You've heard this one before: the Japanese game market is shrinking, and Japanese companies need to look to the West to compete. Most of the presidents and CEOs of the NES-era aging titans have said this at one point or another, but few have made such bold statements, and bold moves, as Square Enix president and CEO Yoichi Wada.

Wada, in his Tokyo Game Show 2008 address as chairman of CESA -- Japan's equivalent of America's ESA -- said flat out that the country has "lost its position" as the world leader of game development. "Why has the Japanese industry lost its position?" he asked. "I, as chairman of CESA, shouldn't be saying this, but it's true."

But the move made surprised many -- the company acquired troubled UK-based publisher Eidos, gaining a host of great IP and some strong studios into the bargain. Now, it wasn't that surprising when the company acquired Japanese publisher Taito in 2005. But a huge Western organization? That's more interesting.

But owning doesn't necessarily equate to a meaningful collaboration or any form of understanding. How will the two companies integrate their operations in a meaningful way?

To answer that question, Gamasutra sat down with Square Enix's head Wada and Phil Rogers, CEO of Eidos, at last week's E3 trade show in Los Angeles.

So, obviously, you guys have come together, and it's an interesting time. I've been following the things that you've been saying -- like at Tokyo Game Show and to the media -- about the importance of targeting the western markets, and the Japanese game industry's insularity, so it is interesting to see Square Enix make this step.

I was wondering: how has it been? I'd like to hear from both of you, how has it been so far, and, you know, it's been a very short time that things have really come together, but...

YW: In the sense of the newlywed, we're only third day of the marriage, so we're still sorting out the furniture of the husband and the wife. So when the new contents are born that's the first time that the couple is going to start their lives, actually, and it's going to take a couple more months until that can happen.

And for E3 -- take that as an example -- Eidos [and Square Enix] will be able to be informed by one another as well, and I believe that the accumulation of this kind of experience is going to be beneficial on bothsides.

And there was a technical academy or summit?

Phil Rogers: It's coming. It's coming, yeah. This month.

YW: And there, the Square Enix engineers are going to be participating in that as well, so there is going to be a lot of exchange going back and forth, in that sense.

PR: And although it's only been a little over a month now since the legal closing, you prepare and you think. Obviously, we announced this in February, so we're dealing with the questions in a couple of areas. And I think we're very excited on the announcement -- leading a company through this sort of change. It's great to get a reaction internally that thisis going to be a fantastic thing for the business.

We're trying to reinvent Eidos, as we've seen the industry changing -- we've had to readdress ourselves, and I think that this is really going to allow us to accelerate. Do more; perhaps travel faster, travel deeper.

Clearly, in our sort of industry, the synergies about "how does one and one equal five, or ten?", as opposed to, other times the synergy is... sometimes combinations aren't really achieving.

So, there's tons of excitement. We've loved the pace, internally, that things seem to be [at]. There's a lot of planning and thought leadership. Some initiatives that we talked about: we have anacademy of experts; we're going to take our studio leadership structure and key engineers, and have attendees and participation from the Square Enix side, and that's fantastic.

So there's genuine excitement in the business, and it's lovely to be able to say that, actually. I really love that it's true. We're a very product-focused company now, and this combination feels right.

It opens up a lot of questions. Square Enix has a very strong creative culture, and Eidos does too, but I think that in recent times Eidos maybe didn't have the resources -- as things were a bit troubled at Eidos -- to pursue that creative culture; there were a lot of product cancellations and stuff prior to the merger. How does that creative culture flow in and out from the two organizations together?

YW: One of the reasons that we decided to acquire Eidos was because of this creative culture residing in that company, and that became a decision factor. And so I believe, in that sense, we were a good match, and I believe more and more of the creative cultural exchange going forward between the two companies.

But to nurture this creative culture is the tough part, because if there is too little in the way of resources then we won't be able to nurture that creative culture. But if there is too much of it, then it is going to rot.

And because both of the two companies have been facing tough times, through this exchange we will be able to get an insight from both parties that will fuse, which is going to become a good mix in the quality of the creative culture.

PR: And I think there's more creativity flowing in Eidos today, probably, I'd say in the last two years, as opposed to my 10 years being at Eidos. I think the history is there -- I mean, the narratives, the gameplay, the characters.

