Square Enix has released its revenue report for the last fiscal year, and nestled in the middle of the sea of numbers and sales figures, is some interesting information, including the fact that Square Enix wants to create new game studios.
Normally, a publisher wanting to build or acquire more game studios would make perfect sense. But this news comes shortly after Square Enix announced the sale of three major studios – Crystal Dynamics, Eidos Montreal and Square Enix Montreal – to Embracer Group for $300 million. Square Enix also wants to “cultivate a robust IP” after selling major IPs like Tomb Raider and Deus Ex as well as its aforementioned studios.
Analysts have speculated that the sale of some of its major Western studios and intellectual property is part of an effort by Japan-based Square Enix to “refocus” on its Japanese studios. If so, Square Enix is likely considering acquiring or establishing new studios in Japan, rather than other parts of the world.
One of the main reasons for Square Enix divesting some of its overseas studios and IPs is to use the money to “accelerate the launch and monetization of new businesses by advancing in priority areas” which include blockchain, AI and the cloud.
In other words, Square Enix is doubling down on NFTs and blockchain technology. Part of Square Enix’s “mid-term business strategy” is a new focus on “blockchain entertainment” that includes a desire to issue proprietary NFTs and create a “new NFT brand and IP.”
As such, it invests in a number of blockchain-focused ventures, such as Web 3.0-focused brands Animoca and “decentralized metaverse” The Sandbox. It also invests in Ubitus, a Japan-based cloud gaming company. Square Enix makes it clear that it is considering several other investments related to blockchain and cloud services not mentioned in the report.
Square Enix’s new focus on NFTs and blockchain comes just as the market for NFT and blockchain-based cryptocurrency took a nosedive, with the the wall street journal recently reporting that the “NFT market is collapsing”. NFT sales have fallen 92% since September 2021, and the number of “active wallets” (aka owners or sellers of NFTs) has fallen 88% since November, according to the WSJ.
This makes Square Enix’s current decision to commit so many resources to NFTs and blockchain about as badly timed as humanly possible, but Square Enix isn’t the only gaming company still trying to enter the NFT space. Companies like Ubisoft have also expressed interest in (or have already implemented) some forms of blockchain technology in their games and experiences.
Regardless of the company’s NFT decisions, Square Enix has performed well over the past fiscal year, with net sales and earnings hitting new full-year records. Square Enix specifically cites the latest expansion to its MMORPG Final Fantasy XIV, Endwalker, as making a “major contribution” when it comes to the company’s gaming business.