Square Enix CEO is still taking risks with bets on core console games

Square Enix has continued to thrive as one of the few successful companies that can make games that appeal to those both in the East and West. Last year, it generated $1.97 billion in revenues and profits of $183 million thanks to big hits like Final Fantasy XIV.

Now it is coming out with heavy schedule of blockbusters for 2016, including Deus Ex: Mankind Divided, Final Fantasy XV, and even an experiment with virtual reality, dubbed Final Fantasy XV VR. We talked about this slate with Yosuke Matsuda, who became chief executive of the Japanese company after longtime CEO Yoichi Wada stepped down to run Shinra Technologies, a supercomputing cloud games startup.

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GamesBeat met with Matsuda at last week’s Electronic Entertainment Expo, the big game trade show that drew more than 50,000 professionals and 20,000 fans to the Los Angeles Convention Center.

Here’s an edited transcript of our interview.

GamesBeat: Where can I get my own bionic arm?

Yosuke Matsuda: Do they sell those yet? [Laughs]

GamesBeat: The Deus Ex arm. It’s a nice touch. What are some of your impressions of the big press conferences that started the show, Microsoft and Sony?

Matsuda: Looking at Microsoft’s hardware, I thought the Xbox One S and the Scorpio presentations were very interesting. When I saw the slim version, I wondered why they didn’t make it that way to begin with. It’s very small, very stylish, a nice design.

My impression is that since they released the Elite controller last year, Microsoft has become much more design-conscious when it comes to their hardware. They also had the announcement about releasing in multiple colors this time. That’s a bit different from Microsoft’s approach up until now. Apple and Sony have images as companies that are more design-aware. Apple in particular is known to be very design-conscious. But up until now I didn’t think that way about Microsoft. When you look at the slim console and the Elite controller, it gives the impression that they’ve changed. There was also the announcement about Scorpio, of course. It was more of an overview. They didn’t provide that much detail. But it’s a good way to build some excitement.

Sony was very much focused on PlayStation VR, which I’d heard was going to be the case. But what surprised me was their enormous game lineup. They kicked off God of War and ended with Days Gone. Those were very impressive. I was also very surprised by Spider-Man.

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GamesBeat: I wonder if you felt like there was anything missing at Sony. We didn’t hear about a slimmer PlayStation 4 or the Neo that they’d talked about before.

Matsuda: I’d heard about Neo beforehand, though. There was a variety of information out there. I knew they were targeting something higher-end that goes above the standard console. In that respect it was mostly what I expected.

GamesBeat: With Scorpio, Microsoft is talking a lot about blurring the line between PC and console. What do you think of that? What’s your own understanding of where that line might be in the future?

Matsuda: In terms of console and PC, because of Microsoft’s position, they probably want to see some standardization under Windows 10. Recently they were talking about “play everywhere.” They very much emphasized Xbox One and Windows 10 exclusives as their strategy. PC is constantly advancing in terms of technology. For players who can’t invest in a PC, but still want to play that kind of high-end game, that fits perfectly on Xbox One. They’ll probably try to have the two coexist. I don’t know that I see them leaning more toward one or the other.

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GamesBeat: When it comes to Final Fantasy XV, what did you want to show here? What impression did you hope to make on gamers?

Matsuda: We’re slated to launch the game in September. It’s still in development, but we’re approaching the final stages. In the lead-in to launch, it’s important to have a playable version that users can experience. That’s what the team really wanted to focus on for E3.

GamesBeat: How is Square Enix balancing its portfolio of Asian-made games and Western-made games?

Matsuda: We don’t really have a defined policy where we decide how we’re going to strike that balance. We have studios around the world. Even in Tokyo there are multiple development teams. In the west we have Montreal, San Francisco, Denmark, and London. Each of those has their own individuality. We want to enable them to leverage that individuality in creating their games. In so doing, we wound up with the portfolio we have.

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One thing I can say is that all of those teams like and make up the company Square Enix. That’s part of our identity as a company. As a result of that, you have all these games with their own individual personalities, but you have a single company in Square Enix that provides them all. I feel like that’s a good thing.

GamesBeat: Among the venture capitalists and entrepreneurs I write about, mobile gaming has fallen out of favor. Virtual reality is the big thing now. I wonder how Square Enix looks at those two different opportunities. Do you have a simile view, that VR is worth more investment now than mobile games?

Matsuda: It’s a fact that there’s a lot of excitement around VR at the moment. But I think a lot of that comes from the supplier side. Users, players, haven’t experienced it very much yet. As far as how much we want to invest in that, or what kind of business we want to build around that, we’re in a wait-and-see mode right now.

