In part two of our exclusive interview with Yoichi Wada, president of Square Enix, he discusses the marketing challenges presented by the current generation of consoles, digital distribution, and the company's strategies for a new breed of gamer.
Q: In a recent interview with CNET Japan, you said that consumers are purchasing the Wii as a toy...
That particular article interpreted what I said in a rather coarse way. To fill in the context, with this generation of consoles, people take it for granted that all of them should be and are multi-functional. So it is each manufacturer's responsibility to communicate with potential customers, and let them know which of them would make the best use of which function in each console.
In that context, Nintendo seems to place a great emphasis on Wii Sports and Fit rather than Zelda, a role-playing game. In my opinion, if they expose the functions in this way, they are making the Wii look like a toy. With PlayStation 3, Sony are not appealing to consumers with strong messages that say this kind of user can make use of PS3 in this particular way for this particular kind of fun. That, they are quite weak at.
Q: You did however note that software attach rates are lower for Wii than for other consoles. So does that make it a less appealing platform for Square Enix to develop and publish games on?
No, that's not the case. What we have to do to start with is ask what kind of consumers are buying Wii for what purpose. When we've finished that analysis, then we have to work out what kind of games we should create for Wii. For DS, Square Enix publishes both traditional games like Final Fantasy and Dragon Quest, and also more casual software. The DS is managing to get through to a really broad range of people at the moment, and I think the Wii can follow in its footsteps.
Q: Do you feel that the recent price cuts have significantly improved PS3's positioning in the market?
I am expecting an improvement. But I personally feel the price is quite low as it is. My mobile phone is actually more expensive than a PS3, but nobody thinks that's too expensive.
But it really depends how the manufacturers communicate with potential users. Either they want to sell it as a games console, or a multifunctional machine. At the moment they're focusing on the price reduction, but if they communicate with consumers better, sales will improve anyway.
Q: You've commented before that in this generation we've seen great diversification in game hardware, with very different types of machine on offer. Do you think that's healthy for the games market?
I regard it as positive. It was going to happen anyway, it wasn't accidental. Videogames became popular in the 80s, and for about fifteen years, until the year 2000, the main focus was just on ensuring that everybody had a console. Now we have moved to a new era where we have more types of gamers and console users, and what is important for both hardware and software makers is how to deal with diversified demands from diversified users.
Q: On the other hand, some commentators say that the only way for games to become truly mass-market is to have a single format, like DVD. Do you think that's even possible?
Speaking as a software manufacturer it would be convenient for us, obviously, if everybody was to standardise. But that kind of standardisation would be impossible, in my opinion. I would like it to happen, but there's not much chance.
Q: What are your feelings about digital distribution of games?
I'm sure it will be huge. We have to read the trends correctly to act at the right time, but I'm sure that in ten years time it will be the main way games are experienced. We must find a balance between the digital and physical sides, though. We will never get rid of the physical side completely, so we have to ensure a good marriage between the physicality of the game experience and the digital side.
Q: Can you explain the thinking behind what you call polymorphic content — for example, the development of the Final Fantasy VII world in various games, merchandise, a DVD film and so on?
We manufacture content. We wrack our brains for what might sell and what might not, but it's very difficult to hit the jackpot, as it were. Once we've hit it, we have to get all the juice possible out of it. The obvious example is Final Fantasy. If we just sell each one, we end up with only 12 commodities. We have to think what we can do to make more profit out of the series.
We believe that consumers should be segmented by what they think, rather than age, profession or even race. We feel that what really wins their hearts is the concept of the game world. By the polymorphic strategy, we sell them what they really want in terms of concept — something that appeals to them — several times over.
Q: Your company statement says Square Enix intends to become a leading community management company. What do you mean by that, and how does it relate to your games business?
One of our main projects is FFXI, and a lot of people are playing it globally, which means that there is a community for this game that people live in, and that needs to be managed. When a group of people share the same ideas, values and concepts, we regard it as a kind of demographic group, and we would like to make the management of that kind of group a major part of our business strategy.
What we feel is important is catering for them individually. Other companies see a group of one million people there, two million people here, and deal with them as a group of three million. We would like to deal with these groups individually. That's why we place great emphasis on it.
Q: So you feel that the skills you learn from managing an online gaming community are transferable to other areas of business?
If we've managed to maintain a community and make it successful, then those customers are loyal to us. Which in other words means their individual value, the potential profit we can make from each person in the group, is increased as well. Therefore we have to do our best to find out what kind of treatment they really want, what we should provide them with. That would lead to good community management, which can be employed in other types of business strategies.
Yoichi Wada is the global president of Square Enix. Interview by Oli Welsh.