Case Study - Final Fantasy
Case Study - Final Fantasy
Case Study - Final Fantasy
Source: iStockphoto.
followed several years of radical strategic initiatives
including strategic alliances with the strategy games
developers Double Helix and Gas Powered Games in
the USA and Wargaming.net in the United Kingdom.
Most radically in 2009, it had also acquired the British
Eidos Group, famous for the Lara Croft games. Square
Enix President Yoichi Wada commented at the time:
‘Our goal is to become one of the top ten players in
new people coming in, no new ideas, almost xeno-
the world’s media and entertainment industry. Since
phobic . . . The lag with the US is very clear. The US
the games market is global, both our contact with our
games industry was not good in the past but it has
customers and our game development must become
now attracted people from the computer industry and
global too.’
from Hollywood, which has led to strong growth.’1
TV series, films, comics and novels. In 2005, Square continued: ‘The Group’s management and administra-
Enix bought the Japanese arcade-game company Taito tion departments will be integrated, while our product
Corporation, famous for its Space Invaders game. Space and service delivery will be established locally in each
Invaders versions have appeared on PlayStation, Xbox territory to maximise our business opportunities through
and Wii consoles, as well as PCs. better understanding of local customers’ tastes and com-
By 2008, Yōichi Wada was presiding over a company mercial practices.’ Wada also recognised the new strength
that was increasingly diversified, with sales of ¥136 bn that Eidos brought in action-adventure games, by con-
(about €1 bn) and just over 3,000 employees. However, trast with Square Enix’s traditional core of role-playing
it was still overwhelmingly Japanese (85 per cent of games. He declared his commitment both to sharing
sales at home) and lacked scale by comparison with com- technologies across the businesses and to sustaining
petitors such as Electronic Arts and Activision. On the particular strengths: ‘While promoting shared technology
plus side, Square Enix reportedly had a ‘war-chest’ avail- and expertise among our studios, we will also develop
able for acquisitions of about Y40 bn (about €300 m).3 products which reflect the unique identity of each
During the summer of 2008, Square Enix made a friendly studio, regardless of locality.’ Wada also commented on
bid for the Japanese game developer Tecmo, whose the nature of the skilled games developers he was
fighting games Ninja Garden and Dead or Alive were acquiring: ‘It is always difficult to manage creatives
popular in North America and Europe. Tecmo rejected anywhere in the world. We want to cherish the Eidos
the bid. Wada began to look overseas. studio culture but change it where it is necessary.’5
One thing that Square Enix was quick to do was to
end the Eidos distribution agreement with Warner
Lara Croft falls
Bros for its products in the USA. Square Enix regarded
Eidos is a British games company best known for the itself as strong enough to do that itself.
action-adventure games series Tomb Raider, starring the
extraordinary Lara Croft. However, during 2008, dis-
Strategic alliances
appointing sales for Tomb Raider: Underworld drove its
share price down from £5 (~€5.5; ~$7.5) to around At the same time as acquiring Eidos, Square Enix
30 pence. Eidos’s founder and Chief Executive, Jane cemented three significant strategic alliances. In the
Cavanagh, was forced to resign. The company declared United Kingdom, Square Enix tied up with the strategy
losses of £136 m, on sales of £119 m (down from game developer Wargaming.net (famous for the Massive
£179 m two years earlier). In April 2009, Square Enix Assault series) in order to produce the World War II game
bought the company for £84 m, a premium of 129 per Order of War. This would enter the market at the end
cent over Eidos’s current market value. Given the of 2009 as Square Enix’s first global product release.
declining success of the Tomb Raider franchise, many In the USA, Square Enix formed partnerships with Gas
speculated that Square Enix had overpaid for its first Powered Games (producer of the Supreme Commander
overseas acquisition. strategy game) and with Double Helix (producer of the
The acquisition of Eidos did offer Square Enix global Front Mission strategy series). Together with the Eidos
reach, however. About one third of Eidos’s sales were acquisition, these partnerships significantly extended
in the USA and 40 per cent in Europe, excluding the Square Enix’s range beyond its traditional core in
United Kingdom. Eidos also brought Square Enix its role-playing games. They also extended the company’s
first studios outside Japan, with studios in the United geographical reach. Yōichi Wada commented: ‘We see
Kingdom, Denmark, Hungary, the USA, Canada and China. great opportunities in North American and European
Yōichi Wada commented: ‘It is significant that we have markets, both of which are expected to be maintaining
opened a window for creative talents worldwide.’ sustainable growth over these coming years. Therefore it
Wada chose to keep Phil Rogers, the new Eidos Chief is crucial that we create alliances with proven developers
Executive, and the rest of his management team in such as Gas Powered Games in order to serve these
place. Wada described a new group structure, in which significant markets better by providing products and
Square Enix, the arcade business Taito and Eidos would services in tune with customer tastes.’6
each be standalone divisions: ‘Our aim is to imple- All three of these new partners were relatively small
ment a hybrid management structure which avoids the (around 100 employees each), privately owned and had
extremes of being either too global or too local.’4 He their origins as start-ups during the 1990s. The founders’
We were all into that, so that was easy. When we asked 1. M. Palmer, ‘Square Enix views Eidos as a jump to next level’,
Financial Times, 28 April 2009.
them, “How should we develop our game to work with 2. ‘Cost of making games set to soar’, www.bbcnews.co.uk, 17 November
their philosophy?”, they said, “Don’t do that because 2005.
3. ‘Square Enix needs to show growth scenario to market’, Nikkei,
we want you to do what you do. You make games for 9 October 2007.
the Western market, and we’re interested in making 4. Joint interview with Yoichi Wada and Phil Rogers, www.square-enix.
games for the Western market.” So if we changed, com, 26 May 2009.
5. M. Palmer, ‘Square Enix views Eidos as a jump to next level’,
we would be missing the point. Which was terrific, Financial Times, 28 April 2009.
because that meant we could do what we loved to do, 6. ‘Square Enix and Gas Powered Games announce strategic partner-
ship’, Newswire Association, 12 November 2008.
make great RTS (real-time strategy) games . . . and if
7. P. Elliott, ‘Foot on the gas’, gamesindustry.biz, 19 August 2008.
we tried to change them in any way, we’d be moving 8. X. de Matos, ‘Interview: Chris Taylor on Supreme Commander 2’,
away from the goal.’8 joystiq.com, 9 June 2009.
9. Randy, ‘Square Enix tries hand at WWI RTS with Order of War’,
Gaming Nexus, 17 April 2009. Italics in original.