Square Enix talks tough choices

Well-rehearsed announcements of company acquisitions offer a glass half empty and half full.

The excitement that comes with a surge of new opportunities is often, if not always, balanced with concerns of a new owner looking to tidy up the business.The 2009 buyout of Eidos is no different. Square Enix’s acquisition gave the Tokyo-headquartered firm a vast pipeline into the western market, while the entire business took another step forward in its aim to create a sustainable global empire.

In part one of our interview with Phil Rogers – CEO of western division Square Enix Europe – we discussed new opportunities and new advantages. Here in part two, we discuss the cuts, the closures and the tough choices made along the way.

Two years ago in an interview with MCV you personally said Eidos had too many average products.
Well, since 2008 we’ve been driving toward creating higher quality experiences across our business, and that policy remains central today.

I’m not saying back then we had any magic foresight about where the industry was going, but we saw the skills we had internally and thought that quality product was a space that we should try to own.

It seemed to be a timely move, because in the last eighteen months there’s been an insistence from publishers to stick to their core IPs and curb risk.
Yeah, we have definitely seen that. Another part of our plan is that we do want to create a world group of studios, rather than a number of studios that happen to be placed around the world.

We have studios California, Montreal, Copenhagen and London, and a small base in Shanghai, but we are looking now to share information and knowledge across those studios. It won’t be our Raison d’être, but sharing knowledge across our studios is important to us.

Why did Square Enix close its Eidos Hungary studio?
We took the decision back in October, and this all goes back to the broad strategy of focusing on games that are either first or best.

We were pleased with Eidos Hungary [developer of the Battlestations series], but I think we realised that to be first or best in the RTS genre was going to be really challenging. It wasn’t necessarily something we were going to win.

On the balance of all that we decided that we would focus elsewhere and not move forward with the Battlestations IP and Eidos Hungary.

It’s never a decision we take easily – the human costs of all these things is always something we truly appreciate – but again you have to look at this as a global business, which is what we had to do.

Many publishers today are trying to reign in their expenditure and become as efficient as possible.
Yes the chase for being effective is the right one, and the sensible one, to take right now.

How many staff were made redundant at Io Interactive back in March? Rumours were that about 35 staff left the group.
Well we don’t disclose numbers but we did let a number of people go.

Io has been tremendously busy over the last two years though – it has launched new IPs, we’ve got Kane and Lynch 2 and another project in development – looking at all our production schedules and how they overlap, and realising that we had surpluses at that stage.

But how much will this cut have an effect on the Kane and Lynch project, or indeed Io Interactive’s capacity for multiple projects?
Part of our rationale is to look at all our business and see where we can share resources across locations. Even back in 2008 we looked at things like QA, and decided to focus that work on one area.

That’s a policy which we continued at Io last month, and in that respect it’s a consolidation of resources into a single site. Plus we had a handful of people moving off projects, which spurred on the consolidation.

So Io Interactive still has the capacity to do more than a single project? It’s not being watered down?
Oh Io is working on more than one project right now, massively so.

There’s always been many suggestions that project is the next Hitman game.
[There have always been those suggestions], yep. [Laughs] And of course you would expect nothing else, Io and Hitman go hand-in-hand.

Moving on to more cuts, Square Enix also recently axed, essentially, the whole coding team at Beautiful Game Studios and set up a new coding team at Shanghai. What was the thinking behind this move?
The thing about Beautiful Game Studios is that I think we’ve got a fantastic brand with Championship Manager, and again we tried some new things with CM10.

What happened was we looked at Championship Manager within the PC market and decided that actually we’re now best positioned to focus expand the brand in new ways. We’re looking at new platforms and new designs, we have a number of new initiatives that we’ll be talking about throughout the rest of the year, and I think people will see how we’re expanding the franchise going forward.

So the staff cuts was looking at our skills, looking at where we wanted to invest more, and where we felt we should invest less.

