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Square-Enix President’s New Year’s Letter: NFTs and Blockchain Gaming

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FF7 Remake: Barret & President Shinra
Screenshot taken from Final Fantasy 7: Remake

As we watch 2021 drift into oblivion (not before losing Betty White, RIP) we countdown to 2022 with hope and anticipation that it can be a new year filled with renewed hope and positivity. If 2022 turns out to be more of the same, gamers such as myself could at least play a video game for fun and for the disconnect from the real world, if even for just an hour or two of respite. At least, for now, if Yosuke Matsuda, President of Square-Enix, and every other gaming company taking a similar path, has their greedy little way.

Ushering in the new year and releasing this right on the first of January, Mr. Matsuda dropped a new year’s letter to the public. In that letter, he revealed the direction of the company when it comes to NFTs and blockchain gaming by surmising that playing games for fun just isn’t enough, not with the money that can be made. Following companies like Ubisost, Mr. Matsuda not only wants Square-Enix to follow a similar path, but he wants this to become the norm for gaming as a whole…regardless of what consumers want, he writes.

Click here for his letter and keep reading here as I dissect the “good” parts of the letter.

He opens the letter by applauding the controversial Facebook as they rip off VR Chat and call it the Metaverse. This already raises several red flags as Facebook should not be where one gets inspired by. Mr. Matsuda looks at the Metaverse as a big opportunity to make money for Square-Enix and talks about how advances in tech is giving the possibility for any of this to exist:

“I attribute this in large part to advances in extended reality (XR) technology, the increasing prevalence of the cloud and 5G, more sophisticated blockchain technology, and other technological evolutions that have taken place in a variety of fields over the past several years. That is because these advances are giving rise to services that fall under the metaverse umbrella. The metaverse will likely see a meaningful transition to a business phase in 2022, with a wide range of services appearing on the scene. As this abstract concept begins to take concrete shape in the form of product and service offerings, I am hoping that it will bring about changes that have a more substantial impact on our business as well.”

See, I’m a tech geek. I love any advancement of technology and can’t wait until I can jack into the Matrix and learn Kung-Fu. As much as I dislike the cesspool of Facebook, VR Chat becoming mainstream was an eventuality that I knew would happen eventually as tech becomes more accessible thanks to affordability. My qualm isn’t the advancement of tech, it is when the advancement of tech doesn’t benefit anyone other than the wealthy and causes a large amount of electrical waste. This is where the letter nosedives into NFTs and takes up most of the letter defending it and expressing his eagerness to delve in.

Here’s a couple of articles from The Verge that talk about what NFTs are and why they are dumb and terrible:

TL; DR: Use enough power to light up all of London for one transaction where you get a fancy receipt saying that you own this unique piece of digital art. Why? Because you have disposable income and an apparent want to say you super-duper own a JPG, which may or may not have been stolen from an artist.

If it sounds ridiculous to you, it’s because it is unless you’re the one getting paid. Which is exactly what Mr. Matsuda is hoping to achieve:

“Another term that gained quick currency in 2021 was “NFT” or “non-fungible token.” The advent of NFTs using blockchain technology significantly increased the liquidity of digital goods, enabling the trading of a variety of such goods at high prices and sparking conversations the world over. I see 2021 not only as “Metaverse: Year One,” but also as “NFTs: Year One” given that it was a year in which NFTs were met with a great deal of enthusiasm by a rapidly expanding user base.”

This is when things start to get REALLY funky. It’s odd that he feels that NFTs have been met with enthusiasm, when it has been anything but. I mentioned earlier how Ubisoft is also jumping into NFTs, calling it “Ubisoft Quartz”. Well, it’s doing incredibly poorly. Mike Fahey from Kotaku covers how badly Ubisoft’s Ghost Recon NFTs ended up. As he wrote on Kotaku:

“Why so few sales in a moment of energy-hungry NFTs spiraling out of control on the worldwide marketplace? First off, and I am just guesstimating here, but only five people play Ghost Recon Breakpoint, give or take. Secondly, chances are a large portion of the people who actually play the game aren’t big fans of non-fungible tokens. Considering the fan uproar that recently caused S.T.A.L.K.E.R. 2 devs GSC Game World to announce, then quickly cancel its NFT plans, that’s a likely scenario.”

He then goes into AI and cloud technology, which is fine. This is good tech, and swings right back to the bad tech with blockchain gaming. The part that is horrifying about this is how he acknowledges that people play games for fun, and how they are not the focus of this new direction. He feels that there are people that are forced to play games for goodwill alone. No. Not making this up. Mr. Matsuda writes:

“I realize that some people who “play to have fun” and who currently form the majority of players have voiced their reservations toward these new trends, and understandably so. However, I believe that there will be a certain number of people whose motivation is to “play to contribute,” by which I mean to help make the game more exciting. Traditional gaming has offered no explicit incentive to this latter group of people, who were motivated strictly by such inconsistent personal feelings as goodwill and volunteer spirit.”

