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Sega says it will walk away from NFTs if the response is poor

Negative player reception could tank Sega's blockchain dreams and schemes.

It seems Sega's blockchain gaming future isn't set in stone. Word is spreading this week about comments made during an investor's meeting late last year that shows the company isn't quite all-in on the latest craze in the video game business.

Back in December, Sega Sammy president and CEO Haruki Satomi, board director and CFO Koichi Fukazawa, and Sega Corporation president/COO Yukio Sugino took questions from investors about its plans for 2022. The trio were quizzed about topics ranging from Sonic Frontiers to its announcement that the company would be getting into the blockchain video game business--specifically with a "play-to-earn" strategy.

When asked about "play-to-earn," the trio responded that Sega isn't quite all-in on the concept quite yet. "In terms of NFTs (sic) we would like to try out various experiments and we have already started many different studies and considerations but nothing is decided at this point regarding P2E," they said.

NFTs of course, refers to non-fungible tokens--blockchain-backed assets that can be purchased using cryptocurrency and ostensibly are uniquely owned digital assets that can appreciate or depreciate in value (many of them also burn an obscene amount of CO2 when they're minted).

One of Sega's 2021 experiments with NFTs was to partner with Double Jump Tokyo to sell classic game assets as unique collectibles. 

Sega leadership seems to be paying attention to the negative backlash players (and developers) are having to NFTs. The trio stated that if Sega wants to pursue NFTs as a business strategy, it needs to be able to "mitigate the negative elements" of the technology, and ensure it can be produced in compliance with Japanese regulation. 

What's eye-catching is their apparent willingness to publicly state that Sega will back off the technology if players don't want it. "if it is perceived as simple money-making, [we] would like to make a decision not to proceed." (It's not specified which of the trio made this comment).

The "negative elements" of NFTs and blockchain gaming go beyond the environmental impacts, which can be mitigated by what algorithmic process a company uses to generate new additions to their blockchain of choice. Ubisoft's much-tarnished "Quartz" NFT platform uses a blockchain that relies on proof-of-stake computing (which uses far less electricity than proof-of-work), but still garnered negative reactions from players and developers.

That's because NFTs (and blockchain tech in general) still are built on a number of financial pillars that come with a huge amount of risk. "Play-to-earn" technology isn't about doing tasks in exchange for wages like a job, it's about acquiring speculative assets in the hope that someone will pay more money for them than you initially spent. 

In the context of video game design, it's possible those assets could have tangible value by making them high-performing objects in a game--maybe even letting players rent them out to other users. 

But that opens the always-touchy door of "pay-to-win" game design, something that attracted ire even before blockchain games hit the market.

That's also before you consider the security risks that have grown with NFT related projects. For every high-earning sale, there are a number of cyberattacks that attempt to break into users' crypto wallets to obtain these assets for themselves.

And as many developers have noted, many proposed blockchain gaming systems can be created without the blockchain. Roblox managed to build an entire ethically sketchy speculative market with nary a minted coin in sight.

It's possible that Sega could thread the needle and find an ethically-sound model for this new technology. It does seem doing so will be a tall hill to climb. 

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