Square Enix: Selfish Experiments in the Cloud

In some ways it was quite a selfish but quite an obvious move initially. We looked at some of our games - we work hard on these games, on the designs and the development - and we thought that not enough people were getting the opportunity to play them. We hear about the challenges in the traditional games market and the opportunities elsewhere so very much from the outset we were wondering how we actually get more people to play. Is it price, is it flexibility on console, or are there new ways that people are playing games?

We believe in our games, we've had a big push to quality in terms of making richer and more entertaining experiences for some years now, so we were thinking about how to reach the full potential. We saw the emergence of cloud, we saw the emergence of browser - I think that game/business drive was meeting a technical ambition in some of the studios that we manage, in terms of 'where are the engineering hearts and minds right now' - that's often the best place to start - what are the big problems that engineers are thinking about and trying to solve.

"That's often the best place to start - what are the big problems that engineers are thinking about and trying to solve"

Phil Rogers, CEO, President Square-Enix Europe

Take Mini-Ninjas, we think it should be played by multiple millions of people and actually it's not, it's played by single millions of people, so how can we expose it to a broader audience. Technically how can we do that, is it possible by re-working the code? What sort of service and delivery platforms can we build around it.

Very much on that innovative experimental axis, that's how we started it. We believe in our games, we believe that the more people that can find and play our games, the better.

I suppose they haven't, really. I guess in some ways we've been travelling fast. There's a lot been written about the OnLive situation - often pioneers end up in a position where they get shot in the back. It's very hard to work out exactly what went on but I think it comes down to the fundamental view that giving customers more choice, new ways to play and new ways to pay - increasingly we're thinking about the business model - I'm not saying it has to work, but there must be some logic there. Maybe there are operational things that we need to avoid.

In relation to you question about how long we've been doing this, it's certainly months versus years.

Fundamentally we believe in the flexibility that it offers. We're pleased with the comments that we've got, advertising in other media is well proven and well accepted - people watch TV and there's an advert, with games it's been really interesting over the last 3 or 4 years how that acceptance of advertising has been really quite troubling.

"With games it's been really interesting over the last 3 or 4 years how that acceptance of advertising has been really quite troubling"

Phil Rogers

Frankly speaking some people say, "I could love this, play for free and watch adverts, why not, I do it with TV." Other people can't think of anything worse. I think that sort of binary reaction is something that we have to expect from an industry where there's increasingly choice and more opportunities for people.

So I can't really say we've been overly concerned by the OnLive situation - I feel that we're pushing into a good field.

Let me speak to you about the whole picture, why we're doing this. Currently, time is shifting quite quickly - the industry is changing, and we need to do some experiments. We perceive core online as a big experiment, in terms of both technology and business model. On the technology side, if we look back on the last 30 or 40 years, the pendulum has been shifting from server to client and back again. First it started with IBM Mainframe and the clients were just an empty box. Then the pendulum shifted to the client with the Microsoft PC. With Google, and browsers, most of the functions shifted to server side again, then Apple shifted it back again. We think that there's going to be another shift.

With the browser, we think that the application is going to shift onto the server side, but the CPU and GPU will remain on the client side. Eventually, both CPU and GPU will shift to the server, meaning a fully-fledged cloud computing era. The next three to seven years until then, we think will be a transitional period, where software is on the remote side, but hardware is local.

With really good browser tech like Google Chrome and HTML5 there's a transitional period that would also be acknowledged by every day users. The games industry itself is unique - it's seen a long period of quite client heavy development, it's not really used to what's happening, the changes we're facing at the moment. In terms of the technology we needed to experiment in how to use the browser to provide console-quality titles. As Phil mentioned earlier, in terms of the business model experiment, we've not made any concrete decisions, so we'll be trying a few different ones.

That's the rough background of how we perceive the project.

Well in this case, there is local processing, I think this is the balance we're addressing. I think the next phase of the experiment is to lower that local processing need to get the broader expansion possibilities in sight.

Firstly, right now I'm interested in our early steps to find out who the consumer really is, trying to see if there's an overlap. I'm quite open-minded - are there new consumers coming in who've not played this type of game before, or not - it might not combat second-hand sales because they're new. We're trying so much for a friction free process, lowering those barriers with the processing power required in the machines.

