Ex-Square Enix Exec Claims Games Market Shifted from Content to Social Networks

Ex-business director of Square Enix, Jacob Navoc, claims that the video game industry is undergoing significant realignment. He believes that games are going from a content structure format to social networks, drawing examples from failed games alongside undeniable successes within the video game industry. Navoc attributes part of the Microsoft layoffs alongside the increasing relevance of AI in video games to this shift within the industry. 

Jacob Navoc posted his observations and insights on X.

“Square Enix has spent two decades slowly moving away from being a content business. Not just Square Enix, but every publisher. Wada-san was right. The future of games was the Network. But the Network business he imagined isn’t about games being online, it’s about the social network of games (Metcalfe’s law) replacing the content business,” Navoc claimed. 

The ex-Square Enix executive then goes on to say that the recent layoffs are not a result of a passing storm, but a fundamental realignment. Gamers used to finish a game, then move on to the next; this business model worked since content was in scarcity. It was a basic tenet that games were content: a game that provided good content would make profitable outcomes. 

“A portion of the game business still remains this way, but it is crumbling. As I argued last year, the issue with the Final Fantasy series was not that its costs were too high, but that it could not generate the revenue needed. Audiences expected to play did not come, or were not willing to pay to spend their time.” 

Numerous games attempted to reach their network era, but many failed. Navoc mentions Star Wars Hunters, a Zynga-published team-based shooter that was shut down just nine months after its initial launch. Similar to social networks, only a few grow into a successful network. Navoc references Facebook’s emergence in this sphere, and states that only TikTok has rivaled the platform since. Other social networks, such as Snapchat, continue to pale in comparison to such giants. 

Using this as a staple to his claims, Navoc points out Fortnite’s and Roblox’s success in creating a social network. Both games thrive with millions of players on the game each day, yet many other live-service titles fail to meet such metrics. Roblox and Epic, according to Navoc, already have forever platforms. Sony now needs to make its own, or it will be stuck in its content business structure in the era of network businesses.

“Nearly $1bn in game investment went into the following games: $400m for Mindseye, $100m for Splitgate 2, hundreds of millions more for Marathon, and tens of millions more for FBC: Firebreak. These are just four titles that, in June, announced that their launches or betas had not gone as planned,” Navoc wrote.

After numerous examples, Navoc delves into the Microsoft situation. According to him, the layoffs are not a result of them replacing studios with AI. He states that AI is a once-in-a-generation change in the entirety of digital order, and Microsoft must either adapt these practices or perish.

Navoc worked as director of business development at Square Enix Holdings from the years 2010 to 2015, later serving as Senior Vice President of Shinra Technologies. He is currently the CEO of Genvid Technologies Inc., where he helps build tools and operations for game developers, media companies, and other content outlets.