What strategy is Japanese giant Sony playing in Web3 behind the acquisition of a cryptocurrency exchange?

Author: Zen, PANews

On July 1, Amber Japan officially changed its name to S.BLOX. Acquired in February 2022 by Amber Group, a subsidiary of the Singapore-based market maker Amber Group, and subsequently acquired in August 2023 by Quetta Web, a wholly-owned subsidiary of Sony Group, this company operates the cryptocurrency trading service platform "WhaleFin" and has officially become part of the Sony Group.

With the mission of "touching the world with the power of creativity and technology," Sony's business segments cover "touching people" through gaming and network services, music, and film; "connecting people" through entertainment, technology, and services; and "supporting people" through medical and financial services. To highlight the functions of its major industries, which encompass financial services, gaming, and entertainment, Sony Corporation changed its name to "Sony Group Corporation" in April 2021, marking its first name change in over 60 years.

Among its various businesses, Sony's gaming and network services, music, and film sectors have rapidly developed over the past decade. In the fiscal year 2021, their combined operating revenue for the first time exceeded half of Sony Group's consolidated operating revenue, and their overall operating profit accounted for two-thirds of the group's consolidated profit. With the evolution of blockchain technology, especially the rise of the metaverse and NFTs closely related to entertainment products, Sony has also begun to cautiously explore and expand into the Web3 space.

Metaverse

As a buzzword in the tech world, the concept of the "metaverse" began to enter the vision of many industry enterprises in 2021. As an entertainment giant, Sony is no exception. In its corporate strategy for the fiscal year 2022, Sony anticipated growth in the metaverse and planned to create new entertainment experiences in this field. Sony CEO Kenichiro Yoshida also revealed that the metaverse serves as a social space and real-time network space intersecting games, music, movies, and anime, expressing interest in launching more products that offer metaverse experiences for users.

After targeting the then-popular metaverse track, Sony quickly laid out its plans. In February 2022, it signed a three-year cooperation agreement with Premier League champion Manchester City to jointly create the world's first metaverse football stadium. In April, it was disclosed that Sony and KIRKBI, the family investment company behind LEGO, each invested $1 billion, jointly investing $2 billion in Epic Games, making a significant bet on the metaverse. By the end of the same year, Sony acquired Beyond Sports, an AI-based data analysis and visualization company, which positions itself as a metaverse sports portal, providing real-time digital sports engagement solutions for leagues, broadcasters, brands, and end consumers, as well as sports content from traditional media to the metaverse.

NFT

There has been no unified conclusion in the industry regarding what exactly constitutes the metaverse and which technologies fall under this concept. In the future envisioned by many, NFTs, which possess interoperability and digital asset attributes, are considered essential elements, believed to provide the metaverse with true digital ownership, economic activity, and social interaction. Furthermore, in the foreseeable future, NFT technology has broad application prospects in entertainment products such as games, music, and film. Therefore, Sony has shown considerable interest in the NFT space since 2022.

In April 2022, Sony's subsidiary Sony Network Communications established an NFT business in Singapore, a joint venture between Sony and software development company Sun Asterisk, with Sony Network Communications holding a 70% investment stake. The newly established company aims to maximize value for customers, creators, and end users by leveraging NFT technology in Web3. According to the new company's website, its business includes "NFT business strategy planning support," "NFT issuance support," "unique token issuance support," "NFT game development support," and "NFT promotion support."

Another segment of Sony, Sony Music, began exploring the application of NFT technology at least as early as 2021, participating in a $30 million Series A funding round for the NFT marketplace MakersPlace. In 2022, it first partnered with the Solana-based NFT platform Snowcrash (which has since transformed into an AI-driven music production platform), announcing plans to launch a series of NFTs featuring legendary musicians like Bob Dylan; later, it established a Greater China division of RCA Records to explore opportunities in streaming, NFTs, and the metaverse, signing artists Jackson Wang and A-Lin; and submitted trademark applications related to NFTs for the Columbia Records logo, planning to use the trademark for NFT-supported media, music and podcast production, artist management, and music distribution services.

