Buying Eidos, makers of the Lara Croft: Tomb Raider video game, is just the first step in turning Square Enix into a more global company, said Yoichi Wada, the Japanese games group’s president.
Mr Wada, who has just completed the £84.3m ($123.3m) purchase of the flagship UK games maker, would not rule out further acquisitions as he looks to reach out to western gaming markets.
“The combination of Eidos and Square Enix gives us a good platform from which to expand. In that process, we might decide to acquire another company,” Mr Wada said.
Mr Wada said Japanese games companies had started to lag behind those in the west and needed to revitalise themselves with foreign influences.
“In the last five to 10 years, the Japanese games industry has become a closed environment, with no new people coming in, no new ideas, almost xenophobic. It is now slightly behind western counterparts,” Mr Wada said. “The lag with the US is very clear. The US games industry was not good in the past but it has now attracted people from the computer [industry] and from Hollywood, which has led to strong growth.”
Japanese games companies such as Sega, Konami and Capcom have been leaders in the computer games market since the 1980s but changing tastes have dented sales. Japanese games makers excel at complex role-playing adventure games but have struggled to create the driving and shooting games that are popular in western markets.
Square Enix has sold more than 80m copies of its Final Fantasy game and 45m copies of Dragon Quest titles to date, but saw sales fall nearly 10 per cent in its last fiscal year to March 2008. They fell again nearly 7 per cent in the nine months to the end of 2008. The company attempted a $200m takeover of its Japanese rival Tecmo last autumn but was rebuffed.
Square Enix has also signed a strategic partnership with Gas Powered Games, a US games developer known for titles such as Dungeon Siege, a role-playing game, and Supreme Commander, a strategy game. The two are working together to create Supreme Commander II.
Mr Wada is not making big changes at Eidos for the time being. The management team, headed by Phil Rogers, will remain in place and Mr Wada has professed himself a fan of the Tomb Raider titles. Eidos, which made a £136m loss in the year to June 2008, had already begun a restructuring programme to cut development costs and raised £60m from shareholders a year ago for working capital.
Mr Wada has some experience of rescuing troubled companies, having brought Square back from the brink of bankruptcy after taking the company’s helm in 2000. He plans to keep a close eye on cash flow at Eidos and make sure the company does not overspend on marketing. However, Mr Wada acknowledged he would have to walk a fine line between financial control and retaining talent.
“It is always difficult to manage creatives anywhere in the world. We want to cherish the Eidos studio culture but change it where it is necessary.”
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