And like any story, it's had different chapters, and the chapters of the last three years have been quite tough. I think that the games that you reference -- for cancellation -- that was actually realizing that the creativity wasn't so good in those games. It wasn't so much of an expectation of success, actually; it's been clearing those to allow new things to grow: actually bring some new ideas to market.

And so, I think the creativity right now is at a great place in the group, and this transaction is one that comes with confidence: we can actually bring the titles through to fruition.

Something I'm particularly actually interested in, in the Eidos organization, is the Montreal studio. Obviously, it's been said that they're working on a Deus Ex title.

PR: It's announced. And Thief.

We haven't seen anything much out of the studio, right? Since it was founded. I hear it's a beautiful facility; I know we did a tour. I feel like right around when it came to fruition, maybe that's when things started going south a little bit. So I see a tremendous potential there. Do you think that this relationship will help you actually bring out the potential in that studio?

PR: Well, I think we've had truly ambitious plans for Montreal. I think, actually, when I look at the potential there today-- I think if we set that out as our plan, I think we may not even have started on it, because we might have actually realized, "Can we really achieve this?"

We were almost two years to the day -- I think it was in June 2007 -- when forming an ancillary studio, and it was really being started, with the first, second, third employee. We've had very ambitious goals, to really find a quality team, and create a new vision for a studio structure in Montreal.

So, we've got two titles in development. We feel very much on track. When we go and visit the teams there, and see the sort of skill sets, the passion, and the energy that is in the studio -- it fills me with tremendous excitement.

We'll start seeing things now on Deus Ex; we have announced that as a title. Clearly it's an outrageously popular game in the past, so it has a lot of community interest. But I think now we'll start seeing content come through.

But it is a great place; I think Montreal has this great fusion of creative talent, production talent, and the incentives there; the media, entertainment heart of Montreal is a great place to work.

Eidos Montreal's Deus Ex 3

Something that interests me very much right now is seeing Front Mission: Evolved announced at E3, because it's being developed by Double Helix in North America. Before I jump to conclusions, is there a possibility that one of the Eidos development teams could work with what was originally Square Enix IP, or vice versa?

YW: I think that's possible. But what's more important is that the two companies, for example, are going to be creating a new IP together.

What's going to be important is to be able to get a mutual understanding of each of the quarters so that we will be able [to create it], and what is going to be born from this new unity.

But I believe that there is also going to be the mutual exchange of the IPs between the two parties as well. That can happen in areas outside of games as well; for example, Square Enix not only has IP for games, but there's also IP for animation or manga, as well. So those IPs might be leveraged, for example, by Eidos -- in order to turn them into a game.

Or it can be vice versa as well: the game IP that the Eidos team has might be transferred over to the Square Enix team to turn it into a comic book, for example, or animation, or figures as well. And so those are some of the areas that this question concerns, as well.

Do you have any reaction to the idea of potentially collaborating in that way? Or any of these ways?

PR: I think the short term opportunities and ideas that we're already thinking about... Certainly, we look at the broad exploitation and management of IP expertise at Square Enix, so the potential to further IPs in that direction is quite clear.

So, figurines, or comics... We have tried this in the past, and had some success, and had some challenges as well, but we should keep working on that direction. I think I'd be disappointed having the same discussion in five or 10 years' time, and we haven't seen that IP exchange. I see that within Eidos today.

And it's an interesting trend, too: three years ago, a certain studio may never have thought about working on someone else's IP, or actually having the confidence to say, "I wonder what this studio within the same group could do with this IP." We're trying to create a very strong studio structure now within Eidos, and have a lot of good exchange and great competition, and I think with that trust we'll see that information on IP exchange. So, you know, I hope we do. I hope we do.

You're talking about cultural exchange, and with products, and you also talked about having engineers exchange tech. Both of your organizations separately, have proprietary tech -- obviously, Crystal Tools, Pollux, stuff like that [on the Square Enix side] and you have the Tomb Raider engine and others [on the Eidos side], so...

PR: It's called Crystal Tech as well, so...

Hey, yeah! It's Crystal Dynamics, right? So, you know, that proprietary tech, is that something that could map across organizations? Be shared? Be utilized?

YW: Of course we will. Of course we will. Luckily for us, the areas that we have strength in differs between Square Enix and Eidos, so in that sense the technology, as well as the technology exchange, is also going to be mutually beneficial.

