undisputed proof of ownership, which means they will not have to go through cumbersome procedures to prove the player's identity and what items they have before the transaction. But ownership can only be transferred through encrypted signatures, so even if the entire network has access to a player's transaction history, the player's identity remains anonymous.
Finally, the most revolutionary feature of blockchain gaming is Play-to-Earn. Players can earn tokens or assets by completing certain challenges. Tokens earned in the game can be exchanged for other cryptocurrencies, such as Bitcoin or Ethereum, or even used to buy real-world assets. This allows players to earn real money from playing the game. Blockchain games offer players meaningful investment opportunities that can be sold for a profit.
Whether it is Ubisoft, Square Enix, or other game companies that have announced the NFT plan, in their view, in the future, players can create value in the game of NFT games, exchange with real money, and even beyond the game cycle of the game itself, as long as the demand exists, players can always get value. However, it is also reasonable for gamers to worry that blockchain will change their precious entertainment world, and NFTs still have many real-world problems to solve if they want to be truly accepted by players. Square Enix also needs to accumulate experience in the test waters again and again, balance the gameplay and quality that players want with the ownership of the blockchain, and be a "savvy explorer" in the fresh field of blockchain games, rather than "blind exploration".
Risk Warning:
According to the "Notice on Further Preventing and Handling the Risk of Speculation in Virtual Currency Transactions" issued by the central bank and other departments, the content of this article is only for information sharing, and does not promote and endorse any business and investment behaviors, and readers are requested to strictly abide by the laws and regulations of the region and not participate in any illegal financial acts.