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Interview with Square Enix President Yoichi Wada

Interviews / 面接 by: Elmer the Pointy

Translated from nikkei TRENDYnet

Square Enix came out on top of the 2008 sales war with their portable Final Fantasy-related titles. The postponement of Dragon Quest IX - Defenders of the Starry Sky, coupled with a slump in the entertainment sector, hit their bottom line during the fiscal quarter up to March ‘09. However, they are now anticipating sales exceeding 3 million units during the next quarter. We are also drawing closer and closer to the release of the newest installment in the Final Fantasy series, which is expected to shake things up dramatically in 2010.
We spoke with CESA chairman Yoichi Wada about 2009 causing an upheaval in the gaming industry, and what his strategies and outlook are for the future.
(Interviewer: Kazumasa Watanabe

How did you fare in the sales wars during the late ‘08 to early ‘09 season?
Wada: We performed well, and according to our predictions. Our main focus at the end of the year was Dissidia: Final Fantasy. I feel our exploration of new sales approaches has lead to favorable sales of that title. (※860,000 units as of Feb. 1st ‘09 - Source: Famitsu)
Since Autumn of 2008, there has been a shift in the gaming market, and I thought that it would have reflected more strongly in the number of units shipped. However, the numbers themselves are still within our predictions.
What do you mean when you say “the gaming market has shifted”?
Wada: I mean that the environment surrounding retailers is harsh and is affecting sales. The bulk of game titles are passed along to retail stores and sold as merchandise. Due to the economic downturn, creditors are extra cautious and now retailers have much less leeway.
There are new limits to what they can do with their capital, and cannot carry an extensive variety of games. Rather, they must focus on which titles are going to sell. Even when you have a customer intending to purchase a game, the first thing they see are your strongest titles displayed at the storefront, and as the number of those titles decreases, it really becomes survival of the fittest - a distinction between what sells and what does not.
The reality is, retailers will not stock titles in which they have no faith. This means there are very few chances for unknown titles to break out in this environment. Fundraising is tough, and so we have to understand that we can only deal in titles that are sure to sell. Dissidia: Final Fantasy was a prominent title that received a lot of praise. It was thankfully a title that retailers were eager to place on their shelves. As a result, I feel we were able to post some positive numbers.
I always felt a period like this could come, one way or another. However, I’m predicting the true sales war will erupt during some extremely harsh conditions during the end of 2009. Particularly in America, even more so than Japan, I feel the conditions will be tough, and we will have to focus solely on titles that are sure to move.
Why do you feel that way?
Wada: There actually was not much of a slump in the American market at the end of 2008. The “Lehmann Shock” is what set up the slump, and that was in October and November. However, most orders were already placed in September and October and the capital necessary to fill those orders was already obtained. For retailers, business had already been settled, so sales were favorable during the end of the year. This is why I feel the real trouble is set to come during the ‘09 holiday season. Conditions in Japan will probably be just as bad.
What keeps Dissidia: Final Fantasy constantly flying off the shelves?
Wada: Honestly, it’s the Final Fantasy series development team trying out a host of new ideas. Above all, we’re analyzing how the success of Network Play can widen our user base.
How exactly are you doing that?
Wada: One way is to steadily add passwords to unlock new characters and new items for a game. Players can continuously enjoy online battles, working to unlock all the characters and items available. This is an idea for keeping an online community thriving. With a thriving community, it becomes possible to break the usual cycle of a game being played through to completion, and quickly pawned off to the used-game shop.
I see.