So is Beautiful Game Studios’ London studio still a development hub?
I think ‘development hub’ encompasses many things – it is more than just core programmers; it has a key design hub, it has a key research hub, I think those are the key components of what we consider as development, and we have a talented team that can take the franchise forward.

I look at the situation from a broader axis than pure play programming skills. Research and design skills are critical for the studio.

So will you enact this broad policy at other studios, then?
Well, whether we could or whether we would depends title-by-title and franchise-by-franchise to be honest with you. Championship Manager is in such a unique set of circumstances.

I mean, when I travel the world – especially in the emerging territories – I talk about the old Eidos franchises and Championship Manager is one that definitely piques everyone’s interest. It’s something that we’ve all played so much throughout our lives, so I think that it’s one of these things, certainly in emerging territories, that people see great potential in.

That’s how I see our strategy for Championship Manager, and on that basis, if we find opportunities in a different space, we may do the same thing.

It sounds like you’re trying to expand the CM franchise; “new markets, new platforms”.
Very much so, we’ve tried things like iPhone apps, which was a relatively small success but something, as a new and fresh initiative, we were very pleased with.

Again, our policy here is to get a lot of creativity into a vey established franchise and I think we’ve got to be confident to try more.

Whose idea was the Pay What You Want deal for CM10? Roy Meredith’s?
Actually, it was a decision we took across the group. We were confident with what we had with Champ Man 10, and to be honest, we just wanted to get as many people to try it. We considered the barrier that price is nowadays, and we were brave enough to take some decisions on that and thought, y’know, let’s be bold.

I think that it certainly got the game into new people’s hands, and it was interesting to look at how it got picked up across various territories. Looking back we were very pleased with it – I’m pleased that we took the decision, I’m pleased that we were brave enough to try it, and as an industry I hope we all continue to make these brave decisions.

It was clearly very bold, but did it work comercially?
In many respects it did, in terms of getting people to try the game, and raise awareness of the game and getting people back to a brand people have spent a lot of time with in the past. I think in this sense it worked very well.

With all these cuts now given a bit more context, do you anticipate Square Enix will need to make further cuts to be as efficient as it can?
I don’t think right now I would use the word anticipate. I would say that we are in a world of constant change.

The industry used to work in this cycle where there would be these set function changes every four or five years. There’s a prediction that the whole platform transition which will extend the current cycle to seven or eight years, but what we’re looking at today is an environment that is constantly shifting with new platforms.

So, if you interpret change as looking at investment in new areas, then absolutely. I’m always looking at where we should be spending more time, and where can we partner with companies to do things that we don’t want to do ourselves anymore.

In terms of that kind of change, yes these things are going to be constantly looked at. There’s nothing imminent on the horizon, but I think anyone in our industry today is got to look at all the opportunities that are emerging.

In regards to the changing market, what’s the feeling towards social gaming groups such as Zynga and Playfish?
It’s something that interests us very much. We have to look at what people are doing today to receive entertainment experiences, and social games is a very important part of that equation right now.

I know some people take the binary approach that the future of the industry will go down this one new direction, while others say the industry will solely go down another direction, but I genuinely think the future of the industry will be one of mass-convergence, with traditional games of today, with social games, with a converged business model.

That doesn’t mean that everything will blend completely and be very wishy-washy..

But certain elements from both sides will cross-pollinate…
Massively. When you see people spending all their time on social games, you have to take an interest in that. Of course, how do we monetise that? How do we keep people playing these games? Is this an issue of only certain demographics? These are the questions that I think every single publisher should look at.

Perhaps social gaming can help improve brand awareness of traditional retail games, like the way Flash games on official websites do.
I agree, as a new entertainment stream, I think we haven’t realised that social networks have established many of its own brands very quickly. I mean, where was Pet Society ten years ago? Where was Farmville?

I think as an industry we are going to see many new brands appear, but we’ll all going to see that existing brands – if you look after them and nurture them and take them in new directions – can thrive.