The Epic Saga of Square Enix
Delving into the corporate evolution and creative legacy of a global gaming titan, from pixelated origins to multimedia empire.
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Foundational Origins
Enix: The Publisher's Ascent
Enix Corporation, established on September 22, 1975, by architect-turned-entrepreneur Yasuhiro Fukushima, initially focused on publishing games from exclusive development partners.[8][9] A pivotal moment arrived in the 1980s with the launch of the *Dragon Quest* series, developed in partnership with Chunsoft. This console RPG franchise, featuring the talents of director Koichi Nakamura, writer Yuji Horii, artist Akira Toriyama, and composer Koichi Sugiyama, saw its first installment, *Dragon Warrior*, sell 1.5 million copies in Japan in 1986, cementing *Dragon Quest* as Enix's most lucrative property.[10][11] By November 1999, Enix had achieved "large company" status, listing on the Tokyo Stock Exchange's first section.[8][15]
Square: The Developer's Vision
Square Co., Ltd. began in October 1983 as a computer game software division of Den-Yu-Sha, a power line construction company. Founder Masafumi Miyamoto championed a collaborative development model, bringing together graphic designers, programmers, and professional story writers—a novel approach at the time.[10] Spun off as an independent entity in September 1986, Square initially struggled. However, inspired by Enix's success, they developed the role-playing game *Final Fantasy* in 1987.[1] This title sold over 400,000 copies, becoming Square's flagship franchise and leading to a reputation for high-quality RPGs by late 1994.[10][17] Square's strategic decision to develop for the CD-based Sony PlayStation, rather than the cartridge-based Nintendo 64, proved highly successful, with *Final Fantasy VII* selling 9.8 million copies and becoming the PlayStation's second-best-selling game.[1][18]
The Grand Unification
Strategic Imperative for Consolidation
Discussions for a merger between Square and Enix had been ongoing since at least 2000. However, the financial setback from Square's 2001 film, *Final Fantasy: The Spirits Within*, made Enix hesitant.[19][20] Square's subsequent financial recovery, bolstered by the success of *Final Fantasy X* and *Kingdom Hearts*, led to record operating margins in fiscal year 2002.[22][23] This stabilization paved the way for the official merger announcement on November 25, 2002, driven by the shared goal of reducing development costs and enhancing competitiveness against international developers.[24] Square's president, Yoichi Wada, emphasized that the merger occurred when both companies were at their peak.[25]
Navigating Shareholder Concerns
The proposed merger faced scrutiny from some shareholders, notably Masafumi Miyamoto, Square's founder and largest shareholder, who expressed concerns about his reduced stake in the combined entity.[26] Critics also questioned the operational synergies, given Enix's outsourcing model versus Square's in-house development.[27] These concerns were addressed by adjusting the share exchange ratio, leading to the merger's approval. On April 1, 2003, the new entity, Square Enix, officially came into being.[1][28] Enix was the surviving legal entity, and Square Co., Ltd. was dissolved.[2][3] Yoichi Wada became president, Keiji Honda vice president, and Yasuhiro Fukushima, Enix's founder, became honorary chairman.[32][33]
Post-Merger Expansion
Global Reach and Strategic Acquisitions
Following the merger, Square Enix embarked on a period of significant expansion. In March 2004, it acquired mobile application developer UIEvolution to bolster its wireless market presence, later establishing its own Square Enix MobileStudio in 2008.[34][35] International growth included the founding of Square Enix China in January 2005.[16] A major acquisition in September 2005 was Taito, the renowned arcade game developer behind classics like *Space Invaders* and *Bubble Bobble*.[36] In February 2009, Square Enix acquired Eidos plc, gaining control of popular Western franchises such as *Tomb Raider*, *Hitman*, *Deus Ex*, and *Thief*, along with its development studios. This led to the formation of Square Enix Europe in November 2009, integrating Eidos's European operations.[43][44]
Challenges and Studio Dynamics
Despite strategic growth, this period also saw challenges. A proposed takeover of Tecmo in 2008 was rejected.[37][38] A *Final Fantasy* spin-off, *Fortress*, developed by Grin, was reportedly canceled by Square Enix, leading to Grin's bankruptcy and accusations of betrayal.[40][41] Several smaller studios were founded and later closed, including Hippos Lab (2011-2015) and Smileworks (2013-2015).[50][70] These instances highlight the dynamic and sometimes volatile nature of the video game industry, even for major players.
