Sega Corporation, the gaming company behind hit products Sonic the Hedgehog, Yakuza and Virtua Fighter, said it plans to release a Web3-based game soon, despite news reports and speculation that the company would be pulling out of blockchain-based games.
A Bloomberg report on Friday said the company was “putting plans to develop its own games in the genre on hold, at least for now,” citing an interview with Sega co-chief operating officer Shuji Utsumi.
However, Utsumi, who has been with the company for nearly 30 years and helped launch the Sega Dreamcast console in the US, said in an email response to questions that the company’s strategy revolves around the blockchain had been misinterpreted.
As an example, Utsumi cited the development of a new blockchain-based game between Sega and social media platform Line, announced on July 10. It would be “very strange” to assume that Sega would pull away from blockchain technology given the announcement of the deal with Line, he wrote in the email.
Utsumi said the company’s business strategy includes Web3 – a new phase of the internet based on decentralized blockchain technologies, the metaverse and non-fungible tokens (NFTs).
In an interview at the IVS Crypto 2023 conference in the Japanese city of Kyoto on June 29, Utsumi said Web3 is among a number of technologies the company is exploring.
“We’re not trying to be a Web 3 company,” Utsumi said. Instead, Web3 technologies like blockchain and NFTs are “features” that the company will continue to explore to grow its business and expand the potential of its intellectual property (IP), he said.
“So I would say we’re Web 2.5,” he added. “2.3 or 2.7 – somewhere in the middle.”
He said the company’s strategy is to invest in Web3 projects, which includes licensing the company’s intellectual property for certain game titles to blockchain-based developers whom the company trusts to uphold its quality standards and meet audience expectations fans fulfilled.
“Blockchain technology can definitely make a big contribution to growth [gaming] “We are seriously evaluating this potential by investing in multiple initiatives, whether it be investing in a fund as a limited partner or investing in the developers,” Utsumi said.
He added that the strategy is a “transmedia” approach, which involves building on a given title across platforms, be it console, arcade, PC or mobile games, collectibles , movies, music or even self-made gaming platforms such as Roblox.
“Theoretically, NFTs can be a medium to connect these different transmedial activities,” Utsumi said. “It would be nice if we could connect with our fans via the blockchain, we just don’t know how yet. We’re still learning.”
An example of Sega’s transmedia approach is the IP licensing agreement between Sega, blockchain game developer Double Jump Tokyo, and decentralized blockchain gaming platform Oasys. Together, the three companies are developing the Sega arcade titled Sangokushi Taisen – Three Kingdoms – into a blockchain-based game.
The hybrid digital and physical collectible game, originally released by Sega in 2005, is based on the warlike “Three Kingdoms” period of Chinese history. The gameplay allows two players to engage in combat based on the strength of the cards in the deck they are holding. The franchise is an extremely popular fixture in arcades in Japan and across Asia, and has reportedly sold over 500 million units of the physical cards used in the game.
“The business we’re running now will be similar to the process behind Three Kingdoms,” Utsumi said. The company will pick titles like arcade franchises that are popular in Asia — a market with gamers who see the integration of blockchain technology in their favorite titles as a “form of entertainment,” Utsumi said, rather than “evil.” it can be perceived as in the West.
Therefore, while there is accuracy in reports that franchises such as Sonic the Hedgehog – well-known names in Western markets – are still a long way from being on the blockchain, Sega remains in what Utsumi describes as a “search mode” for Web3 gaming initiatives that might prove popular elsewhere.
“We’re trying not to offend people, but ultimately, technologically speaking, blockchain will be really helpful to really improve the player experience,” Utsumi said.
“But we also understand the mood of Western players. So we’re trying to figure out what’s the best way to do it by first targeting this type of initiative more towards the Asian market.”
On Monday, Sega announced an IP licensing agreement with Line Next Inc. – an NFT-focused subsidiary of Tokyo-based social media platform Line Corp. – for developing “one of SEGA’s hugely popular gaming IPs” into a Web3 game. The IP in question has yet to be confirmed.
Sega is part of the publicly traded Sega Sammy Holdings group, which has a market cap of $4.55 billion and reported annual sales of $2.68 billion in 2022, up from $2.7 billion a year earlier. Shares are up 25% over the past 12 months.