To Our Shareholders

The Group’s Three Strategic Pillars

1. Globalization

If the gaming industry expands as investment barriers for customers are lowered, geographic expansion is inevitable. Globalization is a basic premise of all companies in the industry. Therefore, our strategy differentiates itself on how we define globalization.
Our group does not think of one global, abstract market. We do not believe it is realistic that every title will sell throughout the entire world, and we do not seek this. Market segments should be identified not by region but by consumer preference, and each piece of content must be pursued on its individual characteristics. It might be the case that certain content designed for Japan’s extremely small segment of core users also appeals to French and Chinese students as well. I think our market segmentation approach based on customer preference is more scalable in that deployment is not limited to a specific region.

Having this basic concept, our distribution channels take firm root in each respective region we operate.
Even though there are no national borders for taste, the distribution of content is entirely dependent on local business practices. In fact, even network services are rooted in local cultural differences making them extremely regional in nature.
Furthermore, our Group’s recruiting bases that cover the world give us a very significant competitive strength.
In addition to considering talent from various regions, we also consider factors such as personnel systems, taxes, and foreign exchange, to construct the optimal human resource portfolio.
We are also focusing on entering emerging markets. We have almost completed our foundations in Japan, North America and Europe, and established a foothold in China. Going forward, we will be actively expanding into more territories.

2. Becoming “Network Centric”

As I have mentioned, we have to transform both our business model and our content design. The two critical points are embracing the continuous relationships with customers and having pricing determined by customers according to their level of satisfaction. We need to pursue these not only with emerging new genres, but also as we implement network aspects into our traditional packaged software titles as well.
Furthermore, under a common infrastructure, we gain the ability to become network, and even platform operators. Ultimately, however, we must transform ourselves into a community platform operator.

3. Strengthening Own-IPs

As our business domain is entertainment, the ultimate bond between our customers and us is content brands. This will remain unchanged regardless of infrastructure and business models utilized. We will put all our efforts toward creating 10+ compelling IPs comparable to FINAL FANTASY.
Furthermore, with the network as the centerpiece of business operations, the amount of flexibility held when converting a particular title into various content or services becomes critical. How a creator might want to alter a title later in its life-cycle is unpredictable in the development stage. However, the current copyright system defines the rights of copyright holders regarding changes allowed. Thus, without our own-IPs, we would face fundamental obstacles in our business expansion. Therefore, we are focused on holding our own-IPs.

After a year which may have given you concern, we are determined to achieve our established targets and look forward to your continuing loyal support.

Yoichi Wada

Yoichi Wada
President and Representative Director
SQUARE ENIX HOLDINGS CO., LTD.

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