(C)2008 SQUARE ENIX CO.,LTD. All Rights Reserved. CHARACTER DESIGN:TETSUYA NOMURA Wada: Another tactic is to use the Internet as a way to promote our products via word-of-mouth. Until now, the Final Fantasy series has taken huge chunks from the budget in advertising costs. This time, however, the objective is not to saturate the mass media, but rather utilize the Internet community to get the message out.
As a concrete example of this, we made it simple for players of Dissidia: Final Fantasy to save their battle replays and upload them via USB onto their computers. From there, players can share their videos with other users.
For example, we have set up an area to present these videos on Square Enix Members, which is free to join. We want to thank all the users who have already uploaded their battle replay videos to our site.
In addition, while it may not be an official Square Enix outlet, there have been a number of video uploaded to YouTube and NicoNico Video. Until now, there have been many among the development staff who were adverse to presenting such videos, but that feeling is gradually changing.
We are beginning to better understand what users enjoy, and incorporating that into our marketing. These are some of the changes our company is currently undergoing.
So, instead of presenting advertisements to the masses, you are looking to target your PR towards consumers within a specific demographic?
Wada: That is correct. We are thinking of moving away from the idea of needing the mass media to target your audience. There are many small segments to consider amongst users; it is not simply just a matter of male/female and age anymore. We are confident that targeting these individual segments is going to become increasing vital for marketing effectively.
This is why we cannot simply view it as having to sell 10 million copies of Dissidia: Final Fantasy. Although, I would be pretty happy to see 10 million copies sold. (laughs)
In order to sell a few million copies, it is more about enticing the core gamers rather than dreaming up a slew of commercials. We are thinking this is the real foundation of a successful gaming company.
We need to see how many different segments there are in the player base. This will become the real foundation of a successful gaming company.
I feel that 2008 perhaps did not have many titles that appealed to specific segments that would increase this foundation of which you are speaking.
Wada: That is not necessarily the case. Certainly when cultivating a new market, there is a lot of trial-and-error required. Right now, we are planting the seeds.
For example, under our umbrella group, Smile Lab, the company that brought us the virtual life community service, Nicotto Town. This company has brought things together at a phenomenal speed. Only one year has passed since the hiring of their first employee. In that short period, they planned, developed, and finally opened for membership, a service that boasts over 130 thousand members. Square Enix has never matched such development speed before.
When I say “specific segments,” it does not just mean something like the arcade game Dragon Quest Monsters - Battle Road, which is aimed towards young children, but also products that reclaim our adult fans who grew up with the original Dragon Quest series. We are looking to market to kids as well as their parents.
Are you focusing on any other markets?
Wada: There is also the female market, which is completely different from the male market.
For example, between the ages of 10 and 11, there is an unseen change that occurs. In the span of a year, all of a sudden, things they used to enjoy become “childish” to them. So, we have to look at them in a different light. When marketing to females, there is a separation between elementary school, middle school and high school. You also have honor students, girls into fashion, girls popular among the boys - the female community is more varied.
We must change the way we view this market, and begin provided products for these specialized segments of the female community. Rather than target them en masse, we have to develop new theories and ideas.
Square Enix does already provide content directed towards a female audience such as Kingdom Hearts, Full Metal Alchemist and 黒執事. We feel it is vital for a provider of entertainment to maintain this wide variety of markets.

(C)2009 Hiromu Arakawa At the beginning of 2009, you stated that “this year will be one of great upheaval, and we must master the flow of change, without being swept away by it.”
Wada: It was a powerful metaphor. When explaining management policy, it is often about trying to find “harmony” within the current “ecosystem.” It carries the meaning that one business alone cannot make a significant impact on the world. I thought it was important for people to understand that first and foremost, we must be able to read the changes in our business environment and flow accordingly. We cannot simply charge forth on own strength along.
However, this year, the changes are even more drastic. Up until now, there has been a dam holding back a raging river. Business has operated under the model that if the dam begins to break, we fix it. However, this time, we are dealing with a flash flood, and one way or another, that dam is going to be destroyed. To deal with this, we need to be working on counter-measures to be ready for the dam’s inevitable destruction.
This was the meaning behind what I said. We’re looking at a completely new terrain this year, and it is one we must be able to read and adapt to.
Will the structure of the company change?
Wada: The company itself will continue as usual, but the shape of the company will change.
On the business side, it is all about moving online. We are thinking of dramatic changes in promotion and content distribution. There will be a more direct connection between the user and the content provider. Due to this, a lot of barriers in our industry will disappear, and distribution will accelerate. The current generation of gaming consoles are all Internet-capable. So, what happens next - the shape of game distribution completely changes. With the sudden rise of direct downloading, will this not become a turning point in the way games are packaged and sold?
If so, sales channels will undoubtably change. Inventory management will change. As a gaming company, one’s whole business model will change. Due to a change in distribution, promotional methods will also inevitably change. And I think this is going to accelerate.
You have had connections with Ubi-Soft in France, as well as Activision and Blizzard in North America. Are you thinking of strengthening your distribution of foreign titles?
Wada: Speaking of the business changes I mentioned just now, there will be some changes in the near future, but others that are farther down the road. One of the changes happening now, is seeing which gaming companies will survive, and which cannot.
The companies that remain are going to have to pull out all the stops to come out on top. This means the support of international publishers is more important than ever. The more spaces you can fill on the store shelves, the greater your presence in the marketplace.
Also, in the age of the Internet, I predict the rising stars are not going to come out of the companies that managed to survive, but from new fields altogether. Barriers will disappear between companies and we will see more cooperation; I believe we are approaching an age that will see a convergence of the entertainment and media industries.
Does this focus on the global market also include foreign producers?
Wada: We are seeking out independent developers abroad. I think it is time to really reach out and see what works, such as the U.S.-basedGas Powered Games. In truth, our work with Gas Powered Games in America and Ubisoft in France was active for some time now, but truly came into fruition during 2008.
Instances of contracting work from foreign developments have increased. Until now, we have been looking around at a large amount of development companies. We have examined dozens of them, and are currently ordering projects from several foreign companies.
We look deeply at these companies and see what their strong points are, and how they work and operate. The strength of the yen has also proved a blessing with the increase of foreign development.
New platforms have emerged, such as the iPhone, or Google’s Android. How do you think gaming devices will change over the course of 2009?
Wada: However gaming devices happen to change, one thing is certain: this is the year of the Internet. The Xbox 360, Playstation 3 and Nintendo Wii all have downloadable content, you have PC downloads, and now there are cell phones such as the iPhone and the Internet as a gaming medium is exploding.
This is what we need to get on board. Regarding distribution, there are limits to the packaged software model. Actually, it has been two months now since releasing our iPhone title, and it is still downloaded constantly throughout the world. It is a definite plus being able to reach so many people through a platform like the iPhone instead of having to develop support for each and every different cell phone out there.
Currently, the two companies with the largest shares in the cell phone gaming market are Gameloft in France, and EA in America. With all the different cell phone equipment out there, it is tough to port games to be mobile. That is why only companies who can successfully scale their software and keep it enjoyable will survive in this area. Those two companies have created an international base in order to preserve their market shares. However, there are limits to this business model that are fast approaching.
There are many who are no doubt suspicious of an increasing shift towards online content, but I firmly believe that after all is said and done, they will look back and see that it was true. I cannot say for sure how it will affect the television industry or movie industry, but this shift has considerable momentum, and companies will continue to combine forces.
Honestly, a lot of this is still under the surface. Domestically, it has remained relatively calm, but things are going to shake up very soon.

