Square Enix 2006 Annual Report Download - page 8

SQUARE ENIX CO., LTD.
match the community’s but have not been able to contribute to
revenue. A point to be noted is that while trying to grow the
community, the introduction of people with unrelated interests
should be avoided. If a community’s raison d’être is diluted, it is
very hard to resurrect.
2. Developing new communities
To expand the business without diluting communities, we need
not only to grow existing communities, but also develop new
ones. Up to now, we have concentrated on developing our own
original content and have produced a number of major hits. In
the future, we aim to respond to the expectations of our cus-
tomers by further refining our creativity. I believe that our
diverse creative capabilities across several genres, including
game software, publication and animation, will continue to
bolster our competitive advantage.
At the same time, in a departure from our past practices we
will actively seek to approach outside communities. This may
involve providing value added to third parties, who have already
developed communities with strong drawing power, and helping
invigorate these communities. We are confident that we can
nurture such businesses to become new revenue sources.
Services provided to EZ Game Street! and On Demand TV are
our initial foray into this area. Our joint venture with Xavel, Inc.,
is also part of this strategy. In both cases, rather than our own
brands we will work in the background to enhance our partners’
brands.
What specific measures are needed to implement the strategies
I have outlined? We have formulated three key approaches.
1. Bolstering the performance of existing
communities
To reiterate, customers belonging to a particular community
exhibit few common attributes outside of their shared interest in
the community. Consequently, their lifestyles tend to be many
and varied. By utilizing many types of terminals across a large
number of media, it is possible to bolster the contact points with
customers belonging to a community. As well as increasing
average revenue per user (ARPU), this is also aimed at seeking
out potential customers. An example of how we might increase
ARPU is releasing a movie in response to customer demand for
ways to revisit the emotion they experienced when playing a
video game.
Our definition of potential customers may be a little different
than the typical one. Seen from the customer point of view,
since the communities to which the customer belongs and their
own lifestyle may be unrelated, if there are no content or services
catering to their particular lifestyle the opportunities for purchas-
ing behavior are limited. For example, a busy office worker may
belong to a particular band’s fan club, but he may not have the
time to go to their concerts, and is therefore unable to
purchase tickets through the club. However, he can buy their
CDs, which he can listen to whenever he likes. What we mean
by potential customers are those whose tastes or interests
Forming Alliances: A Key Growth Strategy
SQUARE ENIX
established
UIEvolution (U.S.)
Wholly owned subsidiary
On Demand TV
Development of IPTV system
Panasonic
Co-development of
seamless content solution
Xavel
Incorporation of
Stylewalker, Inc.
(50:50 joint venture)
KDDI
Technical cooperation in develop-
ment of EZ Game Street! for au
Intel (U.S.)
Technical cooperation in
games for PCs and
mobile phones
GAKKEN
Incorporation of SG Lab Inc.
(60:40 joint venture)
TAITO
Wholly owned
subsidiary
(through TOB)
ESPN (U.S.)
Provision of MVNO
service system
April 2003 April 2004 April 2005 April 2006