Square Enix president looks toward opportunities online

Youichi Wada says that although Japan was late to enter the market, it's not as far behind China and Korea as some think.

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TOKYO--Square Enix president Youichi Wada spoke Monday at the Asia Online Game Conference (AOGC), currently taking place in Japan. There, Wada commented on the online-gaming market in Asia, as well as his company's approach to the sector.

According to Impress Gamewatch and other media outlets, Wada shares the feeling that Japan was late to enter the online-game field. However, he also attempted to dispel the myth that Japan is a "third-world country" in the online gaming world.

He said the top online-game companies in Asia have each seen comparable profits, regardless of geographic market. In 2003, Square Enix's online-game sector made 2.3 billion yen ($22 million) in operating profits, while China's Shanda Entertainment made 2.8 billion yen ($27 million), and Korea's NCsoft made 5.5 billion yen ($53 million). Each company's operating profits in 2004 are estimated to double, with Square Enix's at 5.4 billion yen ($52 million), Shanda's at 6.6 billion yen ($63 million), and NCsoft likely tallying 10.9 billion yen ($108 million).

China is quickly becoming a target for overseas game publishers, Wada said. He explained that China's market is on a massively different scale when compared to Japan or America. In China, a new game will attract about one million users at its launch. Wada also said that because most online games in China are played at Internet cafés, opening a new café chain can lead a company toward gaining a respectable share of the market.

While Wada didn't spend much time discussing specific Square Enix strategy, he presented three income models that the company is focusing on: the consumer model, the arcade model, and the derivative model.

The consumer income model is based on games like Final Fantasy XI, where the gamer purchases the packaged software in a retail store and then pays a subscription fee that covers network costs and additional development costs.

The arcade income model doesn't have a purchase/setup fee, but the consumer pays each time he or she plays the game. Wada said that Square Enix launched its online game Crossgate in China using this model, since it fits Chinese gamers' patterns of playing online games from cafés.

The derivative model collects income from selling items within the game. While this approach still faces legal issues, it's already a successful business model.

Though Square Enix is considered a groundbreaking online-game company in Japan, Wada admitted that the cultures of gamers who play traditional console games and online games (on PCs) are very different. This can make it tough for console-game publishers to cross over into the online world. However, Wada added that it will be important for next-generation console games to be playable online.

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