Beyond Final Fantasy: Square Enix grapples with globalization

Square Enix is an interesting case-study in how global publishing brands are grappling with the profound changes facing the games business. Clues to its strategy could be seen at the recent E3, where the firm's offerings covered M-Rated slaughter-fests, new IP, downloadable puzzlers, Japanese standards, mobile and social, major AAA IP like Tomb Raider and that next-gen Final Fantasy-branded demo. As well as straddling genres and business models -- partly through the 2009 acquisition of Eidos -- the firm is working hard to truly globalize its appeal as well as its operations. Mike Fischer, president and CEO at Square Enix U.S says, "We are starting to invest in social and mobile and online games. My goal is to have a balanced lineup, the balance between family and mature content, the balance between East and West content. We are trying to create games like Quantum Conundrum or Motley Blocks or Qwirkle, that fill in gaps, have very high potential, but are lower-cost games, that allow us to take more creative risks." In its last financial year the company turned around a 2011 loss with a $76 million worldwide profit, with sales up 2 percent. Most of the win came down to the success of Deus Ex: Human Revolution, a risky gambit that paid off, garnering great reviews and selling over 3 million units as well as Final Fantasy XIII-2, the latest iteration in its long-running role-playing series. At the time of the company's 2011 loss, Yoichi Wada, Square Enix boss said the firm had been too slow to react to the polarization between major hits and the growth of mobile and social and the new pricing models they have wrought. He outlined the firm's belief in a three-pronged strategy of globalization, focusing on core IP and experimenting with new ways to "network" with consumers via new pricing models and genres. Square Enix resurrected the Deus Ex brand during fiscal year 2012 but it was, effectively, a new IP. This year it is re-imagining Hitman and Tomb Raider, both of which have been generally well-received so far. The company is also trying out a new IP with Asian urban adventure Sleeping Dogs, a game picked up from Activision that is winning increasing regard in the media. But while these games will represent the largest share of the company's income when it reports financials next March, the future likely depends on how well Square Enix plays new distribution and pricing models. This is where new consumers are likely to be won. Fischer, a 20-year games business veteran who has worked for Namco, Sega and Microsoft, says, "When books, movies, and music made the switch to online delivery, they didn't bring new people in. People didn't start reading who weren't reading before, people didn't start watching movies for the first time because they were online. But that's happening with games. There's a certain amount of organic growth as gamers grow older. They're continuing to play as younger people come in and start playing. But you're also getting folks coming in from the side with the online social and mobile games." He adds, "They may not have been gamers before. Some of those may stay at the very light, casual level. Some of them will level-up, so to speak, and become more serious gamers. " A good example of this is the firm's E3 focus being not just on big boxed games, but also on Quantum Conundrum, the digitally-distributed first-person puzzler designed by Kim Swift of Portal fame. It's been created in a year with just a small team at Airtight Games, but recent titles like Fez, Journey and The Walking Dead have hit big on downloads market, so the upside potential is good. "It costs a lot less to make a high quality game for Xbox Live Arcade or Facebook or iPhone than it does to make a full-on high-def retail game," says Fischer. "That allows me to take more creative risks and bring out games that would be probably too risky for a $60 million investment." He adds, "There's no better example than Quantum Conundrum. We had it featured out at E3 as a triple-A title, as big as Hitman or Sleeping Dogs. It's garnering as many awards as anyone else's HD retail title. "This makes me feel really good about where we're headed. These new formats are allowing new creators to come in and actually make games." He likens the new generation of game developers to those who came up during the home computing boom of the early 1980s. "The ease of access with some of these new platforms is going to bring in a whole new pool of talented people, who up until now couldn't reach the bottom rung of the ladder." So, despite the misery of falling retail sales, Square Enix is making money, trying new things and feeling positive about the future. "We're doing okay. Remember, we're coming off an unnatural high because Wii was such an success. Guitar Hero and Rock Band were just out of this world. But I think the core businesses remain stable. "The key for me is to use social, mobile and online to continue to give people a chance to try our games, give Square Enix a more broad-based appeal, and hopefully move those folks up the value chain to more serious games." [Colin Campbell writes for IGN. You can follow him on Twitter @colincampbellx]