Exploring Sony’s 8-year Web3 journey: Why the potential of Layer2 “Soneium” may be overestimated?

Original title: "Counting Sony's 8-year Web3 layout, why don't you overestimate Layer2 "Soneium" first?"

Original author: flowie, ChainCatcher

Recently, Sony Group announced that it will launch Layer2 "Soneium" on Ethereum, trying to promote the large-scale adoption of Web3, which has brought a lot of imagination to Web3.

This Japanese giant with a market value of more than 100 billion US dollars and a history of nearly 80 years, its business covers consumer electronics, games, film and television, music, finance and other fields, and has established branches or factories in more than 140 countries and regions around the world.

According to Sony's 2023 financial report, its net profit for the whole year of 2023 was 970.6 billion yen (about 6.619 billion US dollars).

Whether it is bringing a large number of Web2 users to Web3 or the potential capital investment, it seems to be a positive signal for Web3.

In fact, this is not the first time Sony has laid out Web3. Since announcing its investment in blockchain research and development in 2016, Sony has been involved in Web3 sub-sectors such as hardware wallets, metaverse/blockchain games, NFTs, stablecoins, and encrypted exchanges.

However, facing the Web3 field with a long innovation cycle, Sony may also find it difficult to get rid of the shackles of "big company disease". On the one hand, although the tentacles are wide, they are eager for success and are prone to give up halfway; on the other hand, they often selectively apply technologies such as blockchain, and the marketing gimmicks may be greater than the actual implementation.

For the Web3 industry, in this wave of innovation, perhaps we should not have too high expectations for the participation of traditional giants.

Web3 layout is broad but not deep, often only a taste

"Before you get too excited about Sony and its new L2, remember that its last crypto project was an NFT market called SNFT, which no one actually used." @beaniemaxi, a crypto kOL with 200,000 followers on the X platform, expressed doubts about Sony's high-profile announcement of the Layer2 strategy.

In @beaniemaxi's view, Sony may launch 100 products like most large companies such as Google, and quickly abandon 95 products once they fail to gain attention.

In fact, looking back at the eight years of its Web3 layout, Sony is indeed good at keeping up with hot spots, but often stops at a superficial level. Many Web3-related businesses cannot be found after being announced, and the products remain on paper or in research, and have not been put into large-scale application.

Sony's earliest layout of Web3 can be traced back to 2016. At that time, Ethereum and ICO had not yet emerged, and Japan's crypto asset transactions had not yet been included in compliance supervision.

Sony mainly tried to use blockchain technology to build some shared databases for encrypted transmission and sharing of data.

In early 2016, Sony International Education announced that it would introduce blockchain technology into the K12 field to realize the encrypted transmission of student data.

Since then, Sony has also made similar attempts in real estate and travel. For example, in 2019, Sony established a laboratory with commercial banks to try to maintain the transparency of information in real estate transactions through blockchain and create an environment that promotes transactions.

In 2020, Sony announced plans to develop a public database platform (BCDB) to record and share anonymous travel history data, realize income distribution, and improve the efficiency and transparency of travel services.

These plans are similar to the popular RWA and DePIN concepts in the past two years, but due to compliance and technical issues, it is difficult to find initial results after implementation.

In addition to software, Sony is also trying to make encrypted hardware wallets.

In early 2018, Sony followed the hot spots and announced the development of a contactless cryptocurrency hardware wallet. The hardware wallet is based on Sony's Felica smart card technology.

According to the Nikkei Review, Felica chips shipped 1 billion worldwide in 2016. If Sony successfully integrates and connects Bitcoin payments, it may bring considerable adoption to the crypto market.

However, Sony has not announced its plans to put this hardware wallet into use.

This year, Sony, which has a large gaming business, also announced the adoption of blockchain games.

At the end of 2018, Sony announced that it would release the blockchain game "Plague Hunters" in the first quarter of 2019. Sony said that Plague Hunters is an Ethereum-based role-playing game and will become the first game to use blockchain technology. But in 2019, there was no release news or player data for this "Plague Hunters".

In 2020 and 2021, with the popularity of Web3 concepts such as blockchain games, metaverse, and NFTs that are strongly linked to games and copyrights, Sony, which has a deep layout in games, music and other fields, has begun to accelerate the exploration of Web3. In addition to simple cooperation with Web3 projects, Sony will subsequently carry out related businesses by establishing subsidiaries.