To say he is disconnected from his consumers is an understatement. This letter has a tone that corporations use to gas light their employees into thinking that they stand to benefit from toxic business practices. At this point, he wants to convert consumers to employees, because why play a game for fun when it can be your second job? What’s infuriating is that he acknowledges how most people that play their titles are, in fact, playing for fun but none of them matter. The only thing that matters is how much money Square-Enix (and by extension, he) stands to make. He states clearly that his target audience are now just people who want to “play to contribute”…whomever that might be. I’m sure there are a few folks out there keen on the idea, but is it utterly worth alienating the majority of your consumers for the sake of the few that may help you net a few more tax’ably funky megabytes? He seems to think so. Which is ironic, when you consider how many titles they released where the goal is to stop corporate corruption from destroying the planet.

If this is truly the future of gaming, then we’re starting 2022 by watching the games we love dissolve into nothing thanks to this cancerous trend. His final paragraph makes note of how COVID-19 has moved the economical invisible hand towards new avenues of profit, and it just feels like a scapegoat for his greed. It’s even more obvious if you search their net income on Statista and see that they’ve seen leaps in net gains with COVID-19 (everyone is indoors, so we’re playing video games…for fun.)

I hope that they see the backlash and make the ethical decision of opting out but considering the enthusiasm in the letter and how he made sure to include that very backlash in there as a non-issue, it’s a safe bet that we’re boned. As more game companies sell out for their own selfish gains at the expense of the environment, the gaming industry is going to look as draconian as the worlds they create…only we won’t have a hero to save us from it.

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Labor Board Says Activision Blizzard Illegally Threatened Staff

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Activision Blizzard

The United Sates National Labor Board says that Activision Blizzard, the publisher behind such games as Call of Duty and Overwatch, illegally threatened staff and enforced a social media policy that conflicts with workers’ rights, according to Bloomberg.

This yet another negative mark on the company, and comes following a complaint filed with the NLRB filed against Activision Blizzard that claims employees were being threated for discussing wages and working conditions via the company’s internal Slack channel.

If Activision Blizzard does not settle this issue, the company will receive a formal complaint from the National Labor Relations Board’s regional director in Los Angeles.

 

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Take-Two Interactive Acquires Zynga

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take two interactive

Take-Two Interactive has officially completed it’s acquisition of mobile studio Zynga, following shareholder approval from both parties being completed last week.

With the acquisition, Take-Two now owns all outstanding shares of the company for approximately $12.7 billion, in what that company is describing as a “pivotal step” in their plans to expand their mobile side of offerings..

“We are thrilled to complete our combination with Zynga,” Take-Two chairman and CEO Strauss Zelnick said in an official announcement. “As we bring together our exceptional talent, exciting pipelines of games, and industry-leading technologies and capabilities, we believe that we can take our portfolio to another level of creativity, innovation, and quality.

“We are eager to continue building an unparalleled portfolio of games that will reach broader markets and lead to continued growth for this next chapter of Zynga’s history” Zynga CEO Frank Gibeau said.

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Tencent Releases Q1 Financial Results, Gaming Accounts for 32% of Revenue

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Tencent

Chinese tech juggernaut Tencent has released it’s Q1 financial results, which ended on March 31st, and show a reported total revenues of RMB 135.5 billion ($21.3 billion), which is in-line with the $20.2 billion reported back in Q1 of 2021.

Additionally, Games account for 32% of Tencent’s $21.3 billion in revenue.

According to GamesIndustry.biz, Tencent profits are down 52% from RMB 23.7 billion ($3.7 billion), operating profit was down 15% year-on-year to RMB 36.5 billion ($5.8 billion). Operating margin decreased from 32% in Q1 2021 to 27%.

In regards to Tencent’s gaming side of the business, the revenue for domestic titles (those in China) sow a slight dip of 1%, attributed to “direct and indirect effects” of measures implemented in China to protect minors from excessive gaming.

Titles such as League of Legends: Wild Rift and Fight of The Golden Spatula saw a rise in revenue, but were offset by the declines in Call of Duty Mobile, among other titles.

In regards to titles outside of the market in China, gaming revenue spiked 4% year-on-year to RMB 10.6 billion ($1.6 billion), largely due to the success of Valorant and Clash of Clans, but Tencent did report a decline in revenue from PUBG Mobile, explaining “as user spending normalized post-COVID.”

Domestic games accounted for 24% of the company’s total quarterly revenues, slightly down from 25% in Q1 2021, with international games accounting for 8%, a rise from 7%.

Read more, including comments from Chief strategy officer James Mitchell, over at GamesIndustry.biz.

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