It raised a few eyebrows when Square Enix announced it was selling off a pair of western developers and a slate of its valuable IPs, and would use that money to invest in…the blockchain, among other things. Now we know more specifically what Square Enix’s plans are in that space, which they are laying out in the midst of a crypto market crash and the cratering of NFT values and interest.
But here’s what they’re doing:
- They’ve already created a Blockchain Entertainment Business Division as of February of this year.
- They finished up season 1 of a game you’ve probably never heard of Shi-San-Sei Million Arthur, a blockchain card game. They say they are “encouraged by the results and feedback from our NFT business” and as such, will be doing a second season.
- Past that, they are more generally exploring “earnings structures, breadth of play and NFT ownership experiences” in the NFT business.
- They plan to establish guidelines for blockchain games and take on scalability with NFT economics. They plan to issue fungible tokens and design earning structures based around them. They plan to launch a new NFT brand an IP based on NFTs.
- They are investing in Animoca Brands, which is focused on blockchain games and web 3.0, and also The Sandbox, the “decentralized metaverse” that has attracted a lot of headlines for selling virtual blockchain real estate.
Why does all this sound…very bad to outsiders?
- We have seen next to no mainstream success with NFTs in gaming so far. Existing companies that have tried this like Ubisoft have been ridiculed to the point where despite making their own blockchain/NFT divisions, they’re no longer talking about them at all.
- Popular blockchain games like Axie Infinity are constantly teetering on the edge of collapse due to the instability of the fundamental economics. Axie’s AXS has declined 51% in the last month alone. The game’s Smooth Love Potion has lost 96% of its value, making its “play to earn” mechanics no longer viable for many players.
- NFTs in general seem to have peaked and are now rapidly declining. The number of active NFT wallets has fallen by 88%, and the sale of NFTs has dropped by 92% from its peak in September 2021. NFTs that famously sold for tens of thousands are now going for dozens or hundreds of dollars.
We will see what happens with Square Enix’s plans. They have convinced themselves this is worth investing in, and while I understand the desire to find some alternative to AAA single player games that costs hundreds of millions of dollars, this very much feels like barking up the wrong tree in the current climate.
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