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Nintendo and Square Settlement Details

by Bakudan Yoshinoya - March 11, 2002, 7:24 am PST
Source: Weekly Toyo Keizai

Weekly Toyo Keizai, provides us more info on Nintendo and Square deal.

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The latest issue of Weekly Toyo Keizai, a Japanese business magazine, features an article on Square’s decision to once again develop games for Nintendo’s consoles. Here is a summary of the article (translated from Japanese, of course).

Akitoshi Kawazu, the leader of Square’s second production unit and a board member, will head the new company, which will be formed in March. The new company will be responsible for porting some of the existing popular Square titles to the GBA. The company also plans to develop games that utilize the GBA and GC link. The company received development funding from Fund Q, which was formed by Nintendo’s president, Hiroshi Yamauchi.

Sony, who owns 19% of Square, agreed last October to let Square develop under the condition that this settlement will not influence future PS2 game development decisions. As a result, to meet this condition, Square will form a new company that will be independent from Sony. It should also be noted that Square invested 49% into the new company while Kawazu‘s investment represents 51% of the stake. Since Kawazu has the majority of the stake, he will have control over the company’s operations.

The article continued to comment that this new company will be no more than a paper company as the actual development will come from the second production unit of Square, which consists of around 10 developers.

Square was established in 1986 making games for Nintendo. In 1996, Square announced that they no longer support Nintendo, and went on developing FFVII for PS. Following the announcement, the previous president criticized Nintendo’s management strategy, which led to a standoff between Square and Nintendo.

However, the poor performance of the Final Fantasy movie put Square in a management crisis. Square’s current president realized that to stabilize revenues, reconciliation with Nintendo was one of the necessary conditions.

In the past, Square game creators that were specialized in anime and 2D games wanted to develop for Nintendo. There were also cases where many of these developers left Square. Therefore, it can also be said that this move is an attempt to protect Square’s own intangible assets. For these reasons, Square’s president also wanted to reconcile with Nintendo quickly.

The reconciliation would not have been possible if Nintendo and Sony’s relationship have not changed. From Nintendo’s perspective, its rival Sony has just dug a grave for itself. Even to Sony, Nintendo is a very formidable competitor. However, the entrance of Microsoft with the Xbox relaxed Sony and Nintendo’s long standing rival position.

On a side note, the release of Final Fantasy for Bandai’s portable handheld help sold the Wonderswan. The recent settlement has closed up any hopes of Wonderswan surviving in the handheld market.

The article concluded that Square has mapped new roads by being able to effectively use its existing assets while Nintendo will gain an extra spurt in selling its GBA, which has seen mediocre performance recently. The settlement will bring profits for both companies, and can be considered as a good move resulting from a rational and economical decision.

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