I see how that would make sense, because Crystal Tools, at least in my primary understanding, was created to create Final Fantasy XIII and games in that vein, whereas the Crystal Tech started out with Tomb Raider and stuff in mind, so potentially there are different benefits to the different technologies thatcould definitely work. That's interesting.

That'sgoing to be a tough process, you know, in terms of, like, translating documentation and stuff. Is there a process that's going to be in place, or is it still too early to say?

YW: I believe that we would have to forcibly start that kind of a process.

PR: I think we are, at this stage, really trying to promote discussion, and we've tried to do that through these academies, and looking at different engines. We know we're an entertainment, or a content business, so we take an approach to technology which is: use the best tech for this best game. We have games where we have licensed technology; we have games where we use proprietary technology.

So, I can see further and further exchanges, and at some level having to translate documentation or APIs or whatever to be able to make the tools and workflows really work. Companies have done this. There are software solutions today that work in different regions and locations, so, we'll get that done when we need to.

Eidos/Crystal Dynamics' Tomb Raider: Underworld

WorldwideIP creation is tough -- in the sense that creating IPs that sell globally is very, very tough. I think that, actually, there really aren't many games that really do sell well in all three major global territories.

So, moving in with this organization coming together, that now spans Europe and North America strongly, North America and Japan strongly... Creating worldwide IP through Eidos and Square Enix that can work together; how is that process a priority for you?

YW: We're not considering that one certain title is going to be sold on a worldwide basis in all of the territories. For example, there might be one title that we're going to be giving to two of the territories, and another title that we'll be giving to one of the territories; one that would only cater to one particular territory.

But as long as there is going to be a well-balanced portfolio as a company, it's going to be fine, because if we tried to forcibly make a certain title work worldwide, and if that's going to be degrading the quality, we don't want to go down that path. But rather than that, even if that certain title only ever worked for two out of the three major territories, but still it is going to be selling deeply and thoroughly, then I believe that is going to be the better path to take.

And in order for that to happen, there needs to be a deep-rooted understanding of the culture of the particular culture ofthe particular country -- and Eidos and Square Enix both have 20 years of history residing in that particular country, so we are native in that particular area that we grew up in.

If [a company] is going to be an office, only an office, that is going to be operating in a different territory, then that will still be a foreign entity, and it will not work; but I think that the strength that we have is that we are both in the native in that particular area, and it's a good combination in that sense.

What do you think about it? I mean, I know it's stupid to just say, "What do you think about it?" but...

PR: Oh, no, no, no. Well, actually, I was going to ask this question of you: what do you think about it? I mean, you're a consumer, so you could get any media form -- look at TV; look at film; look at radio... Certain things work better than others.

Absolutely.

PR: You know, there have been some successes, of some IPs that have worked better, and truly achieved great things on a worldwide stage. You know, I don't -- I suspect, in years, we will see success, but it is a hard challenge.

What I've wanted to see is some of the innovative concepts and tech that comes out of the West being transferred and communicated to Japanese studios, and actually see... Like, I'd love to see a sandbox game set in [Final Fantasy VII's] Midgar, or something. That would be a more interesting setting to me than Liberty City. Maybe not everybody would feel that way, but that's how I feel. That's just a random off-the-top-of-my-head example. Using the expertise of Crystal Dynamics to create an action game in the Final Fantasy universe would be, actually, extremely compelling, so...

PR: I agree with that. So, I think, it's more than experimentation: I think you need a trust, and a desire, and a passion for these properties, and a technical capability to actually drive that utility.

It's a natural thing for consumers to want [games like] that, and I don't think that you're untypical. There's going to be strong communities of people that would love to play that. We talked about, maybe, in the future, user-generated content. You know, where does that start becoming a platform type of IP that is customized in certain locations but fundamentally you're playing the same sort of game.

So, again, I think in five or 10 years, we'll no doubt see more of this.

Is there going to be a global review process for titles as they come out of the studios? Obviously, I get the impression that Square Enix is interested in hearing from the West. I also get those ideas from some of what you specifically said, Wada-san, as both in terms of your role as CESA chairman, as well as Square Enix. Is there going to be some sort of process where there's a global evaluation of titles as they're in development, or as IP is being generated?

YW: Meaning whether we check for each title whether it is going to reflect the opinions from each of the customers in that region; is that what you mean when you say"global review"?

