Square Enix 2005 Annual Report Download - page 8

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Our Vision for a New Era
Some people may wonder how we can make money in
such a structural change; others may feel that there will
be no profit opportunities because of this intensified
competition. We believe the opportunity lies in the
structural change itself.
We do not expect end users to spend more money.
Customers will spend the same amount, but the
money will be distributed differently. In the initial stage
of the industry evolution, the value-added lies at the
infrastructure layer. As a result, money is distributed
heavily to the infrastructure providers. They will reinvest
the cash to improve infrastructure. This will eventually
lead to commoditization of the infrastructure and the
distribution of money will be diminished.
Going forward, we expect more money to be distributed
to the software layer rather than the infrastructure layer.
Our fundamental strategy is to grasp this shift of value.
The two points below sum up our competitive
advantages in the marketplace.
1. We are not involved in the infrastructure or
hardware sectors.
In what may seem like a contradiction in terms, our
strength lies in what we lack. Players already successful
in the infrastructure and hardware layers cannot deny
their own business domains, and they will end up
leaning toward an impractical vertical integration
model, which is doomed to fail in the network age.
Even if they pursue new businesses without seeking
synergies with their existing core businesses, limited
returns on investments in new fields are swayed by
the oversized core businesses, and this eventually
sinks new businesses.
2. We are one of a few players in the position
to expand their presence comprehensively
across all the areas in the software layer.
In the world where the larger value-added resides in the
software layer, it is clear that the company that controls
a larger part of the software layer wins. There are several
layers in the software layer, including the software
platform, application and user service layers. SQUARE
ENIX is in the unique position of having advantages in
each of these.
In the software platform layer, we have ramped up
our development since acquiring UIEvolution, Inc.,
in 2004. To make all terminals become windows into
a virtual space, we need a platform that absorbs the
differences of terminals. This idea is embodied in
our cross-platform strategy, which enables users to
access content from game consoles, PCs and mobile
phones anywhere.
6SQUARE ENIX CO., LTD.
In a networked society, content providers and customers will develop content together
Software Community
Content made
by game makers
Content generated
by users