Square Enix 2009 Annual Report Download - page 6

The SQUARE ENIX Group’s Growth Strategy
I believe that the entertainment industry’s structure, or “ecosystem,”
is undergoing a major transformation, triggered by the on-going
progress of globalization and networking. The SQUARE ENIX
Group’s growth strategy is based on this perception of the
times. Although it is essential to adapt one’s tactics flexibly
during such a transformative phase, our core strategy remains
focused on the following four principal elements.
❶
Enhancing the value of our brands
The essence of entertainment is the value derived from the
entertainment experience. To enhance that value, we believe
that it is important to produce our own robust lineup of content
and services, and build this lineup into firmly established brands.
In other words, the SQUARE ENIX Group’s identity is that of a
creator—the source of our value is what we create ourselves
rather than acting as an intermediary for the creations of others.
By focusing principally on intellectual property (IP) that we
own outright, we can promote our own cross-media initiatives
with increased flexibility and scalability, without burden of
procuring third party rights. This provides a crucial foundation
for profit maximization.
In the fiscal year under review, although we successfully
reinforced the brand value of our main franchises, only the
Publication segment was able to produce significant new IP.
We will continue tackling the challenges of enhancing our
brand values.
❷
Building a global business structure
Through advances in communications technology, interaction
among people spread around the globe is accelerating. Cus-
tomer preferences are spreading beyond national borders. We
therefore have to design strategies based on the premise that
the market extends world-wide for entertainment industry players,
including among others, the digital entertainment sector.
Having said that, we must also acknowledge that until now,
the Group’s business foundations have remained—for the most
part—within Japan.
A substantial share of our earnings have been dependent on the
Japanese market. Although we have several strong franchises
appealing to North American and European markets, our
business structure has remained as a typical export-driven
model, whereby the content we developed in Japan has been
exported to overseas markets.
In the fiscal year under review, the major management
theme for us has revolved around building a global business
structure.
First off, from the fiscal year ended March 31, 2009, we
began placing orders for game development with U.S. and
European companies. We have forged strategic relationships
with such renowned game developers as Gas Powered Games
Corp. We have already shown several of these titles at the 2009
E3 (Electronic Entertainment Expo) in Los Angeles.
Additionally, leveraging our significant marketing strength
within Japan, we commenced domestic sales of game titles
produced by leading game publishers. These include titles from
Ubisoft (released exclusively by Square Enix in Japan) and
Activision Blizzard.
We expect these moves to contribute to earnings from the
second half of 2009.
Regarding our efforts to build a global business structure,
we have already taken another decisive step in 2009. I will
provide further details on this development later in this report.
Gas Powered Games Corp.
Gas Powered Games is currently developing “Supreme Commander 2,” which is scheduled
for release by the Group in 2010. In June 2009, “Supreme Commander 2” received consider-
able attention after winning the Best Strategy Game award at E3 2009 in Los Angeles.
❸
Establishing diverse points of contact with our
customers
Since the content we create is not a commodity with physical
value but derives its value from the experience it provides, this
content cannot reach our customers without passing through
some point of contact. I use “contact points” as a generic term
including such communications devices as game consoles,
personal computers (PCs), and mobile phones; such media as
books, DVDs and broadcasting; and such distribution channels
as movie theaters, game arcades, DVD retailers, ISPs and
mobile communications carriers.
The revenue model for content has been established in
Review of Operations
The SQUARE ENIX Group’s Growth Strategy
❶
Enhancing the value of our brands
❷
Building a global business structure
❸
Establishing diverse points of contact with our
customers
❹
Reinforcing capabilities in community management
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