Would you present titles internally, say, at a global strategy meeting? You're talking about the cultural understanding, of having an indigenous office, right -- would Eidos staff be able to say, "Yes, I see that this title actually does have this kind of real potential," or, "This is a way that you could make this title more appealing to people in our territory," and by the same token, could you present titles and you would say, "Well, I see that there's actually a real potential for this to be a success in Japan or Asia."

YW: It's something that we're trying to make happen. That's exactly what we're trying to make happen.

We definitely would like to do something like that, and implement that. And we have ideas, but there is a tremendous amount of titles; so we have to be able to strike a balance of which one is going to need a deep dive type of discussion, versus something that can be shallower than that.

Because if everything is going to become a deep dive, then people will start to collapse, because they're too busy. So in that sense, we would be taking a little more time in order to design that kind of schema to implement, but we would definitely like to be able to do that.

PR: So we've -- I've got to stop saying "we've" -- at Eidos a good, robust, workable greenlight process for all our titles has been an initiative that we've had to really drive for the last 12 or 18 months, to deliver the quality that we aspire to.

I think it's been really interesting looking at how you greenlight processes, and how you manage creativity, and design, and sales, and territorial impact. We've had a year of some great successes, and some challenges too. I think what's been interesting, again, is when you build trust in that working group, I think it does enable you to have more input from different people, just people of different viewpoints.

The challenge is then that games can become color-by-numbers. You know, if you take everyone's little ideas and just input those, you don't necessarily keep the balance in the overall aspiration that you're trying to achieve. But if you've got at least an environment where you can put that view out there, and have that view as a trusted view, then it actually is interesting.

So, we've had a year of working in this way-- again, the benefit, or the beauty, if you like, of this transaction is: at some of the greenlight meetings at Eidos, I think we'd love to have people from Square Enix attend, and look, and contribute to. So I think there's an excitement and anticipation towards that.

So it sounds like you guys have a strong process. Your greenlight process is an established process that you've spent time thinking about working on. Are processes something that could map across, and share not just your tech or staff, but processes?

PR: Well, massively. I mean, we've recently done some process analysis on certain data flows around sales, and marketing, and publishing; and, actually, when you look at the "hardware", if you like, of how we work, of course there are huge similarities. Then you've got the "software", if you like, the people side, on how we get these things to work.

But there are lots of similarities in terms of what we do. And therefore, efficiencies that we can achieve, or best-of-class... You know, again, knowledge transfer to improve things. We've got a process for greenlight that I think is very logical. You can read it, it's documented, and you understand it; but it in turn takes people to actually make that thing work.

So sharing best practices is something that you see as a definite possibility.

PR: Of course. It's the first step -- whether it's internal, or even looking outside and seeing what other people are doing -- and trying to achieve more.

Around GDC time, I spoke to Fumiaki Shiraishi, who is establishing the U.S. studio of Square Enix, and I wonder, does this have any effect on him at all? Does it have any effect, positive, negative, or indifferent on what he's establishing?

YW: Eidos has multiple numbers of studios because of the multiple numbers of the territories. And it just so happens that we only have one, in Tokyo area. So it's not too unusual that there's going to be multiple numbers of studios. Plus there is going to be more diversity.

Square Enix's Final Fantasy XIII

I've heard some things kind of come through the grapevine from American developers that Square Enix has recently been working with on their projects, that they're finding it really good to work with Square Enix as a publisher, compared to both Western and Japanese publishers that they've worked with in the past. I was wondering -- have you heard that from the people you've been working with in the U.S.? And why do you think that is, honestly?

YW: Maybe the budget is better? They can use more money?

(laughter)

PR: The currencies!

YW: Just kidding! But, actually, in the past, we've never placed an order to an overseas studio. But, actually, only with the domestic [Japanese] studios, we will not be able to address all of the global market and global needs. And because of that, in the early portion of last year, we started to place orders to U.S. studios and European studios.

And because it's the first time, we want to be able to do a thorough job -- and also because it's the first time, it's exciting, and I believe that transcends; that it's communicated to the developers that are working.

And Phil has mentioned this a couple of times, but the big point, the big key word is "diversity," I believe, and we have to be able to acknowledge that we are a different entity, and a different people. So based on this acknowledgment that we are different, there is going to be a mutual respect for each other, and we believe that that is something that we need to be able to adhere to and embrace.