Sega Pulls Back From Blockchain Gaming as Crypto Winter Persists

Takashi Mochizuki, Bloomberg News

An inflatable figurine of the Sega Corp. video-game character Sonic the Hedgehog at the Tokyo Game Show 2022 in Chiba, Japan, on Thursday, Sept. 15, 2022. The show runs through to Sept. 18. Photographer: Kiyoshi Ota/Bloomberg , Bloomberg

(Bloomberg) -- Sega Corp., the gaming studio once regarded among the staunchest advocates of blockchain gaming, is pulling back from an arena devastated by the global crypto industry meltdown.

The company behind Sonic The Hedgehog and Yakuza will withhold its biggest franchises from third-party blockchain gaming projects to avoid devaluing its content, co-Chief Operating Officer Shuji Utsumi told Bloomberg News. It’s also shelving plans to develop its own games in that genre at least for now, he added.

The remarks, from an executive who helped launch the PlayStation at Sony Group Corp. decades ago, underscore a shift at the 60-year-old firm. Sega, along with rivals like Square Enix Holdings Co. and Bandai Namco Holdings Inc., previously advocated using blockchain-based technology it believes can boost the appeal of its titles. Those were the days platforms such as Axie Infinity, where gamers earn tokens just by playing, were taking off. But the digital currency market collapse wiped out much of their appeal.

Sega does plan to let external partners use its lesser-known Three Kingdoms and Virtua Fighter characters for non-fungible tokens, a sort of certificate that confirms ownership of a digital asset. The company’s intent to join the once-red-hot NFT community, first announced in 2021, drew widespread criticism from gamers who viewed crypto technology as bad for the environment.

“The action in play-to-earn games is boring,” Utsumi told Bloomberg News. “What’s the point if games are no fun?”

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Utsumi was also non-committal about employing Web 3.0 technology in what Sega dubs its “super game” initiative: a lineup of big-budget online multiplayer games due to roll out from 2026.

“We’re looking into whether this technology is really going to take off in this industry, after all,” he added.

Sega’s shift reflects a broader cooling on the concept of Web 3.0 — a term used to describe an internet built around the blockchain — that once attracted billions of dollars from the likes of Andreessen Horowitz. Peers such as Ubisoft Entertainment SA have pulled back on their investments in NFT games after drawing criticism amid low interest.

Sega will still offer its lesser franchises to several blockchain games to be announced later this year, and will continue to invest in related projects — to the tune of hundreds of millions of yen in each case, Utsumi said. The technology remains useful, for instance by making it possible to move characters and items between different games, he said. Longer-term, Sega remains open to getting more involved as the technology matures.

“For the majority of people in the video game industry, what blockchain advocates say may sound a bit extreme, but that’s how the first penguin has always been,” Utsumi said, describing risk-takers who’re the first to take the plunge. “We should never underestimate them.”

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