On NFTs, Sony's operations were relatively simple at the beginning, mainly through the launch of NFTs of movie tickets through partners, and strategic cooperation with NFT market platforms to develop some NFTs.

For example, Sony Music Entertainment (SME) has reached a cooperation with Solana's NFT platform Snowcrash, which can release celebrity series NFTs such as stars or artists, but the platform has rarely spoken since January 2023.

On April 13, 2022, Sony Network Communications announced the establishment of an NFT business company in Singapore, a joint venture with software development company Sun Asterisk, with an investment ratio of 70%.

Its business is "NFT business strategy planning support", "NFT issuance support", "unique token issuance support", "NFT game development support" and "NFT promotion support". The joint venture operates an NFT market SNFT, but it does not have much presence in the market.

This summer, Sony Bank launched the Web3 mobile application "Sony Bank CONNECT" to try to provide digital service content for its bank NFT users and digital securities users.

In addition, Sony has applied for a number of NFT patents. At the beginning of 2023, Sony Interactive Entertainment has applied for NFT-related patents to allow consumers to use NFTs in the Sony ecosystem, while also supporting games from other third-party game developers such as Nintendo and Microsoft.

In the metaverse and blockchain games, Sony has successively reached strategic cooperation with Hadean, a metaverse infrastructure developer, and Didimo, a metaverse digital human avatar technology company.

In March 2022, Premier League champion Manchester City Football Club established a three-year partnership with Sony, planning to build a football field in the metaverse. In October 2023, Roblox, the head platform of the metaverse, also went online on Sony PS4 and PS5.

As the popularity of the metaverse, NFT, etc. faded in 2022, and infrastructure such as public chains emerged, Sony also began to turn to more basic infrastructure or financial services.

The Layer2 public chain plan recently announced by Sony was actually launched as early as 2023.

In September 2023, Startale Labs announced that it had received a $3.5 million investment from Sony Network Communications, and announced that it had established a joint venture with it to promote the development of Sony Chain, saying that the chain has the potential to surpass Coinbase's previously released Layer2 network Base.

On April 5, 2024, Sony Bank also announced the official launch of a stable currency issuance empirical experiment linked to fiat currency. Trying to reduce the handling fees for individuals when making payments and transfers, while exploring its potential for application in intellectual property-related businesses in areas such as games and sports.

Web3 investment exceeds $1 billion, heavy bet on metaverse games

In addition to exploring Web3 at the business expansion level, Sony also deploys Web3 through investment.

Sony has not set up a special investment fund for Web3 investment.

Sony has invested in innovative technology funds focusing on emerging fields such as artificial intelligence, robotics and financial technology through its Sony Financial Ventures and Sony Innovation Fund, Innovation Growth Fund I L.P. and other funds. The funding scale of Sony Innovation Fund and Innovation Growth Fund is 10 billion yen (about 68 million US dollars) and 20 billion yen (about 136 million US dollars) respectively.

From 2019 to now, in 5 years, Sony has invested about 10 times in the Web3 field. It has made the largest bet on metaverse games, with 5 financings related to it.

Among them, in April 2022, Sony announced an investment of $1 billion in Epic Games to accelerate the construction of the game ecosystem metaverse. Epic Games' post-investment valuation reached $31.5 billion.

Epic Games is the developer of the most profitable game "Fortnite" on the entire network, and controls the "Unreal Engine" most used by mainstream 3A games.

Before the concept of the metaverse became popular, Sony had invested $250 million and $200 million in Epic Games in 2020 and 2021 respectively.

Although the current craze for the metaverse concept has receded, Epic Games is still the leading player in the metaverse concept. In early 2024, according to foreign media GamesIndustry.biz, Epic Games once again received a $1.5 billion investment from Disney to create a new game entertainment universe.

Anzu, which focuses on advertising in metaverse games, received $20 million in financing from Sony in 2022, and again received $48 million in Series B financing led by Emmis Corporation and participated by PayPal Ventures in 2023.

In 2024, Sony's two Web3 investments still fell on games. Among them, Sony invested in double jump.tokyo, the developer of Oasys, a long-established Japanese game public chain, to promote its development on the Sony Group blockchain "Soneium".

Among the Web3 startups that Sony invested in early, the asset tokenization platform Securitize has the most stable development momentum. After the RWA boom in 2023, it has become the underlying technology provider for many RWA institutions. After Securitize received investment from Sony, it obtained nearly $100 million in financing through two rounds of financing.

