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Sega becomes first major business to realize blockchain isn’t all it’s cracked up to be

Video game publisher Sega appears to be backing down from its intentions to make the blockchain, which no human being alive is yet to pitch a valid application for, a core part of its business strategy going forward, offering a cautionary tale to similarly blinkered business owners and tech evangelists who still want to wish the bubble back into existence.

You’ll have to forgive us as we enter the video game industry to bring you this cautionary tale in action, but we’re talking about business strategy here, and we both know the analyst shrunk down to microscopic size inside you is on the edge of its seat.

The journey began in 2021, with Sega’s Q2 results for that year revealing that it was looking to create cloud-powered “super games” (us neither) and “investment in new fields such as [non-fungible tokens, or NFTs for short]”.  

In April 2022, talking about these “super games”, producer Masayoshi Kikuchi claimed cloud streaming and NFTs were “the future of gaming”. The former being, in our view, unlikely, and the latter, we had hoped, a hilarious joke.

Despite its President and and CEO Haruki Satomi claiming that the plans would be scrapped if the strategy was “perceived as simple money making”, and anything to do with the blockchain being just that, trademarks were filed for ‘Sega NFT’ and ‘Sega NFT Classics Collection’. These, as far as we can see, never materialized.

In July 2023, Sega’s steadfast belief in BLOCKCHAIN as THE FUTURE appears to have become more complicated. In a statement to Bloomberg (non-paywall story via the Register), the company’s co-COO Shuji Utsumi, once a staunch supporter of this strategy claimed that it would keep its highest profile franchises, like Sonic, or the delightfully bonkers Yakuza (something I very much imagine a white businessman in his sixties and an ill-fitting suit playing on his lunch break) well away from the strategy, resigning: “what’s the point if the games are no fun?”

The jaded scamp is getting there, but I think we can plum further. What’s the point if it, ‘it’ being ‘video games’, or any industry at all, isn’t broken, but we try and fix it anyway, by introducing concepts and mechanics that very few understand and even fewer, if they did understand, would want them in their games.

In a video game context, commonly when a wide-eyed developer talks about the blockchain, NFTs, or cryptocurrency wallets, they’re talking about a game where, by playing, you earn some form of digital monopoly money. Well, it’s real money, but also not really. Try not to think about it too much. You may be starting to twig that this sounds like a job, which you already have.

Utsumi also claimed that he knew “Western gamers” were critical of these moves, its “Web3 initiative”. Yeah, you know, it’s just words, why not tune out for a bit, Bargain Hunt will be on in a minute.

Stage 1: Denial

Sega does not have the best track record for sound business decisions, and so it’s a bit of low hanging fruit, probably, to be using them as a teachable moment in our GCSE Business Studies class today. What Sega’s latest saga tells us (watch it – Ed) is why you shouldn’t jump into integrating any wanton innovation into your business strategy five minutes after hearing about it. It also tells us that, when told that innovation evangelism is a bad idea, to take that advice, in order to maintain a long-term revenue stream.

In the wake of this, it will be interesting to see if other industry development companies, like Japan’s Square Enix, and second-hand embarrassment’s Peter Molyneux, under his studio 22cans, will continue on with their projects slated to utilise blockchain.

Molyneux’s Legacy, both a terrifying noun phrase and the name of his next project, will, using this “play-to-earn” idea, be a “blockchain business sim”. Ars Technica reported, in 2021, that players had invested $54 million, actual, real, U.S dollars into fictional plots of land before the game had even been released. 

Legacy proves it’s true that a version of this strategy of death marching BLOCKCHAIN into your business strategy can succeed if you’re perceived as an auteur with past glories under your belt. Molyneux is rightly lauded as the co-founder and public face of Populous, Dungeon Keeper and Theme Hospital developer Bullfrog Productions, in addition to original Fable developer Lionhead Studios. 

However, we’ll assume that you’re not, in fact, coasting on good ideas you once had decades ago, and you haven’t accumulated such good will despite having products in unfinished states for over ten years (Molyneux’s Godus has been largely abandoned on all but mobile platforms).

While Molyneux may be able to ( and probably will) use the last of his industry clout to squeeze BLOCKCHAIN for every last drop, you, probably in a wholly different industry with nowhere near the mass appeal of VIDEO GAMES. For you, the bubble has burst, and if even Sega, who created Sonic the Hedgehog (which you have also not done, although one of his co-creators did just get sentenced for insider trading, which you may have done) are starting to think they can’t drink from the well any longer, what choice do you have?

And it is a burst bubble. Remember Bored Ape Yacht Club NFTs? (Ask your grandparents.) Remember how [checks notes] Paris Hilton, Snoop Dogg, and Gwyneth Paltrow had them, and they were the next big thing? Their value has been reported as having crashed by 88%, this heady week in July 2023. There’s something here about ApeCoin, which I, a tech journalist, have literally never heard of.

Ye cautionary tale of crypt-woe

In all, because this is really winding me up now, there should be one of those logic diagrams that goes ‘DO YOU UNDERSTAND THIS TECHNOLOGY’ – > YES / NO. And if you say ‘no’ it says ‘DO NOT INVEST’. And if you say ‘yes’ it goes ‘IS THIS TECHNOLOGY POPULAR’, and if you say ‘no’ it says ‘DO NOT INVEST’. And if you say ‘yes’ it goes ‘MAYBE’ with about ten asterisks, assuming, of course, that you’ll do your own research.

Blockchain was three years ago, a fad induced by psychosis induced by cabin fever enforced by a literal plague. Move on. There’ll always be some other cool way to make money, and it might just be tried and tested, with logic and reason to back it up.

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