(C)SQUARE ENIX CO., LTD. All Rights Reserved. Do you have a plan for the “deterioration of the developer community” that was addressed at the 2008 Tokyo Game Show?
Wada: Speaking for Square Enix, as a business, it is now about what country should develop what title. However, speaking for the CESA, it is about keeping an abundance of game development within Japan.
First, I think one needs to define Game Creator in terms of an occupation, in the way that Securities Analyst and Data Processing Technician have developed as qualifications over time. Now these titles are things that would be routinely included on one’s resume.
As far as education towards being a professional in the gaming industry, the CESA hosts the CEDEC (CESA Developers Conference). The conference continues to improve, and the abilities of developers continue to increase.
One the other hand, while there has been some progress with game development education in universities, the real task at hand is widening the amount of internships at major companies.
In addition, perhaps then game development should be a part of primary education.
Primary education?
Wada: Exactly. With game development as part of primary education, wouldn’t it raise the standard of developers?
There is certainly a desire among many children to design and develop games. Despite this, kids are always forced to perform boring tasks which hold very little interest for them in computer classes. If the interest is not there, kids do not take the initiative to let the lesson sink in.
A long time ago, I studied the FORTRAN programming language. It was boring as hell. (laughs) What I really wanted to do was calculate the orbit of Mars using FORTRAN, but instead the assignment was to draw a circle using a dot. I had no interest in that at all. (laughs)
I think a lot of people can sympathize with your disdain of FORTRAN education.
If games were the assignment, this would not be an issue. “Make a 20 second song to fit this battle scene,” … “Make an RPG character from this picture,” … “Arrange these monsters,” … “Alter this to fire 20 bullets instead of 10,” … “Increase the hit points from 100 to 200.” How about letting elementary school students learn how to perform these basic, everyday alterations to games?
For example, a child may think increasing hit points to 200 makes the game too easy, and may question the hit point system altogether, moving into the gaming industry with fresh new ideas. Incorporating game development into primary education can have an unfathomable range of effects on the industry.
These children could go on to produce all sorts of content outside the realm of gaming as well. This is the goal of the CESA, to produce this kind of activity in the entertainment world.
The Lehmann Shock has sent the financial world reeling, but how is Square Enix faring as far as capital?
Wada: We still have plenty of capital, and we have been able to maintain adequate funds. Actually, many producers of household software are in a similar position of having plenty of cash on hand. This is because until you sell a game, it requires a constant stream of funding. This has been the business model for a long time now.
Moreover, your buyer is not another business, but an individual. If you put something out there, it will not necessarily be purchased. It is an unforgiving world. For example, it is common to spend two years or more painstakingly developing a title, yet you never know in the end whether you can recover that investment.
That certainly is the case. It’s similar to the structure of a company developing computer systems, but that final recovery phase is different. If they deliver the new system design, they recuperate the costs.
Wada: I heard investors and securities analysts often question why we do not buy up private companies with this abundance of cash. That is something that is constantly being considered, but our business model is different from that of the manufacturing industry.
It is sometimes impossible to receive a loan without some results to show up front. We have experienced some hard times in the past, and understand a major gaming company needs to be able to provide its own capital and have plenty of cash on hand. It is common knowledge amongst management within the gaming industry.
Lastly, as chairman of the CESA, what are your expectations for the 2009 Tokyo Game Show?
Wada: As part of the CESA, I want to work towards a larger consumer base. I would like to see more acknowledgment of the gaming industry, and expand its appeal to a wider audience.
Wada: I would like to offer my sincere apology to all fans and retailers anticipating the release of Dragon Quest IX.
The postponement of Dragon Quest IX was decided at the last minute. The person who determined this had found a significant amount of serious bugs.
Once development had been completed, it was confirmed during quality checking that serious bugs were present. A three month delay may seem long time, but we would not be satisfied with the quality of our product if we did not have this time to ensure its quality.
There are no significant difference between us and other companies when it comes to checking for bugs. However, I feel we must change the fact that these inspections are not conducted until after a game’s development is fully completed.
We must strengthen our efforts to root out and eliminate these bugs as new elements are implemented into the game. By further researching new development methods in this manner, I think we can improve productivity overall.

