Outline of Tokyo Game Show 2011 Keynote Speech held on September 15, 2011

*This keynote was made by the president and CEO of Square Enix Holdings in his role as chairman of the Computer Entertainment Supplier’s Association.

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Our final driver of growth is the business model (Figure 3.)

First, let’s talk about price.

When video games first appeared on the scene as arcade games, they were pay-to-play. You put in as many 100 yen coins as you wanted to play for.

Then, console game software moved into packaged good sales. In other words, a fixed price. This trend has continued since that period. Customers rebelled; that lead to used games. It may be bad of me to say, but used games are inevitable; it's the start of the customer trying to take back control of pricing. The distributor does control pricing through lower priced editions, in America this would be price protection, in any case it's the start of price regulation. Supply-side, demand-side... When you have a sales channel which sells physical goods, in the end the distributor must control the price.

Before I entered this company, I bought a game new, played it immediately, sold it immediately, and then bought my next copy used. I only paid the difference between when I bought it new, and when I sold it used. But that’s the demand-side of fixed pricing.

The decisive breaking point for fixed pricing was the internet. When you connect your game to the web, you can do micropayments. Then you can pay at any time. This is something completely different than fixed pricing. We've returned from fixed pricing to pay-to-play. But from here on out it gets difficult. The amount that gets paid for in pay-to-play schemes isn't something the suppliers can control. Customers will only pay to their satisfaction. And the realization of this phenomenon is microtransactions and freemium. This is, in a word, a situation where the customer pays for as much as he/she is satisfied.

The unit price for goods and services is going down. People call this price destruction or "free." But that's not what's happening. The phenomenon may appear that way, but the undercurrent that I can see is we've moved to a system where each customer is paying as much as he wants to. And when this happens, the creative side needs to begin designing for this new model- game designs will change completely. But it's not that games will become cheaper and unprofitable; rather the method of game design has to change. Within this context, discussions over price become necessary.

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