In Securitize's $47 million financing in May this year, BlackRock also participated as the lead investor. Earlier in March, BlackRock also cooperated with Securitize to launch a new fund, BlackRock USD Institutional Digital Liquidity Fund.

Recently, Securitize also provided support for the issuance of securitized tokens for Sony's new film. Sony Bank and Sumitomo Mitsui Trust Bank use the Securitize platform to provide digital securities for customers.

However, the crypto banks and NFT markets that Sony invested in early performed poorly.

Nuri, a crypto bank invested by Sony in 2019, declared bankruptcy in August 2020 after failing to find an acquirer and external investment.

In 2021, MakersPlace, invested by Sony, was one of the top 5 NFT trading platforms in terms of trading volume.

MakersPlace once collaborated with Christie's to auction artist Beeple's digital art work "Everydays: The First 5000 Days" for a sky-high price of US$69 million, which attracted a lot of attention from users.

However, as of September 2, 2024, according to NFTscan data, MakersPlace has had almost no trading volume in the past seven days and nearly a month.

In addition to the traditional investment model, in May 2023, Sony launched the Web3 incubation program through its subsidiary Sony Network Communications in cooperation with Polkadot's parallel chain Astar Network, and initially reached early Web3 projects by holding a "Demo Day" event.

Behind the high-profile entry into Web3 again, Sony is in a state of sluggish growth

Entering 2024, Sony's layout and voice on Web3 seem to be more high-profile.

In the past, Sony's Web3 layout was mostly limited to technologies such as blockchain, or the vaguely defined concept of Web3.

But in July this year, Sony first announced the acquisition of Amber Japan (now S.BLOX) to enter the field of cryptocurrency trading; recently announced a partnership with Startale Labs to launch Layer2 "Soneium" on Ethereum to build a universal blockchain.

In the Japanese crypto market, which has always been regarded as closed, conservative, strictly regulated, and slow-paced, Sony's recent developments have indeed attracted attention.

From the perspective of Sony's own business development, Sony is indeed looking for a growth path after PS5.

In February this year, after Sony Group disclosed its third fiscal quarter results for 2023 ending December 2023, Sony's total market value in the stock market has evaporated by about US$10 billion.

A Wall Street analyst said that before the quarter from January to March 2022, the operating profit margin of Sony's game business department was about 12%-13% in the past four years, and Sony's game operating profit margin in the quarter was the lowest in nearly 10 years.

Faced with the slowdown in the growth of the game business, after the Sony Group released its fiscal 2023 financial report in May, Sony Group President Hiroki Totoki mentioned a new growth strategy, "to maximize synergies through content IPs of games, music and movies", and explore a growth model for continuous profitability of its own content. And a growth investment plan such as mergers and acquisitions (M&A) of 1.8 trillion yen in the next three years.

Crypto exchanges and public chains seem to be one of the most profitable areas in the crypto field. Sony's high profile in the crypto field this year may be to alleviate the lack of growth.

General blockchains such as public chains are also conducive to Sony's further realization of content IP synergy. Startale Labs CEO Sota Watanabe recently revealed on social platforms that Sony's blockchain Soneium is focusing on creative IP to build a universal creation platform, which is in line with Sony's growth strategy of "maximizing content IP synergy".

In addition, the relaxation of supervision may also provide positive factors. In April 2023, Japan's largest party, the Liberal Democratic Party, released the "Japan 2023 Web3 White Paper" in an attempt to relax supervision. Officials from the prime minister are supporting various Web3 conferences to show their support.

With Sony's high-profile announcement of entering the encryption field to form a demonstration effect, it is expected that larger Japanese giant players will announce encryption layouts later.

However, there are still many skeptics about the encryption plans carried out by traditional Japanese giants such as Sony.

From the Sony Web3 layout sorted out in the previous article, most of them participated in the form of strategic cooperation or investment. The same is true for the crypto exchange acquired this year and the Sony Chain to be released soon. The official core team of Sony is not the leader.

With extremely wide business, it is necessary to question how much investment and persistence Sony can make in this part of the business.

Secondly, the limitations of traditional Web2 thinking. Crypto KOL @Lorrainelooloo said that if the final (Soneium) "Sony Web3 Ecological World" product is still a "selective partial application of blockchain technology as a marketing gimmick, and the core still uses the traditional approach from top to bottom" and cannot achieve more innovative breakthroughs, it may even hit the creativity of the Japanese crypto industry.

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