Last week Square Enix released its 2016 annual report, which outlines two key areas for the next years. In its report, Square Enix has said that it’s looking to expand into emerging markets, especially into India, the Middle East, and Latin America. A key focus of the growth strategy it’s also particularly interested in the Chinese market, which it termed a “leading country” in terms of online and mobile gaming, and gaming in general.
Speaking of mobile, Square Enix has said that making premium apps for mobiles is going to be a “pillar” of its business. “In so doing, we believe that we can enrich the portable game market in the broader sense in order to respond to a variety of customer needs,” read the report. The company believes that smart devices have an edge over consoles due to the latter’s backward compatibility issues.
The publisher has been releasing premium games on smart devices for years; even going back to 2006, it spoke about the growth it saw in mobile games and expressed interest in pursuing them. In the past few years, it’s released original games like Mobius Final Fantasy, Lara Croft Go, and Deus Ex Go, as well as ports of existing games like Adventures of Mana, Final Fantasy IX, and Final Fantasy XIII (in Japan). Mobile has been specifically called out as one of the reasons for a surge in profits in past earnings reports.
If you were hoping that was all a fluke and that Square Enix was only using mobile to temporarily prop up its business, you’ll likely be disappointed with what president Yosuke Matsuda told investors. “Currently, the global market for smart device games is dominated by F2P (free to play) games, and the market for premium games that players pay to purchase is practically nonexistent,” he said in the annual report. “However, our group has for some time been offering premium games for smart devices, including brand-new titles. When viewed across the group, these offerings represent a considerable volume of earnings.”
He reiterated the benefits of free-to-play games, which rack up huge user counts by offering themselves up as free downloads, to begin with. But he dispelled the notion that these games are cheaper to develop or provide any guarantee of success.
“Initial development costs for both F2P and premium games are roughly the same as or even higher than those for new games for dedicated handheld game machines,” he said. “In other words, the level of investment required cannot be considered low risk. The risk involved in F2P games is even higher than for premium games because of the need to spend on ongoing operational and additional development efforts.”
Premium games do require upkeep, as developers need to continue marketing them and updating them to support the devices they run on. Despite this, Matsuda said that “smart devices still provide a better platform for playing greatly loved games for many years than dedicated game consoles do because of the latter’s issues with backward compatibility.”
Matsuda then turned his attention to handheld games, essentially explaining what’s been apparent for years: mobile games are increasingly taking their place. As a result, Square Enix believes it makes sense to develop handheld games for mobile platforms in addition to handhelds.
“Continuing the comparison with dedicated handheld game machines, we note that significant advances have been made in both the specs and operability of smart devices and that this evolution is likely to continue unabated,” he said. “Moreover, smart devices have a much greater installed base globally than dedicated handheld game machines. The smartphone-native generation already sees smart devices as all-in-one game consoles.
“For these reasons, it makes sense for game manufacturers such as ourselves to supply games that we have traditionally developed for dedicated handheld game machines not only for such consoles but also for multipurpose smart devices.”
Matsuda specifies turn- and simulation-based RPGs as being good matches for smart devices, noting that Square Enix “has excelled at [making turn-based RPGs] for some time.”
“By releasing new RPGs not only for dedicated handheld game machines but also for smart devices, we hope to develop the premium game market into a pillar of our business on a par with the F2P market,” he concluded. “In so doing, we believe that we can enrich the portable game market in the broader sense in order to respond to a variety of customer needs.”