If we were to get into VR, we’d want to do that in a way that leverages our own personality. We’d create VR content that’s very high-end and very recognizable. We believe that we still need to wait a while longer in order to decide what kind of business we want to do there. Having said that, I don’t mean that we aren’t doing anything at all right now. We’re taking several VR showcase initiatives, like the VR content we just announced for Final Fantasy XV. We have a number of projects in the works. Those things all reflect our own individuality. We don’t think it would be meaningful to just do what everyone else is doing.

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As far as whether or not VR will take hold and become prevalent going forward, I do believe that’s going to happen. But we’ll see it used more frequently in non-gaming applications. For example, VR broadcasts of concerts or sporting events, so that viewers can enjoy a live experience. We’re already seeing things like that start to happen. It’s through applications like that that we’ll see VR become more prevalent. If VR applications were confined solely to gaming, that would be narrow and constricting. People would just see it as a piece of the game market. Once it’s used more broadly, that’ll add to the potential VR presents for gaming.

GamesBeat: I like the Go series of games, like Hitman Go. That seems to be a way for traditional console companies to participate and be more successful in mobile games. It seems to appeal to core gamers and bring them into mobile. How do you look at that opportunity?

Matsuda: The Go series is very interesting. We’ve thankfully gotten excellent feedback from users and from the platforms, Apple and Google. Our recent Lara Croft offering actually won a design award. They’re high quality games.

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Free-to-play games are very important to our business, but at the same time we need to enhance our initiatives in regard to premium apps. As one example, our Japanese development teams excel at turn-based RPGs. We want to release a lot of new titles in that genre. We want to price them strongly as well. We don’t want to offer them at discount prices. We want to produce content that warrants a premium price.

When you think about the handheld game market, the installed base for smartphones is just massive. We see those devices making up a very important market. I don’t think it would be good for that market to consist entirely of free-to-play games. It’s important for that market to have quality premium games as well. If those kinds of games were a viable option, it would draw more developers to give that market a second look. Premium apps are something we’ll be focusing on.

With the Go series, we most recently announced Deus Ex Go, but I haven’t heard what we’ll be doing next. I’m looking forward to hearing some interesting proposals. It’s a unique series, a very fun one, and we want to keep it going.

GamesBeat: Shinra Technologies recently closed down. Was there a change in strategy that led to that decision?

Matsuda: We had been investing in that project, but given the business model and other issues as well, we determined that it wouldn’t be successful if we were only investing in it by ourselves. Given the scale of the investment that was going to be required, though—Shinra was talking about becoming an actual platform. We decided it was something we couldn’t support on our own without external financing. Unfortunately, Shinra wasn’t able to attract the capital it needed. It proved difficult for them to continue as a platform, and that resulted in our decision.

Of course, the cloud remains a very interesting area, one where we have to consider a variety of opportunities. We want to continue to explore what we might do there. However, our core business is developing game content. Pursuing a platform business may have been a step too far.

GamesBeat: Where does Square Enix take most of its risks now?

Matsuda: In a variety of places, but our core business is developing games. We won’t hold back on investing in that business. In that sense, you could say that’s where we take the most risk.

GamesBeat: Some of the games you’ve created in Japan for the Asian market have a strong following in the West. Do you believe that represents a trend, that there’s more appetite in the West for Asian content today?

Matsuda: Particularly among a younger generation, content originating in Japan is very popular. Japanese media has a lot of fans. I think that has a lot to do with the speed at which information travels these days. There’s no time lag in the availability of information and media, which allows Japanese content to find a following.

GamesBeat: I met a game company with 100 employees that made mobile games in Siberia. I find it interesting that Supercell is worth more than $9 billion with only 180 people. We have a very strange game industry nowadays, it seems like. What’s your impression of that?

Matsuda: It’s all about what kind of team is making what kind of games. In our industry there are always surprises. That’s one of the reasons we can benefit as a company from having teams both in the west and in Japan. We have a variety of perspectives. Continuing to give rise to lots of different content is part of our identity as a company. You have to have that. The diversity of the Square Enix group is very important.

GamesBeat: Is there anything else you’d like to focus on today?

Matsuda: We have a lot of big titles coming out this year and I hope everyone’s looking forward to them. Also, going back to our discussion about premium apps, we’re going to be releasing I Am Setsuna very soon [for the PC and PlayStation 4]. It’s a turn-based RPG, but I don’t think you can call it old-fashioned or outdated. It’s just a classic style of game. I want us to continue providing a variety of content, including games like that, to gamers around the world. I want us to be very proactive in that area.

We’ve already invested in some of the games that have come out of the Square Enix Collective. As I say, we want to be involved in a variety of platforms, especially mobile. Fear Effect is an IP from our back catalog, quite an old franchise, but it’s something I thought would be very interesting if we could revive it now. I’m very happy that, through the Collective, a French company is going to make a new installment in that series for us.