Square Enix squares off pretty well in the fight to be the top gamer in Japan. The company is a leading developer of video games for consoles from Sony, Microsoft, and Nintendo, as well as for PC and mobile. Popular titles include Kingdom Hearts, and iconic franchises such as Final Fantasy and Eidos' Tomb Raider and Deus Ex. Some games are available online, such as Final Fantasy XIV, a massively multiplayer online role-playing game (MMORPG). Subsidiary Taito (creator of Space Invaders) operates about 130 arcades across the country that accounted for more than a third of sales in fiscal 2011, its second largest segment. Square Enix also publishes game-related books, magazines, and comics.
Square Enix got a splash of cold water in the face for fiscal 2011 as sales dropped 35% to little better than 2006 levels. The bottom line would succumb to the shortfall, as the company suffered its first loss (¥12 billion ($130 million)) since Square Co. and Enix Corporation merged in 2003. A culprit named for over half of that loss was a goodwill write-down related to its Eidos and Taito businesses.
Playing its part, however, was the nearly 50% drop in its core segment. It fell from more than 60% of sales to just over 50% for the fiscal year, and the more modest miss from its Amusement segment (14%) boosted that business's share of sales to 36% . The comany acknowledged significant operational stumbling blocks in its games division, most notably a drop in development quality to get games to market quicker. The most startling victim of that rushed approach was the disastrous launch of its most recent online title for its signature franchise, Final Fantasy XIV (FFXIV), widely reviewed as too buggy and poorly designed to play. One publication described it as "in no way...ready for commercial release."
The company responded by promising to fix FFIV and get it back to the level of quality expected from the series. In general, Square Enix also focused on less than a dozen titles for the remainder of that year, and delayed the launch of its highly-anticipated Deus Ex: Human Revolution to improve its quality. It needs to remember this lesson as it readies its next installment for Tomb Raider, planned for release in 2013.
The company's strategy follows three general ideals: globalization, being community network-minded, and focusing on proprietary intellectual property. Globally, Square Enix has an established presence in North America, Europe, and Japan, while China is at the head of its emerging market endeavors. With gamers becoming more connected, the company aims to improve its role as a community platform and network operator. Finally, concentrating on its own brands is at the core of its plans, particularly in an increasingly networked environment where game content creation and monetization becomes much more nimble.
Aside from its own game development efforts, the company has worked to expand its partnerships with other developers and studios, including partnering with Activision Blizzard and Ubisoft to publish their games -- such as Call of Duty and Prince of Persia, respectively -- in Japan, as well as working with Disney Interactive Studios on the action RPG Kingdom Hearts, which pairs characters and settings from Disney's animated films with content from Square Enix's Final Fantasy series. The company also partnered with Seattle-based Gas Powered Games to publish Dungeon Siege 3 for console and PC in the US in 2011. – less