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A Fresh Start - Part One

Mon 27 Apr 2009 7:00am GMT / 3:00am EDT / 12:00am PDT
BusinessPublishing

Yoichi Wada and Phil Rogers discuss the acquisition of Eidos - where it came from, and why it's a good fit

The games industry has seen three monstrous towers of acquisition talk in the past 18 months: Electronic Arts and Take-Two Interactive, which didn't happen in a quite spectacular fashion; Activision and Vivendi Games, which did; and Eidos and... pretty much anybody with cash that you'd care to mention.

Eidos as a publisher has flown the flag for the UK for a number of years, as those around them have disappeared or been taken over by foreign money, but when the management of owners SCi failed to secure a much-rumoured buyer in late 2007, the parent company's share price plummeted steadily for several months.

With new management in January last year, followed by restructure and a full rename back to Eidos, the company was still followed by controversy - but now an acquisition has finally happened, and the Tomb Raider, Hitman and Kane & Lynch franchises will sit alongside new pan-group stable-mates Final Fantasy and Dragon Quest.

So what will Sqaure Enix, officially the owners of Eidos since last week, make of the rollercoaster brand? In one of the first interviews since the acquisition was completed, GamesIndustry.biz sat down with Square Enix president and CEO Yoichi Wada and Eidos CEO Phil Rogers, and in part one of a two-part interview, find out exactly what the plan is.

Q: How do you characterise the job that you've done in the past 12 months? The company had a fair degree of instability prior to your arrival.

Phil Rogers: We're pleased. We're never complacent, but we're pleased with our progress. We were clear early on that it was a multi-year programme that we were on, and we talk internally about the first year of three, to give you some sense of rhythm or cadence. We're pleased that we've set out with a clear direction - Eidos has had different directions in the past, but when you bore back to the common direction it's about the absolute gameplay, games with character.

We saw that as the key DNA of our business, and tried to really build around it. Actually, the positives we've achieved have been built around that DNA. We've also had challenges as well, like any business, in navigating the changing industry.

But I'd say that we're happy with that. In terms of how we see the fit, the test for any announcement or transaction like this is how people feel internally. I think people here think that it feels very right, that it strategically fits well, and there's a great deal of excitement now around the business. As a leader of a business, I think that's a great litmus test.

Q: What exactly did you see as the specific challenges, from a business perspective, that you had to deal with as a priority?

Phil Rogers: It was getting a single-minded vision into the company that people can embrace, and then that vision can be used to direct product decisions, sales and marketing decisions - that's the strength of a vision. If you don't do things that contribute to the achievement, then arguably you've got the wrong vision, and you're doing the wrong things.

I think we saw getting the right vision set up as being of prime importance, and then keeping to that is always part of your core decision-making. It's taken in terms of certain products then that we wouldn't green-light - we could green-light, but it wouldn't help us in terms of where we wanted to go.

I think staying to that vision has been a good driver, a good focus for us - and getting people's mindsets in the business changed, because we know we've gone from a broader portfolio, with more of a wholesaler mentality, to more of a content-creation business with supreme sales and marketing talent around that. That's a different operating model.

Q: There's been a shocking amount of speculation around takeovers in the past 12 months, and worse before that - has that been difficult for the company to deal with?

Phil Rogers: If I take the last 12 months, I don't think it has. I think we set out very clearly with our plan in February 2008, where we had this 6-8 months of legacy of on-off deals. I think we set out a very clear plan - we had some interest as you know which we didn't want to pursue, and then actually when we got into these discussions which seemed a very right and natural fit, we completed the transaction fairly quickly. I think that helps people focus around it.

Q: Had this offer not come in, then obviously you had the three-year plan in place - but was it something you were expecting, or did it come as a surprise when Square Enix made its move?

Phil Rogers: I never like to be surprised in business... I'm not sure I'd admit to being surprised - to me it's an ultimate compliment in some ways. When you're doing something that you think is right in business, and people see a commonality in what they're trying to achieve, and potential synergies to move faster or deeper or wider, then those combinations make sense.

I wasn't surprised, but obviously there were a lot of discussions that took place to make sure it was all right. It wasn't a focus for us - I think some of the best transactions are natural ones, and they come out of unforeseen meetings or events.

Q: And the process itself seems to have been a smooth one?

Phil Rogers: That was our joint commitment, really. When something's right, you want to move fast.

Q: What specifically was it about Eidos that made you feel you wanted to move for the company?

Yoichi Wada: I felt that Eidos was a very good fit in terms of sharing the same culture and sharing the same foundation for the business. When I say 'sharing the culture' that includes the personality of the top management of the company, and the atmosphere in the studios.

Because even if you were to have just had a capital tie-up, after the acquisition that will simply become a pure business contract-type of relationship. But with Eidos I felt that the fit was very good.

Also, in terms of our business, you need to have content which works like a very strong magnet to attract customers. That is how content is created at Eidos, and it's the same way we create our content.

We share the same concept that it's so important to own our own intellectual property rights, because we have to be able to offer different materials in different formats to our consumers. If you don't own the IP, then the rights of using your content becomes so complicated - and you won't have the freedom to roll out the usage of the content. So that's a notion that we and Eidos shared.

Q: Eidos has had a troubled past - you must be confident that with the Square Enix guidance, and the spread of practices and culture, that it's something that can stay in the past?

Yoichi Wada: I don't think that Square Enix is necessarily right and Eidos is wrong, as such - but with the merger I think we'll be able to manage as the same family.

When I came to Square in 2000 it was on the verge of bankruptcy, but I managed to revitalise it. When I merged Square with Enix, people said that it was a merger of two companies with completely different cultures - but today there's absolutely no hint of it.

So I don't think there's absolutely any problem with Eidos - it might sound strange, but if there's love, things will work, and I don't think there's any problem with Eidos.

Q: Would you agree that, from the perspective of gamers, the quality of the game is the most important thing?

Yoichi Wada: Of course, quality is important, but what's the opposite of that?

Q: Well, if you look at gaming communities, and how they've responded to Eidos products in the past, it's not necessarily been a very positive reaction. If you're thinking from the gamer's perspective, that's different to the perception of the Square Enix brand, which is very strong on game quality, and very polished, finished products. In the past it's fair to say that Eidos - among others - has been guilty of releasing product before it's finished in order to hit financial date targets. With that in mind, do you feel that there will be some reassurance for gamers now with this acquisition, that they can have more trust and belief in Eidos games as time goes forward?

Yoichi Wada: Yes - that's what I hope to achieve for the entire group. But we at Square Enix also have a problem - it takes too long for us to produce a game...

In reality I think the issues we have are basically the same. On one side you might say that because of the budgetary constraints they released the games without having the games polished to perfection, but on the other side we take too long to release the game.

So we have the same issue in the management and control of the process isn't strict enough. Even though we're producing entertainment products we need to have the right production process in place - and that is something that I'd like to implement across the entire business in our group.

I personally believe that having a good cost performance and having a good quality game can co-exist - I think that this relationship is actually a positive one. But when you look to the creators they tend to think that if they're asked to pursue a better cost performance, they have to sacrifice quality.

It's not true, but we have to change the mindset of the creators - you probably also do a better job when you're busy...?

Yoichi Wada is president and CEO of Square Enix, Phil Rogers is CEO of Eidos. Interview by Phil Elliott.

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