Square announces internal restructuring

[04.05.99] » Square of Japan intends to divide its internal departments into 8 subsidiary companies by March 2000 while cutting back to 2 or 3 blockbuster titles a year.

8 subsidiary companies

   In order to counter sharp increases in the cost of game development and production, Square of Japan has announced that the company will split many of its departments into 8 different subsidiary companies by March, 2000. Separate accounting within each division is expected to boost overall profits as the divisions remain interlinked to the parent company. Additionally, Square plans to cut back development in game genres new to the company, focusing instead on its strengths and releasing only 2 or 3 high-profile titles each year.

   Among the game development departments, the CG, Planning, Programming, and Sound groups will each split into their own subsidiaries. Managerial departments such as Computer Support, Network Administration, and Customer Support will also divide into separately accountable structures. Not all departments will be affected, however, as Strategic Planning and Public Relations will remain a part of the main company, as well as the development and production department responsible for the Final Fantasy series.

   The surprising move is fueled by the risk of losses when one of Square's costly titles sells poorly in the Japanese market. Not only will the number of actual titles be reduced, but many of the subsidiary companies will contract out their services to other game companies between parent projects. The CG subsidiary, for example, will expand their production facilities to create CG effects and movies for other gaming companies while continuing development on the Final Fantasy Movie. The company hopes the subsidiary will be capable of competing with global special-effect studios to develop CG effects for blockbuster movies. The Sound division will also adapt to multi-channel sound generation technology needed for DVD-based media. Other divisions such as Marketing, Quality Assurance, and Customer Service will take on contracted work from outside companies as well.

   Square of Japan intends to limit forays into gaming genres in which the company has little experience, instead focusing on their strengths, such as RPGs. 6 to 8 major project teams will be formed at a time, and with each project taking 2 or more years to complete, the company plans to release 2-3 titles per year. Teams would be formed by taking staff from the subsidiary companies, such as Programming, Planning, and CG.

   What does this mean to the gaming public? Titles like Chocobo Racing and Internal Section, while decent, aren't quite the blockbuster mega-hit games Square is aiming for. With fewer games and development teams, the company can focus more development staff, funds, and marketing clout on pushing a small number of high-profile, extremely successful releases. This is especially welcoming to international gamers, as a much higher proportion of Square's titles would likely be translated for English audiences. Regardless, the company's new philosophy could stand to be even more damaging to profits should a title bomb in the retail market.

   Many thanks to a friend of the GIA for the translation of a release from the Nikkei financial reports.