Square Enix Letter from the President on 2022

The president of Square Enix wrote a letter recently. It has a lot of words like ‘blockchain’ in it, and that has some folks a bit twitchy. If you want to read the full letter, you can see it here. If not, I’m going to summarize it and give some thoughts.

I have a lot of opinions on blockchain and games. My primary one is, “You motherfuckers need to stop freaking out each time a large company, gaming or otherwise, puts out a press release with the words ‘blockchain’ or ‘NFT’ in it”.

This isn’t because I think they’re secretly great, but because letters are cheap to write, and long term strategic business decisions are hard to make. I said as much in my writeup on the letter from last year.

As such, I maintain my position that when a company makes a statement like “We are investigating forward facing technologies for future monetization including non-fungible tokens” what they mean is “Someone in the c-suite got pitched on crypto over Christmas/Thanksgiving/April 20th and now we have to spend a bunch of money to explain to them why it’s a bad idea.”

And while this years letter has a lot more statements about web 3.0/blockchain stuff, I maintain a high level of confidence that this won’t impact Square Enix’s current customers. I’ll get to why in a moment, but let’s review this letter.

The first 8 paragraphs say nothing related to blockchain. Paragraphs 1 & 2 are a recap of current world economic conditions (pretty bad) and current world conditions (even worse). Paragraph 3-6 lay out some specific business plans and moves that Enix is making, and restructuring efforts, including sales of various business units.

Paragraph 7-8 are the most interesting ones that aren’t related to distributed Excel sheets. These paragraphs note a restructuring of Square Enix’s publishing setup in which the eastern and western groups functioned as separate silos. In the statement, the company intends to make them function as “One Square Enix.”

As a cynical man, I have to wonder how smoothly that will go.

Continuing to speak as a cynical man, we get to the remainder of the letter. Paragraphs 9-15 are all about “Blockchain.” Paragraph 9 lays out that Square Enix has “focused on Blockchain Entertainment” and “devoted aggressive investment and business development efforts.”

Paragraph 10 notes that many governments have moved to regulate Crypto (possibly in reference to China) but states that Japan has launched some initiative called “Priority Policy Program for Realizing a Digital Society,” which frankly, I have no god damn clue about. I don’t know if this is pro-crypto, anti-crypto, or just window dressing.

Paragraphs 11-13 are pretty meandering, but can be summarized as “It’s hard to predict the long term impacts of Blockchain technology. Currently, the space is extremely volatile, and we are investigating what that looks like.”

Also, this gem:

“If we consider traditional gaming to have been centralized, then blockchain gaming must operate based on a self-sustaining decentralized model. It is that concept, that philosophy that I see to be key.”

Author Note: I hate this quote. It makes no sense from a technological standpoint. More on that in a future writeup perhaps?

Paragraphs 14 and 15 are the most important, at least in regards to crypto stuff. Paragraph 14 notes that while there is a lot of “interest” in crypto-gaming, that interest is primarily from speculators, not players.

And so we get to paragraph 15, the important one. I’m going to go through the full thing sentence by sentence, as it’s short but important.

“Our Group has multiple blockchain games based on original IPs under development, some of which we announced last year, and we are undertaking preparations that will enable us to unveil even more titles this year.”

Did you catch that? Original IPs! Which means that Square Enix isn’t going the Ubisoft route of experimenting by grafting NFTs onto existing projects. If you’re a FFXIV person, or just a Square Enix fan of various brands in general, you’re likely safe!

“We are also engaged in global sourcing from an investment perspective and will continue to take stakes in promising businesses whether we find them in Japan or abroad.”

I honestly don’t know how to parse this sentence 100%. My guess is it means that they will continue to actively look for valuable locations to invest in related to our gaming enterprise and web 3.0 technology regardless of where it’s located in the world.

“Blockchain has been an object of exhilaration and a source of turmoil, but with that in the rearview mirror, we hope that blockchain games will transition to a new stage of growth in 2023.”

This is wishy/washy bullshit. It promises nothing, hopes for a rich future, but makes no predictions about actually achieving this future. You can probably ignore this sentence.

Oh, and I guess it does end with paragraph 16, but that’s mostly a “Woo, we’ve been around 20 years!” and not much else.

So yeah, in conclusion, yes Square Enix spent money on blockchain, but it’s still “early days” (where have I heard that before?) and there appears to be no intention to apply web 3 practices/technology to existing products.

Oh, also despite that whole “Multiple Games” thing, I can’t actually find any released games or announced games that actually do use Web 3.0/blockchain tech from Square Enix. I’ve reached out to them to clarify, and I’ll update this writeup accordingly I hear back.