Unlike Sega and Bandai a few years back, this merger is unlikely to collapse

 November 27th, 2002 - Unexpected news was announced yesterday in Tokyo, Japan – the two leading role playing game developers, Enix and Squaresoft, are merging. In the press conference held late last night it was stated that the gaming industry is changing rapidly, and by the two companies merging it will provide them with better possibilities to keep up with the industry and develop better games than before. Also, Enix has never had offices anywhere other than Japan, and Square who already have experience of global working would be an ideal partner.

Extracts from the press conference held yesterday:

Wada Youchi (President of Square): "This is an offensive merger. The merger decision was made in order to further please game players, and in order to survive. Enix is an excellent company. Square has also fully recovered, meaning this merger is occurring at a time when both companies are at their height."

"Additionally, both companies serve as ideal complements to one-another. We may have big titles such as Dragon Quest and Final Fantasy, but their styles are different and they are viewed differently by users. Additionally, our companies supplement each other in overseas development and in the development of our differing online strategies. Making the best use of this complimentary relationship, we'd like to develop new digital content."

Keiji Honda (President of Enix): "As the game industry sees great changes, we'd like to unite Square's development talents and Enix's external resources to produce games that will make gamers throughout the world take note. From long ago, Wada and I were considering the idea that if our two companies worked together, we'd be able to produce something very interesting. I'd like to produce games that people think are out of this world."

This isn't the first time Square and Enix will be cooperating. They have put their skills together once before in 1995 when Square released Chrono Trigger; a game which some gamers still consider one of the best RPGs ever made.

The company's new name for the time being is "Square Enix", but it might change later. Both of the companies are known brands, but they also want to listen to what their fans think of the name. The name will be decided by April 2003 in the beginning of the new business term, when the new company starts working at full speed.

Square Enix's president will most likely be Wada Youchi, Squaresoft's current headman. Enix's current president Keiji Honda would be serving as a vice president for the new company. Enix's current chairman is also assumed to keep his position. Square Enix's headquarters will be in Enix's current head offices in Tokyo. What will happen to Square's and Enix's other departments isn't known yet. (People from Square USA and Square Europe couldn't answer this yet.)

Although Square seems to be keeping their strong position in the executive field of Square Enix, Enix is actually being the controlling part in the merger. That may be because Square's poor financial situation in the past few years. Square has started two new companies within short time: Square Pictures (which was later sold to Paramount because of the huge losses from the movie – making FF:TSW cost Square Pictures 210 million US Dollars) and Gaming Studies (which is the company working on Squaresoft's Nintendo releases, FF: Crystal Chronicle and FF: Tactics Advance). Square's financial situation improved by an amazing 70% from the year 2001, but they're still not at the same level as they were at the time when FF7 and FF8 came out – Square's two biggest hits to date.

Together Square and Enix form one of the biggest gaming companies in Japan, and are a big threat to any other company making RPGs. The deal would be worth about ¥88.79 billion ($727 million) at current share prices. Enix sold 2.75 million games last year. Square topped this by a few million; they sold 4.37 million copies. Most of the games sold were RPGs. The new company expects the sales to reach 500 million US dollars by March 2004. By March 2005, Square Enix aims for 15 billion yen net profits ($123 million). As a comparison, in March 2002 Enix's net profits were a little over ¥4 billion and Square had taken a loss of over ¥16 billion.

Sony owns about 20% of Square's shares, being the biggest shareholder after Square itself. But Square's spokesman Hideki Tsuchiya said that they expect to win approval for the merger from the shareholders, including Sony.

Both Square and Enix have had difficulties keeping up with the huge western gaming companies such as Electronic Arts, Infogames and other big global companies. Together they hope to have a better chance of challenging these big companies.

None of the release dates of either company are going to change. Square is still working on FFX-2, and according to the rumours also with FF12 and FF13. Both, Squaresoft's FFX-2 and Enix's Star Ocean 3 will be released in March 2003.

The next press conference will be held 29th November.