2013: A Period of Restructuring
Addressing Financial Performance
March 26, 2013, marked a significant turning point for Square Enix, as the company announced a major restructuring in response to sluggish sales of key Western titles and an anticipated loss of ¥10 billion.[56][57] This period saw the resignation of President Yoichi Wada, who was succeeded by Yosuke Matsuda.[56] The company acknowledged that despite critical acclaim, games like *Tomb Raider* (2013) and *Hitman: Absolution* had underperformed commercially, attributing this to an ineffective North American sales force and intense price pressure.[65]
Shifting Business Models
The restructuring extended to executive changes, with Mike Fischer departing as CEO of Square Enix of America, and Phil Rogers assuming leadership for both Americas and Europe.[59][60] President Matsuda articulated a need to transition from a model characterized by lengthy development cycles for major titles to one fostering more frequent customer interactions, even citing platforms like Kickstarter as an example of engaging communities.[66] This strategic pivot aimed to adapt to evolving market dynamics and consumer expectations, influencing subsequent development and publishing strategies.
Recent Divestments & Shifts
Strategic Asset Sales
In a significant corporate maneuver on May 1, 2022, Square Enix announced the sale of several key assets from its subsidiary Square Enix Limited to the Swedish holding company Embracer Group for $300 million.[92][93] This divestment included prominent studios such as Crystal Dynamics, Eidos-Montréal, and Square Enix Montreal, along with intellectual properties like *Deus Ex*, *Legacy of Kain*, *Thief*, and *Tomb Raider*, encompassing rights to over 50 games. Square Enix clarified that this sale was intended to facilitate investment in emerging technologies, particularly blockchain, and to optimize resource allocation within a changing global business landscape.[92] The company retained franchises such as *Life Is Strange*, *Outriders*, and *Just Cause*.
Future Focus: Core Games & Blockchain
Following the asset sale, President Yosuke Matsuda further clarified that the proceeds would primarily be reinvested into strengthening the company's core games business.[94] In September 2022, Matsuda indicated a shift away from outright studio ownership due to escalating development costs, favoring alternative investment models like joint ventures.[97] Square Enix also demonstrated a clear commitment to blockchain and cloud services, investing in seven strategic cooperations in 2022, including Zebedee, Blocklords, Cross The Ages, Blacknut, Animoca Brands' The Sandbox, and Ubitus.[98] In March 2024, the company announced a more selective approach to game development, leading to the cancellation of numerous unannounced titles and a concentrated focus on the third installment of the *Final Fantasy VII Remake* series.[103]
Corporate Architecture
Holding Company Evolution
On October 1, 2008, Square Enix underwent a significant structural transformation, reorganizing into a holding company named Square Enix Holdings. Concurrently, its core development and publishing operations were spun off into a new subsidiary, Square Enix Co., Ltd., which shared leadership and office space with the parent holding company.[16][104][105] The primary headquarters for both entities are located in the Shinjuku Eastside Square Building in Shinjuku, Tokyo.[104][106] This structure allows for diversified focus across various entertainment sectors.
