On January 1, 2022, Square Enix President Yosuke Matsuda spoke Happy New Year letter to investors and the public through the company’s website. The subject of the letter includes reflections on the previous year, as well as topics that are of interest to Square Enix as a company. This year, Square Enix’s letter mentioned new technologies that are gaining traction in 2021, particularly NFT and blockchain-based gaming and the concept of “Metaverse”.
Matsuda recalled a presentation in May 2020 about Square Enix’s mid-term strategy, which identified AI, cloud, and blockchain games as new target areas for investments and R&D. He attributes the popularity of the metaverse concept to advances in “augmented reality” technology. Likewise, cloud, 5G, blockchain, and other developments will enable a “meaningful transition to the business stage” for the metaverse by 2022. In the field of AI, he highlighted efforts like the creation of Square Enix AI and the Arts Alchemy group, for research on “entertainment AI”.
Matsuda went into more detail about the attention of the NFT space and blockchain technology in 2021. He expressed the concept of “play for money” as a “good example” of how blockchain games and the “token economy” may one day enable “self-sustaining” growth. “Play for Money” is a term used by many NFT and blockchain based games to advertise how players can buy and sell their NFT assets back and forth.
However, he did acknowledge some of the downsides and significant backlash that the NFT and the crypto space have received from critics and the general public. In the NFT space, Matsuda acknowledges concerns about the “non-ideal situation” of the NFT bubble, fueled by speculative behavior and trading “overheated” behavior decoupled from “observed value” ” of the content. However, he believes that “the right sizing” will happen at some point.
Notably, Matsuda admits that many people have “voiced cautiously” about the new trends Square Enix seems to be pursuing. He describes the group as “playing for fun” and admits that they make up the majority of the players. However, Matsuda seems committed to “a certain number” of people with a supposed “play to contribute” motive, claiming that a growing token economy and NFTs will add a specific impetus to players to create and develop user-generated content (UGC). He stated that the traditional game provided no clear motivation for these people, other than “inconsistent personal feelings such as goodwill and volunteerism”. He blames this lack of clear motivation (i.e. getting paid through tokens or being able to sell creations directly) as one reason “not much of a big game changer.” [user-generated] content as one would expect”.
The statement does not acknowledge that various platforms have implemented marketplaces for user-generated content without having to rely on NFTs or cryptocurrencies. One such example would be Roblox, a platform primarily based on allowing players to create content for the platform and sell access to other players.
According to Matsuda, by designing viable token economies into its games, Square Enix is able to use NFT and blockchain technology to enable what he calls “decentralized gaming.” He expects it to become a mainstream in future games, and states that incorporating such decentralized games into Square Enix’s portfolio will be a “huge strategic theme.” ” for the company in 2022. He also mentioned that Square Enix will “closely watch the social change” in the space, listen to users, ramping up efforts to grow the business around the crypto space. and has the ability to issue its own cryptocurrency token. It ventured into the NFT space with Million Arthur.
Despite the lack of clear details or specific projects, Matsuda’s New Year’s Letter can be seen as a statement of intent that Square Enix plans to move further into the crypto and NFT space. How and which games will incorporate the controversial technology remains to be seen, although Square Enix has sold NFT based on the mobile game Million Arthur.