In the gaming sector, Sony has focused on developing NFT-related patents, with published patents including "Tracking Unique Digital Assets in Games Using Tokens on Distributed Ledgers" and "NFT Framework for Transferring and Using Digital Assets Across Gaming Platforms." The former describes systems and technologies that can track digital assets between different hardware platforms and publishers, while the latter explores a method for cross-platform use and trading of NFTs. Sony has also stated that it will build an NFT and blockchain system applicable to the PlayStation (PS) platform ecosystem.

Infrastructure

Entering 2023, Sony seems no longer satisfied with just the development of NFT technology and has further expanded its business scope in the blockchain and Web3 industry.

At the beginning of 2023, Sony Network Communications, a business unit of Sony Group, collaborated with the multi-chain smart contract network Astar Network to launch a Web3 incubation program focused on practical projects related to NFTs and decentralized autonomous organizations (DAOs), running from March to June, with selected projects potentially considered for investment by Sony Network Communications. This incubation program was organized by Startale Labs, headquartered in Singapore, which is the development company of Astar Network, founded by Astar CEO Sota Watanabe. (Related reading: “Interview with Astar Founder: Blowing the Horn for Japan's Web3, 'Sony Chain' is About to Welcome Major Updates”)

However, after the conclusion of the Web3 incubation program, the organizing party Startale Labs secured a $3.5 million investment from Sony Network Communications. In September of the same year, the two parties further deepened their cooperation by establishing a joint venture, "Sony Network Communications Labs Pte. Ltd.," which will focus on the research and development of blockchain technology. Sota Watanabe stated that the new joint venture will advance the development of Sony Chain, which has the potential to surpass the Layer 2 network Base previously released by Coinbase.

Earlier this year, Startale Labs raised $3.5 million in a follow-up Series A funding round, with investors including UVM Signum Blockchain Fund, Sony Network Communications, and Samsung Next Ventures, resulting in a post-funding valuation of $63.5 million. Additionally, according to Singapore's business information platform BIZFILE, the shares of Startale Labs held by Sony Network Communications have been transferred to Sony Group, symbolizing a significant step forward for blockchain in Sony's business strategy.

Finance

In 2024, Sony began to expand its financial services into the cryptocurrency industry.

In March of this year, Sony Bank, a subsidiary of Sony Financial Group, announced plans to launch "Sony Bank CONNECT" in the summer of 2024. This new smartphone application aims to provide privileges for digital securities and NFT holders, designed to allow any user to easily and securely access exciting experiences. The app will connect to the market operated by SNFT Corporation, where users can display and enjoy the NFTs they hold in SNFT.

With the product launch, Sony plans to offer digital content to customers who participated in past events and received NFTs, purchased specific digital securities, or answered surveys. Additionally, they are developing a blockchain-based wallet and plan to continue expanding its features based on customer feedback after the launch. Sony Bank stated, "Sony Bank CONNECT will continuously expand its features after launch based on customer needs, contributing to the future development of Japan's Web3 entertainment sector."

Furthermore, in April of this year, Sony Bank began conducting a proof of concept, planning to issue a stablecoin pegged to fiat currency. This experiment will be conducted on the Polygon blockchain. It is reported that due to the advantages of reduced payment and remittance costs, Sony is exploring the use of stablecoins to promote the company's intellectual property in gaming and sports. Sony's stablecoin experiment will assess any legal issues related to transferring yen-backed stablecoins, expected to last for several months. This development will be entrusted to SettleMint, a blockchain company based in Belgium.

The latest developments in the cryptocurrency and financial business include the earlier mentioned acquisition of Amber Japan by Sony, which has now been renamed S.BLOX. Future plans for the company include restructuring or optimizing aspects such as UI screen redesign, new application releases, and the expansion of supported currencies and features.

Since 2021, Sony has been continuously expanding the boundaries of its exploration in Web3, from the metaverse and NFTs to building infrastructure public chains and engaging with cryptocurrencies. For a large entertainment group like Sony, cautiously integrating emerging technologies into its various business segments allows it to avoid being overly aggressive and taking on excessive risks, while also preventing it from being left far behind due to excessive conservatism. This inclusive attitude towards emerging technologies may be the key to its longevity of over sixty years.