Creative Business Units
Square Enix Co., Ltd. is currently organized into five Creative Business Units (CBUs) dedicated to game development and production. Beyond gaming, the company maintains a specialized publishing unit for manga and books, a digital storefront for its e-Store and merchandise, a media and arts division for music, concerts, and visual content production (including live-action, animation, and CG for various media), and a dedicated blockchain business division.[107][108][109][110][111] These CBUs are structured to manage diverse franchises and development approaches:
Business Philosophy
Polymorphic Content Strategy
Square Enix's business model is fundamentally built upon the concept of "polymorphic content." This strategy involves developing franchises across multiple media platforms, rather than confining them to a single gaming system.[136][137] A prime illustration is the *Fullmetal Alchemist* manga, which has been adapted into anime series, films, novels, and video games.[138] Other notable polymorphic projects include the *Compilation of Final Fantasy VII*, *Code Age*, *World of Mana*, *Ivalice Alliance*, and *Fabula Nova Crystallis Final Fantasy* subseries.[139] As former president Yoichi Wada articulated, once a "jackpot" franchise is established, the company aims to extract maximum value from it.[140]
Game Design & Re-releases
The standard game design model at Square Enix prioritizes establishing the plot, characters, and art before moving to battle systems, field maps, and cutscenes.[142] This process became a company standard after the success of *Final Fantasy VII* in 1997.[142] While development teams for major titles like *Final Fantasy XIII* could peak at 180 artists, 30 programmers, and 36 designers, the company has also explored outsourcing large-scale development.[143] Additionally, Square Enix re-releases its best-selling games at reduced prices under the "Ultimate Hits" label, akin to Sony's "Greatest Hits" program, to extend their market reach and profitability.[141]
Iconic Franchises
RPG Dominance
Square Enix is predominantly recognized for its extensive portfolio of role-playing video game franchises.[144] The *Final Fantasy* series, initiated in 1987, stands as its top-seller, boasting over 173 million units sold worldwide as of March 2022.[6][145] The *Dragon Quest* franchise, launched in 1986, is a cultural phenomenon in Japan, with over 85 million units sold globally, and new installments consistently achieve high sales.[6][145] The *Kingdom Hearts* series, a collaboration with Disney since 2002, has shipped 36 million units.[7] Other notable RPG series include *SaGa* (nearly 10 million sales), *Mana* (over 6 million sales), and *Chrono* (over 5 million sales).[145]
Diverse Portfolio & Critical Acclaim
Beyond its core RPGs, Square Enix's portfolio includes a wide array of franchises from its predecessors and acquisitions:
- Former Square franchises: *Mana*
- Former Enix franchises: *Star Ocean*
- Square Enix original franchises: *Drakengard*
- Taito franchises: *Space Invaders*, *Bubble Bobble*
- Quest franchises: *Ogre*
- Retained former Eidos Interactive franchises: *Just Cause*, *Life Is Strange*
- Square Enix America/Europe created games: *Quantum Conundrum*, *Motley Blocks*
Many Square Enix titles have garnered critical acclaim, with 27 games featured in *Famitsu* magazine's "Top 100 Games Ever" in 2006, and *Final Fantasy X* securing the top position.[146] IGN also recognized Square Enix as the "Best Developer of 2006" for the PlayStation 2.[147]
Multi-Platform Strategy
While Square and Enix initially focused on Nintendo consoles, Square Enix now develops for a broad spectrum of platforms.[148][149] This multi-platform approach became particularly evident in the seventh generation of consoles, with titles like *Final Fantasy XIII* releasing on both PlayStation 3 and Xbox 36, and *Dragon Quest X* on Wii.[150][151] The company also develops for handheld consoles (Game Boy Advance, Nintendo DS, PSP, 3DS, PS Vita), Microsoft Windows, and various mobile platforms.[148][153] This commitment to platform diversity reflects a strategy to reach wider audiences globally.[156]
Technological Foundations
Crystal Tools Development
In 2004, Square Enix initiated the development of a "common 3D format" to streamline game development across platforms. This endeavor led to the creation of the Crystal Tools game engine, designed for compatibility with PlayStation 3, Xbox 360, Windows PCs, and to some extent, the Wii.[165][166] The engine was first showcased at E3 2005 with a tech demo that later influenced *Final Fantasy XIII*.[167][168] Crystal Tools was also utilized for *Final Fantasy Versus XIII* before its transformation into *Final Fantasy XV* and subsequent shift to next-generation platforms.[169] While refined for *Final Fantasy XIII-2* and significantly overhauled for *Lightning Returns: Final Fantasy XIII*, development on Crystal Tools is believed to have ceased after this period.[170][171][172]
Luminous & Third-Party Engines