※この記事はElmer the Pointyの提供でお送りしました。

[Raydeus]

It's no surprise Dissidia did so well, not only has all those characters from FF games but the gameplay is great and the voices are awesome.

(Although Cloud was still wondering about what the heck he was fighting for. )

I didn't think playing as Onion Knight was going to be so much fun till I heard Fukuyama Jun (Lelouch, Watanuki), plus Onion has some good ranged moves.

[Armando]

So if FMA targets females (apparently,) you have to wonder what's Square's idea of targeting grown men.

[ospeff]

That has no info about FFXI

[BurningPanther]

Originally Posted by ospeff

That has no info about FFXI

No shit.

Yoichi Wada isn't just president of FFXI, he's president of the whole of Square-Enix. It's no surprise that the interview would cover more than just one game.



Anywho, I was particularly interested in his views on the future of the development community. Seems to mirror some rather unorthodox, progressive works I've been reading on the subject of education in general.

[ospeff]

This was in FFXI forum, it got moved to square enix news.

[Durahansolo]

I have that FFGame for my iPod Touch, its only the demo, but its addictive when you're waiting for lunch in a restaurant.

[Balfree]

Originally Posted by ospeff

This was in FFXI forum, it got moved to square enix news.

Malacite can't post in the Square-Enix section.

Also, who cares?

[Malacite]

Originally Posted by Armando

So if FMA targets females (apparently,) you have to wonder what's Square's idea of targeting grown men.

Good, I'm not the only one who found this to be very strange =3


And I really like his ideas for teaching game design. If only my highschool programming course had been that creative ; ;

[Raydeus]

A game doesn't need to be all emotive and girly to be aimed at the feminine market though (or to be considered into that category.)

Not to mention FMA is already emotive enough as it is. So it doesn't need to be turned into a Nana game to be suitable for that particular purpose.

It all depends on the story and gameplay.

Either that or it's a missunderstanding of some sort.

[Taskmage]

Originally Posted by Armando

So if FMA targets females (apparently,) you have to wonder what's Square's idea of targeting grown men.

[Satimasu]

I guess if guys get their jailbait to look at, girls should get the same. My wife liked FMA and KH, go figure. XI is the one that seems to lean towards guys, with the mission girls getting younger looking and there not being that much man meat for the girls to look at when it comes to original looking characters.

[Feba]

FFXI is kinda fucked for beefcake. Tarus, no, that would just be creepy. Elvaan and Galka are hideous, and Hume are just too bland. The best hope is we find out that one Mithran male is actually a chick, and actual Mithran men are hidden away for good reason.

[Armando]

Ray: FMA is kind of gender neutral. It's not something that appeals only to guys, but it's not targeting girls specifically; it just happens to be enjoyable by girls too. E.g. girls can enjoy a Sonic the Hedgehog game but that doesn't mean Sonic targets a female demographic.

Not like that second manga that was mentioned and linked to. From appearances alone you can tell it's targeting girls.

FFXI is kinda fucked for beefcake. Tarus, no, that would just be creepy. Elvaan and Galka are hideous, and Hume are just too bland. The best hope is we find out that one Mithran male is actually a chick, and actual Mithran men are hidden away for good reason.

Speaking of this - and maybe it's just me - but from day 1 I've always felt that the concept art and pre-rendered models for Elvaans (like in the intro) look noticeably better and less lanky/gangly than the in-game models.

Not to mention they look a whole lot less flamboyant. I hate using daggers with a passion.

[Satimasu]

I like the way they hold daggers,it's just missing the part where they toss it from hand to hand. That's the oldschool stuff.