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Top 3 Takeaways from Square Enix’s NFT Announcement

In a recent letter to gamers and shareholders, Square Enix president Yosuke Matsuda mentioned his company’s ambitions to integrate blockchain technology more deeply into the games they develop. The Japanese entertainment giant is best known for titles such as  Final Fantasy, Tomb Raider, Deus Ex and Just Cause. Now, the team believes these rich and diverse digital worlds could use open-sourced digital goods and virtual collectibles to enhance the experience. 

The president’s comments and the reaction to his announcement on social media could indicate where the industry is heading in the next few years. Here’s a closer look. 

NFTs and games are a natural match

In his statement, Matsuda mentioned the rise of Non-Fungible Tokens (NFTs) and the way they enhanced the “liquidity of digital goods.”  While he didn’t say if the company was already working on NFTs for any of their titles, he admitted that the sector was being watched closely. 

In 2021, the entertainment industry adopted NFTs in a noteworthy way. The NBA’s TopShot was a clear example of how these virtual goods on the blockchain could help megabrands maximize their revenue from existing IP and content. In its first full year, the Top Shot marketplace has generated $589 million in sales. The success of this project has encouraged other brands such as Disney, UFC, and Nike to adopt the technology too. 

However, gaming is now the largest sector within the entertainment industry. Console, PC, and mobile games collectively generate more revenue than movies or music. The fact that gaming is an interactive and social experience also makes it a natural fit for NFTs. In the near future, gamers can expect to buy virtual upgrades for their avatar’s appearance or special abilities for playable characters in the form of an NFT. 

Metaverse: Year One

Despite the recent dip in cryptocurrencies and digital assets, Matsuda believes the industry is still in its early innings. “I see 2021 not only as “Metaverse: Year One,” but also as “NFTs: Year One,” he said.

At the time of writing, the largest NFT project is Bored Ape Yacht Club – which generates roughly $73.18 million in weekly sales. However, the global NFT space is collectively worth just under $22 billion – a fraction of the rest of the crypto sector or even the entertainment industry.

In other words, there’s plenty of room to grow. 

Resistance

Despite the growing popularity of NFTs and blockchain-based metaverse projects, there’s plenty of resistance in the gaming community. “This is disgusting. NFTs are a money-game commodity with no value,” said one Japanese commentator on social media. Others have argued that blockchain-based games are slow and that the microtransactions for digital goods hamper gameplay. 

Nevertheless, game developers are moving forward with their NFT plans. Besides Square Enix, Epic Games and Take-Two Interactive have also mentioned their interest in developing Web3 experiences for gamers. 

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