Square Enix, NFTs and Crypto-Gaming; The Beginning of The End?

As we enter the new year of 2022, we now ask ourselves “what’s next?”. For Square Enix’s CEO Yosuke Matsuda the answer was to spearhead the company to new frontiers; to the land beyond the silicon sea, the Metaverse. But such a direction threatens to undermine the very values that drew fans to the company in the first place. With the nature of the crypto market being what it is, the CEO’s message has left the gaming community wondering if this was done for the benefit of furthering the medium or lining Square’s coffers with what will ultimately result in a regression of game design.

Whilst I believe there may be some boons to Matsuda’s decision, I believe that doing so under Square Enix will result in the negatives outweighing the positives.

Matsuda announcing Blue Mage during FFXIV FanFest 2018

NFTs and Cryptocurrency Simplified

Cryptocurrency is a digital payment system. However, instead of using banks to verify transactions, it uses a decentralised public ledger to record payments and receipts; the ledger functions via encryption known as the blockchain. It is a ‘chain’ because it is a network of users constantly verifying transactions.

What has been created is decentralised currency, unbound by both the support and interests of nations and banking corporations.

NFTs or Non Fungible Tokens are directly connected to cryptocurrency as they use the verification of the blockchain to establish ownership over a piece of art. NFTs are supposed to be special as the token itself acts as an irreplaceable and inimitable receipt, verified by a non-centralised network. Thus, even if the art is saved and reposted elsewhere, you are (in theory) the proprietor of the original work.

However, this area is still relatively new and does not take into consideration intellectual property law and rights. Therefore, issues such as improper ownership, intellectual property theft and devaluation have already occurred. Some allege that the art will be worth something upon the popularisation of the Metaverse, whilst others treat the token as a sort of proof of membership. It is these conceptions that give worth to the NFT and thus, corporations see a potential market.

The Good

To preface, I am not totally against the idea of crypto-games. If we are to see any reduction in the environmental impact of cryptocurrency, the industry needs development. Large companies such as Square Enix, will not only have the resources to do so, but by providing validity to it as a business, other companies will also follow suit and invest in research and development.

The addition of an entirely new type of game will breed competition, and competition breeds innovation. This innovation of self-sustaining games could be the next evolution of the live-service game, one that’s less reliant on microtransactions to maintain profitability; a symbiotic relationship between player and developer.

Furthermore, with potential integration with Metaverse, we could see the company going beyond videogame creation. In the message, Matsuda notes that the company established SQUARE ENIX AI & ARTS Alchemy Co. Ltd in March 2020. It is possible that Square Enix may even make significant advancements to A.I. technology.

The firm’s R&D efforts focus primarily on natural language processing, world models, and simulation technology […] we plan to apply that output to a wide variety of content and provide the relevant technology to other companies, with a view to leveraging these R&D efforts across our entire Digital Entertainment business.  

Yosuke Matsuda, President and Representative Director of Square Enix
January 1 2022

The Bad

However, amidst the backdrop of the current situation, the message seems baffling and rather disconnected to the fans.

Final Fantasy XIV has ceased sales and the creation of new accounts due to their ongoing struggle with server stability and login issues. Director and Producer of the game, Naoki Yoshida attributes this issue to a global semi-conductor shortage. Studies have shown that the cryptocurrency industry server demands are astronomical and so logically speaking, it follows that the crypto market bears decent blame for the shortage.

Assuming this number remains constant at 490 gCO2/kWh as the network’s energy demand increases, a total energy consumption of 184 TWh would result in a carbon footprint of 90.2 million metric tons of CO2 (Mt CO2), which is roughly comparable to the carbon emissions produced by the metropolitan area of London.

Alex de Vries, “Bitcoin boom: What rising prices mean for the network’s energy consumption”
March 17 2021

Yet, Yoshida’s very own boss appears to be supporting and validating the very industry that is undermining the operation of what is one of Square Enix’s largest sources of income. Rather than providing some sort of solution to the currently ongoing issue, Matsuda is seemingly offering to exacerbate the problem. Naturally, players are frustrated, and whilst they are enjoying the game, for the most part, there is a vocal portion of players who grow impatient with the constant interruptions and compromises they have had to experience.

Matsuda may be overestimating the extent of the players’ goodwill for the company. One managerial misstep could result in a mass exodus similar to what Blizzard Entertainment is experiencing. A sobering reminder that no king rules forever.

I actually don’t think that the Metaverse is something people are asking for

Asmongold, 2022

There is also very little demand from their player base for such games, given that the company is synonymous with single-player Role Playing experiences. Therefore, the insinuation that their fanbase is excited over the concept of “play to earn” live service games is completely inaccurate and perhaps stems from a misguided interpretation of their success in Final Fantasy XIV.

Thus, this executive misconception may not bode well for the games that fans actually want.

The Ugly

In this regard, fans are worried that significant resources will be diverted to crypto game development, starving other more demanded projects.

Matsuda states that crypto games will be part of the company’s portfolio alongside “centralized games” (or traditional games) indicating that they will share company investment with mainline releases. Worries include a reduction of releases and revivals of less popular franchises despite the pleas of passionate fans. Games such as Chrono Trigger, Tactics Ogre, and Front Mission may either be abandoned entirely or integrated into the crypto game model, much to the chagrin of their fanbases. Furthermore, game design in these new crypto games will most likely be based on existing free-to-play live service monetisation.

To provide an incentive to pay, systems are placed in the games, hindering gameplay and artificially creating demand for the paid removal of delay or providing rewards for players to grind for.

This means enjoyment is largely secondary to income generation. Mobile games such as Final Fantasy Brave Exvius War Of The Visions already see rather aggressive monetisation, with new characters constantly being more powerful than pre-existing ones to promote the purchase of premium currency. Gameplay elements are vapid, see very little if any innovation and have been made with currency generation in mind. The alternative is not sustainable, which is being a quality free-to-play game.

16 Characters kept their position or rose (green), 26 characters fell to lower positions (red). 61.9% of rare characters became relatively weaker over 1 year.
Courtesy of Nerd Night @ Youtube.

With how popular and lucrative cryptocurrency is, Square Enix will at least see short-term large gains, with their stocks already receiving an 8% increase after Matsuda’s message. It is likely the company will push further into this industry and it is possible that we will see a rise of crypto games in their portfolio.

Square Enix is no stranger to pursuing profit as the FF7 series is their most popular IP and they have not shied away from capitalising on its popularity. Already, a battle royale mobile game based on the series exists that was likely designed for the Chinese market seemingly following after PUBG mobile.

With that in mind, we may see future iterations of currently beloved intellectual properties being integrated into crypto games; for example, a Final Fantasy crypto MMO. Unless significant expansions are made to development teams this could mean that for those uninterested in the fledgling genre, the delay in-between games will be even longer.

Summary

As a fan of these games, I sense great trepidation ahead as we may see Square go down a similar route to Konami, a company that released games that were the pinnacle and progenitors of their respective genres such as Castlevania and Metal Gear Solid, now reduced to peddling pachinko machines.

As the entire worth of Cryptocurrency and NFTs is speculative, it is only a matter of time before the ‘bubble’ explodes. As Matsuda acknowledges, the value of the aforementioned is “overheated” and we will see normalisation similar to the tech boom from the advent of the internet.

Upon the wings of Icarus did those companies fall, for they did not heed the warnings of Daedalus. Will Square Enix fly too close to the new Sun over the Metaverse? Only time will tell.