Square Enix on next gen

Last week, Yoichi Wada, the president of Square Enix and chairman of the Computer Entertainment Supplier's Association (CESA), gave his candid opinion on the "growing pains" that have faced the game industry. Now, in the second part of a two-part interview with Nikkei Business Online, Wada explains why next-generation games must be innovative and hints at a new, possibily hardware-based release from Square Enix.

Wada said that with the Nintendo Wii, Sony PlayStation 3, and Microsoft Windows Vista operating system all nearing release, users will demand more innovation from the game industry.

"If we don't see some [next-generation] titles that differ from traditional games, the industry is in trouble. Nintendo's DS lineup gives you an idea of the potential... There is a demand for something new from the users... Entertainment is not a necessity, so the users don't know what they should demand. It's up to the creators to think about this."

As for the timing, Wada doesn't necessarily see dramatic changes right away: "After three years there will definitely be some [changes] underway [sic]... But this is entertainment after all, so you never know where the next big thing will come from... An exceptional creator can pull off rehashing the same material. This is the easiest thing to do when you're struggling with your content and model. This is fine as long as you pursue efficiency. This is what we've been doing for a long time, and in the process reached a profit rate of over 30 percent. However, this is what Square Enix did when the model was unchanging. Now things are different."

However, the nature of the business dictates that innovation must occur at a sustainable pace, he said. "You really have to dig deep within yourself to produce something new; you can't force it," Wada said. "We must change. But if we change all at once, the system will collapse, and since our profits are built on that system, it's a difficult question. So you have to introduce change from a completely unrelated direction within a separate budget framework. This is something all the companies are worrying about right now. Fortunately, we're financially prepared to handle change."

He observed that the outstanding examples of successful products in the recent past--the Nintendo DS and Apple iPod--are hardware. "The strategy behind Nintendo and the iPod, to create a new environment based on hardware, is completely valid," he said. "But, this is impossible if you don't have experience making hardware."

Then Wada made a surprising comment about the future direction of his company, which had been primarily software-driven.

"This is one of the reasons Square Enix will collaborate with Taito, a company that produces physical hardware," he said. "In our talks with Taito, ideas for an actual physical product have come up. In any case, we will be releasing some 'thing.' It's interesting in that it's not the sort of thing you expect from Square Enix."