Former Square Enix president and current Chairman of the Board Yoichi Wada attended a round table of the “Kurokawa School: Thinking the Future of Entertainment” and gave a few glimpses on the reasons behind the sudden influx of remakes, sequels and social games that affected the company in the past few years. He also mentioned the reasons why Eidos was pinpointed as the best purchase option to expand in the western market.
Wada-san explained that shortly after he became President he realized the the management structure of Square Enix had weakened.
After much thought it was decided that releasing games on which the development staff could work with confidence would lead to improved performance, therefore the conclusion was to produce remakes or sequels of existing IPs and then work on new IPs after that.
That happened five years ago, and since then Square Enix faced a series of challenges like the fact that they were late in developing for PS3 and Xbox 360, and difficulties in developing new IPs. In addition to that a lot of director-level developers were required to participate to the development of Final Fantasy XIV. Given the situation closeing some of the new IP projects was inevitable while creating a big hitting new IP was difficult.
Wada was left wondering why the company should only focus on developing high end titles, but stopping altogether was not feasible. Resuming afterwards would have been too difficult. That’s why he decided that development on them would continue, despite the worsening situation.
That’s why online games that were time consuming but based on monthly billing services, and social games with microtransactions were developed to ensure the cash flow and stabilize the managerial foundations.
This kind of diversification ensured the availability of funds to continue the development of high end titles and new IPs. Wada-san also added that this business model that does not rely only on conventional packaged sales is still used today even after his resignation.
Then in 2009 the company looked into expanding in the western market, and the management also realized that they were excessively reliant on the RPG genre.
It wasn’t just Square Enix. The RPG genre itself had become stagnant and the basic structure of games tended to be always the same, unable to showcase the new technologies.
Classic RPG mechanics were excessively restrictive for example when there was a generational change, and there were concerns that they wouldn’t keep up with technical advancemnt. Eidos was pinpointed as the solution of the problem, as they worked on a variety of genres and owned their own IPs.
At that time Eidos was very different from Square Enix’s own brand image bound to RPGs, so it was thought that they would do well under the same roof.
The acquisition of Eidos definitely proved a good choice for Square Enix, bringing forth a basically instantaneous diversification of its portfolio and opening the door to a stronger expansion in the west. On the other hand the development of social games, remakes and sequels created a solid cash flow that can be reinvested in the development of big titles and new IPs.
I know it’s hard to resist the temptation to shake your head every time Square Enix (and other publishers) announce just another social browser game, a microtransaction-based minigame on smartphones or Kingdom Hearts HD Remix With Cherries on Top 24/7, but the money made with these low risk projects is what keeps high risk ones like Final Fantasy XV, Kingdom Hearts III and new IPs like Murdered: Soul Suspect alive.