Square Enix Plans to Aggressively Expand Overseas and Rapidly Adapt to New Platforms

Square Enix President and CEO Yosuke Matsuda addressed a New Year letter to the Japanese publisher’s shareholders, making a few interesting points about the company’s policies going into 2019.

In line with previous years, Matsuda-san intends to “aggressively expand” into overseas markets. This also includes acquisitions and business alliances in regions excluding China, since the regulatory situation there is still in flux and unpredictable.

“Looking overseas, we first note the unpredictability of future developments in the regulatory landscape for games in China. As though in response to that unpredictability, many Chinese publishers and developers are ramping up efforts at growing their international presence, including by actively engaging in M&A activity and business alliances in regions other than China.

We also intend to pursue a global strategy that involves building collaborative and cooperative relationships with them.”

Interestingly, Matsuda-san mentions the new generation of consoles but puts the accent on game streaming services and subscription-based business models, which are identified as the “key to future growth.”

“Against this backdrop of significant change, the current generation of game consoles has entered the late stage, and the next generation of consoles has become a topic of discussion in the digital entertainment industry.

Meanwhile, cloud streaming services for gaming have at last begun to show signs of taking off. Streaming is likely to bring a number of new platform operators into the market in addition to the existing console providers, while platform holders are also joining the PC gaming space.

These developments produce a growing number of avenues through which game publishers and developers can provide content. In particular, game streaming services will be the ultimate driver of a rapid transition from the sale of games in boxes to digital consumption. Streaming also lends itself to new subscription-based business models, so we believe deciding how to engage with these forthcoming trends will be key to future growth.”

Another area of interest is blockchain technology, while Square Enix’s boss acknowledges that virtual reality and augmented reality have grown in 2018. This goes beyond gaming, and extends to other initiatives like virtual YouTubers (which are massively popular in Japan).

“In 2018, we saw multiple new technologies make robust strides toward practical business use. Smartphones have already reached the entire world. Adoption of VR and AR technologies has shown an especially marked increase in the enterprise domain, and in the entertainment content space, they are being used not only in game content, but also for new services such as “virtual YouTubers.”

With the subsiding of the cryptocurrency bubble, the use of blockchain technology has spread to a variety of non-cryptocurrency domains as well. One has been the gaming space, where there have been some interesting developments with games and game platform services using blockchain technology.

We are also very interested in potential applications for blockchain technology in the digital content space. In addition, with both the public and private sectors supporting cashless payments, numerous digital currency services are currently battling for supremacy in that field.”

On the development side, we heard several teases at the end of the year from Square Enix’s Japanese game creators, and it’ll be very interesting to see where one of the biggest publishers of Japan will go in 2019.