The Luminous Engine, unveiled at E3 2012 with the *Agni's Philosophy* tech demo, was conceived for eighth-generation consoles.[173][174][175] *Final Fantasy XV* was the first major console title to be developed with the Luminous Engine, with the game's production and engine development proceeding in parallel, allowing for mutual optimization.[169][176] In addition to its proprietary engines, Square Enix frequently leverages third-party solutions. Unreal Engine 3 powered games like *The Last Remnant*, and more recently, Unreal Engine 4 has been adopted for major projects including *Dragon Quest XI*, *Kingdom Hearts III*, and *Final Fantasy VII Remake*.[177] Unity is also used for titles such as *I Am Setsuna*, *Lost Sphear*, and *SaGa: Scarlet Grace*.[177] The Squirrel programming language was notably used for the WiiWare title *Final Fantasy Crystal Chronicles: My Life as a King*.[177][178]
Ventures into Online Gaming
Early MMORPG Successes
Prior to the merger, both Enix and Square had independently ventured into online gaming. Enix launched its first online game, *Cross Gate*, in Japan, mainland China, and Taiwan in 2001.[179] Square followed suit with *Final Fantasy XI* in Japan in 2002, initially for PlayStation 2 and later for PC.[180] The immense success of *Final Fantasy XI* led to its port to the Xbox 360 two years later, marking it as the first MMORPG on that console.[180][181] All versions of the game utilized PlayOnline, Square Enix's proprietary cross-platform internet gaming and service platform, which served many of their online titles throughout the decade.[182][183]
Expanding Online Horizons
Building on its MMORPG success, Square Enix initiated a new project, *Fantasy Earth: The Ring of Dominion*, which was eventually licensed to GamePot and released in Japan as *Fantasy Earth ZERO*.[184][185] However, Square Enix later divested from this project, selling it to GamePot in 2006.[185] The sequel to *Cross Gate*, *Concerto Gate*, was released in 2007.[186] A next-generation MMORPG, codenamed *Rapture* and developed by the *Final Fantasy XI* team using the Crystal Tools engine, was unveiled at E3 2009 as *Final Fantasy XIV* for PlayStation 3 and Microsoft Windows, launching in 2010.[187][188] *Dragon Quest X*, also an MMORPG utilizing Crystal Tools, was announced in 2011 for Nintendo's Wii and Wii U consoles, releasing in 2012 and 2013 respectively.[189][190] The company also developed various browser and Facebook games, including *Legend World*, *Chocobo's Crystal Tower*, and *Knights of the Crystals*, alongside titles for Yahoo! Japan.[191][192][193][194]
Cloud Gaming Initiatives
Mobile Streaming & Early Platforms
Square Enix explored cloud gaming to extend its reach to mobile platforms. In 2013, *Dragon Quest X* was made available on iOS and Android in Japan, leveraging NTT DoCoMo as the release platform and Ubitus for streaming technology.[195] This was followed by a 3DS release in Japan in 2014, also utilizing Ubitus.[196] In May 2012, Square Enix collaborated with Bigpoint Games to launch CoreOnline, a free-to-play cloud gaming platform designed to deliver "limitless game worlds" directly through web browsers.[197][198][199] However, due to "limited commercial take-up," CoreOnline was discontinued in November 2013.[200]
Further Cloud Ventures
Another significant cloud gaming initiative was the creation of Shinra Technologies (formerly Project Flare) in September 2014, a company dedicated to cloud services.[201] However, Shinra Technologies also ceased operations in January 2016.[202][203] In October 2014, Square Enix launched *Dive In*, an online game service in Japan that allowed players to stream console games to their iOS or Android devices.[204] This service was monetized based on play time, offering each game for free for thirty minutes.[205] *Dive In* was subsequently canceled in September 2015.[205] Despite these early challenges, some Square Enix games remain available on Japan's G-cluster streaming service.[206][207]
Arcade Presence
Taito's Legacy in Arcades
With the acquisition of Taito in 2005, Square Enix inherited a substantial arcade infrastructure and facilities, marking its entry into the arcade market.[208] Taito, a pioneer in arcade gaming, continued to innovate under Square Enix, notably with the introduction of NESiCAxLive in 2010. This cloud-based system allowed for digital storage and internet-based distribution of games, eliminating the need for physical copies in arcade locations.[209] Square Enix maintains a dedicated presence in the Japanese arcade market, catering to a loyal fanbase that values the unique arcade gaming experience.[210]
Interactive Entertainment Venues
Expanding its physical entertainment offerings, Square Enix announced a "Ninja Tower Tokyo" theme park in November 2019, developed by its newly established Live Interactive Works division.[211][212] This initiative signifies a broader engagement with location-based entertainment, leveraging its intellectual properties in immersive experiences. The company's continued investment in arcade and interactive venues underscores its commitment to diverse forms of entertainment beyond traditional home console gaming.