But I think ultimately in time we'll all, even if you're a dedicated console gamer today, look for more access points for our content. This can be a solution for that.

It's very early stages for us. One of the appealing things so far is that I can tell there are new customers coming in just by looking at where the consumers are coming from. We're talking to people in territories that we haven't previously dealt with - whether that's deep into Russia, or South America, Asia - it's fascinating to see where people are accessing from.

It's an early stage. I think over time we're looking for people to be able to share more. That virality - the ability for people to say "I like this" and share it very quickly and seamlessly with their friends is a great thing, so I expect over time we will look to integrate with those platforms.

I think that's a very smart observation. Last week we were talking about Gyromancer, which is a Square Enix title - we look at it all as one catalogue possibility, so it's a matter of resource and staging. But as you say, certain games lend themselves more, if they're level-based, then they fit in a certain way.

We would eventually like to see more of the Square Enix titles on there, but the thing is, those titles were made for consoles, not PCs. Honestly speaking, we're going to start from the available ones - once we've established that it can work as a business, we're going to be porting them onto the PC, but that actually costs quite a lot.

Yes.

I don't think there's going to be much cannibalism going on. Before, in the disc sales area, there would be lots of discs in the stores and people would buy them and use them in different games machines, there are lots of titles.

Now, with iPhones for example, basically people who purchase something on the iPhone always will purchase on their iPhone and they won't use it on Android because it's completely different. And those who play on the PC tend not to really play on the handheld machines. And those who would buy on CoreOnline are those who didn't used to buy before and they would have already purchased through Steam

Therefore I think there's not going to be much cannibalisation, I think it's when the pendulum swings again that we'll see the cannibalisation.

Well, for example we sell Hitman for $20 on Steam. On a disc it's $30. CoreOnline is free. It's an experiment! Basically, with the $20 and $30 options, millions are already playing so if we become free it's not going to be a surprise to see a few more million playing that. But I don't think that there's going to be a sudden swing towards free.

The reasons why are going to be incredibly valuable data for us - why, if it's available for free, are people still paying tens of dollars?

It's hard to speak on behalf of the advertisers but I guess right now it's more tradtional. As we see the take up then we can actually think about how customised we can go and what data we can provide to the vendor in terms of demographic and location. It's one of these services which will only improve over time. The more people that use it, the more information we get and can feed back to the advertisers. I expect it will become more customisable - we have choice right now on the adverts, that's another question: will we continue to offer choice, how much people actually like that choice or if they'd rather see a pre-determined ad based on their profile.

To me it all sits very firmly on this idea of flexibility, we'll see more tweaks as we roll it further.

We have been doing various sorts of experiments - in fact, the guy who drew up this business model loves hamburgers and TV, so he can always enjoy a narrative because even if the adverts are on TV, he can still enjoy his hamburger. [laughs]

Next, I'll probably find someone who loves going to Disneyland. The characteristics of Disneyland are that the entrance fee is quite high and once you get inside you have to buy things like popcorn, so there are a lot of business models to experiment with.

Do you want to take that one?

[Coyly] Well it's still an early stage...

I'd love to say yes to all of that. [laughs] It's hard to predict. I think one thing we can ask is, when we talk about catalogues, we want more people experiencing and playing our games. I was walking through Heathrow the other day and there was a big advert for Accenture saying "Accenture helped bring all of Warner Bros. catalogue to HD" - as an industry we need to work out how to do that, how to get more people to play what we call catalogue, we move on very fast from catalogue.

I think it can deliver great joy to people in different ways for a long time. We focus on the catalogue side, but at some stage I think we'll be looking at our own games, saying, do we want to launch that via CoreOnline. I think that's safely something which we can say is within our remit and ambition - I'd love to say yes. What we're interested in is ways of driving the service direct to consumers, any way we can promote that is welcome.

That's something that customers will decide. I think that it will turn out as everyone is thinking it will turn out, we will prepare ourselves for that. There are some benefits to the customer if there are no discs. The customer can save games etc to a service, which I think is a wonderful thing, although there are some people who wouldn't. I think that the world is going to change, that this will become easier for customers.