Image Source: ©SQUARE ENIX

Table of Contents

1. Introduction

2. The end of hibernation: awakening of a global gaming powerhouse

2-1. Japan’s strategic move towards market revitalization through crypto-friendly regulations in 2023

2-2. Momentum builds in the Japanese blockchain gaming market

2-3. Exciting prospects in the japanese blockchain gaming market: market size, ip, and culture

3. Square Enix leading the charge in the Japanese blockchain gaming market

3-1. Square Enix: A pinnacle commitment to blockchain among Japanese game companies

3-2. Advancing the token economy: Square Enix’s vision for enhanced scalability through blockchain adoption

4. Symbiogenesis: shaping narratives alongside ten thousand gamers in an original IP-driven blockchain game

4-1. Immersive browser-anchored storytelling entertainment, focused on ‘information exchange’ within a vast universe

4-2. Focusing on providing memories to true fans with a craftsmanship approach

5. Set to establish a success paradigm demonstrating blockchain potential in Japan

 

 

 

1. Introduction

Square Enix made a strategic entry into the dynamic blockchain gaming market with the launch of Symbiogenesis on December 21, 2023. Renowned as the catalyst behind Japan's RPG surge and the innovative force steering classics like Final Fantasy and Dragon Quest, Square Enix now stands as a formidable player in Japan's gaming space, commanding a market capitalization exceeding $4.6 billion. This report delves into the dynamics shaping the Japanese blockchain market, Square Enix's strategic interpretation of blockchain's value proposition, and and the underlying motives steering its inaugural venture, Symbiogenesis.

2. The End of Hibernation: Awakening of a Global Gaming Powerhouse

2-1. Japan’s strategic move towards market revitalization through crypto-friendly regulations in 2023

Japan, having responded robustly to significant hacking incidents like Mt. Gox (2014) and Coincheck (2018) with stringent regulations, is now signaling a proactive embrace of a pro-Web3 stance as the linchpin of its new capitalist policy under the Kishida administration. In tandem, Japan has realigned its regulatory compass to cultivate emerging sectors, such as NFTs and metaverses. Notably, in July 2022, the Web3 Policy Promotion Office was established, placing the blockchain industry, with Web3 at its core, at the forefront of the national growth strategy.

Building on diverse recommendations, the government's White Paper on Virtual Asset Regulation (unveiled in April 2023), received final approval, prompting concerted efforts to liberate ecosystem participants hampered by stringent regulations. Simultaneously, the Japanese government is proactively alleviating the market's burden through enticing incentives, including endorsing stablecoin issuance, a 20% reduction in personal income tax rates, and exempting corporate taxes on tokens issued by companies.

September witnessed the emergence of a bill proposal enabling startups to issue cryptocurrencies, with indications that a policy addressing scalability challenges in startups' access to new investment funds could materialize in 2024. The government's regulatory clarity has not only encouraged startups but has also prompted major corporations to venture into the market. Evidently, Progmat (a subsidiary of MUFG managing digital asset issuance), a key player in the existing Web2 financial space, collaborated with XRP. Moreover, Japan's largest general trading company, Mitsui C&T, and Sony Group are making strides in the market with new blockchain-utilizing ventures, underscoring the proactive regulatory environment established by the government.

2-2. Momentum builds in the Japanese blockchain gaming market

As Japan undergoes regulatory shifts in favor of cryptocurrencies, it is imperative to observe the strategic moves within the gaming sector. Japanese game companies are strategically positioning themselves as swift followers in this evolving landscape. Although Japan entered the blockchain market slightly later than South Korea, its approach to integrating blockchain aligns closely with that of South Korean counterparts. Japan has transitioned from contemplating blockchain adoption to actively exploring business directions.

Two key factors contribute to this disparity. Firstly, Japan is likely to approach blockchain integration with a research and development focus until a proven model emerges in the market. The blockchain games slated for release in 2024 are anticipated to serve as preliminary tests, gauging market responsiveness. Secondly, Japanese game companies exhibit a higher dependency on game IP compared to their Korean counterparts. Consequently, they exercise caution in leveraging IP for blockchain games. While discussions on utilizing major IPs among large game companies are underway, the actual planning, development, and release of such projects are expected to be protracted. As a result, it is projected that Japanese game companies will progressively engage in active development of blockchain game businesses, with a more pronounced presence anticipated from around 2025.

2-3. Exciting prospects in the Japanese blockchain gaming market: Market size, ip, and culture

My anticipation for the Japanese blockchain gaming market is grounded in three compelling factors: market size, intellectual property (IP), and cultural influence. Japan, an indisputable gaming juggernaut, holds the esteemed position of the third-largest global gaming market by revenue in 2022, trailing only behind the United States and China (refer to the chart below). Its pervasive impact on the gaming industry is underscored by the fact that seven out of the top 10 video game IPs, ranked by cumulative revenue, originate from Japan.

Iconic franchises like Pokémon, Hello Kitty, Super Mario, Gundam, One Piece, and Yu-Gi-Oh! epitomize the cultural phenomena emanating from Japan. The country fosters vibrant subcultures centered around anime characters, contributing to a diverse consumer landscape spanning games, music, movies, and more. Notably, seven of the highest-grossing films of all time at the Japanese box office are anime productions, including renowned titles such as Demon Slayer, Spirited Away, Your Name, and Princess Momonoke. A testament to the popularity of Japanese anime and the enormity of the domestic market is readily observable in Tokyo's Akihabara neighborhood.

Akihabara District, Image Source: Rakuten Travel

This cultural richness extends its influence globally, evidenced by the demand for Japanese content worldwide. In 2021, the training simulation game <Umamusume: Pretty Derby> exceeded $2 billion in cumulative global sales in its second year, while Makoto Shinkai's cinematic sensation <Suzume> garnered over 30 million global viewers and achieved a $167 million global box office revenue. YOASOBI's opening theme song for IDOL, <Oshi no Ko> achieved remarkable milestones, holding the #1 spot on Oricon's weekly streaming rankings for 13 consecutive weeks, topping the Billboard Global Chart Excl. U.S. Top 10 on June 10, and securing the #1 position on the YouTube Music Global Chart Top 100.