Cinematic Endeavors
Forays into Film Production
Square Enix has made several notable forays into the film industry. The first was *Final Fantasy: The Spirits Within* (2001), produced by Square's subsidiary Square Pictures (now a consolidated subsidiary of Square Enix) before the merger.[213] Its significant box-office failure initially caused Enix to delay the merger until Square regained profitability.[214] In 2005, Square Enix released *Final Fantasy VII Advent Children*, a CGI-animated film set two years after the events of the PlayStation game *Final Fantasy VII*.[215] A *Deus Ex* film was in pre-production in 2012 and undergoing rewrites as of 2014.[216][217]
Expanding Visual Narratives
More recently, in 2016, Square Enix unveiled *Kingsglaive: Final Fantasy XV*, a film set within the universe of *Final Fantasy XV*.[218] Concurrently, a new web series titled *Brotherhood: Final Fantasy XV* was released on YouTube and Crunchyroll, further expanding the narrative through animated content.[218] These projects demonstrate Square Enix's continued commitment to leveraging its rich intellectual properties across various visual media, enhancing the immersive experience for its global audience.
Manga Publishing
Gangan Comics & Key Titles
Square Enix operates a dedicated manga publishing division in Japan, Gangan Comics, which originated from Enix.[213] This division is responsible for publishing content exclusively for the Japanese market. Its catalog includes highly successful series such as *Fullmetal Alchemist* and *Soul Eater*.[219] Gangan Comics also publishes manga adaptations of various Square Enix games, including *Dragon Quest*, *Kingdom Hearts*, and *Star Ocean*.[220][221][222] Many of these titles have been further adapted into popular anime series.[223]
Global Reach of Manga
*Fullmetal Alchemist* stands as the most successful title from Square Enix's manga branch, with over 64 million volumes sold worldwide.[224] While initially focused on the Japanese market, Square Enix launched a digital manga store for North American audiences in 2010, featuring several prominent series from Gangan anthologies.[219] Starting in Q4 2019, Square Enix began directly publishing some of its manga series in English, signaling an increased commitment to international distribution and engagement with a global readership.[227]
Merchandise & Retail
Extensive Franchise Merchandise
Square Enix has developed an extensive range of merchandise across virtually all its video game franchises. Its former online gaming portal, PlayOnline, began selling merchandise from series like *Parasite Eve*, *Vagrant Story*, *Chocobo Racing*, *Front Mission*, *Chrono Cross*, and *Final Fantasy* as early as 2000.[228] Mascots are a particularly popular focus for merchandise. The iconic Chocobo from *Final Fantasy* has appeared as rubber ducks, plush toys, and on coffee mugs.[229][230][231][232] Similarly, the Slime character from *Dragon Quest* is frequently featured in merchandise, especially in Japan, with a dedicated "Smile Slime" section on the Japanese Square Enix shopping website.[234][235]
Retail Experiences & Collaborations
Slime merchandise extends to plush toys, game controllers, figurines, and various board games, including *Dragon Quest Slime Racing*.[235][236][237][238] Unique items like pork-filled steam buns shaped like slimes were even sold in Japan in 2010.[239] Rabites from the *Mana* series have also been featured in a wide array of merchandise.[240] Square Enix has also ventured into third-party merchandise, producing figures for series like *Mass Effect* and *Halo* in 2012.[241] Since 2012, the company operates "Square Enix Cafe" shops in Tokyo, Osaka, and Shanghai, which serve as retail spaces for merchandise and themed café experiences.[242][243][244]
Subsidiary Ecosystem
Current Operational Subsidiaries
Square Enix Holdings maintains a robust network of subsidiaries, both domestic and international, each contributing to its diverse entertainment portfolio. These entities are strategically positioned to manage specific aspects of the business, from game development and publishing to manga and operational support.
Former Subsidiaries & Their Fates
Over its history, Square Enix has also seen the formation and dissolution or divestment of numerous subsidiaries, reflecting strategic shifts, market changes, and corporate reorganizations. These former entities played various roles in game development, publishing, and support services.
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References
References
- "PlayStation: The Official Magazine Holiday Gift Guide '08," PlayStation: The Official Magazine 13 (Holiday 2008): 37.
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