Square Enix hopes the 'Fantasy' never ends

February 14, 2014: 5:00 AM ET

The Japanese game publisher has rebounded, thanks to the global appeal of its Final Fantasy franchise.

By John Gaudiosi

140213143843-final-fantasy-lightning-620xaFORTUNE -- Even though Square Enix now owns storied franchises like Tomb Raider, Thief, and Deus Ex; it's the sci-fi, fantasy role-playing game Final Fantasy that has sold more than 100 million units and has connected with players around the globe. The game publisher has just released Lightning Returns: Final Fantasy XIII. Final Fantasy X/X-2 HD Remaster soon will be released for the PlayStation 3 and PS Vita (March 18), and the first next-gen title, Final Fantasy XIV: A Realm Reborn, launches April 14 on PlayStation 4.

According to Peter Warman, founder of videogame research firm Newzoo, the Final Fantasy franchise has sold 48 million copies in Japan since debuting 27 years ago. Life-to-date unit sales of the franchise in the U.S. are approximately 32 million, twice that of Europe and four times the 7 million sold in the rest of the world. Additionally, Square Enix generates revenue from subscriptions, which for Final Fantasy IV start at $12.99 per month.

Square Enix has had a long-standing relationship with Sony Computer Entertainment (SNE), which has been beneficial to both Japanese parties. For decades, the Final Fantasy franchise was exclusive to PlayStation consoles.

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"Final Fantasy has been strong in supporting Sony's game hardware, releasing games on every single PlayStation console and handheld device," said Warman. He adds that the games' popularity is relatively modest: Final Fantasy XIII is the 23rd most popular PS3 game, with 5.1 million units sold. Relatively, this is more than double the 2 million units sold of Final Fantasy XIII for the Xbox 360.

Square Enix's flagship franchise has built up a very loyal following since its launch back in 1987. The franchise has always been at the forefront of innovation in terms of gameplay and graphics. In 2002, Final Fantasy XI was the very first cross-platform massive multi-player online (MMO) game, and in 2006 Final Fantasy XI became the first MMO game launched on Xbox 360 (MSFT).

"Final Fantasy has always offered a fantasy experience that surpasses the previous installment," said Shinji Hashimoto, senior vice president, global brand, Square Enix. "And so, we intend to keep evolving the games to achieve the ultimate level."

The newest game, Lightning Returns: Final Fantasy XIII, is the conclusion to the franchise's first trilogy. While each new Final Fantasy game typically introduces a new cast of characters and new worlds, the popularity of the female protagonist, Lightning, warranted a unique storytelling approach.

"Lightning has been depicted as an emotionally strong and cool soldier-type character who stands up to adversity," said Motomu Toriyama, director of the trilogy. "In Final Fantasy XIII-2, Lightning served as a sublime character with near godlike powers. With this final chapter in Lightning's saga, players will not only be able to see her toughness and attractiveness, but also see Lightning's feminine side and experience her character from an everyday perspective, which has never been disclosed before."

The new game also introduces the element of time to the story, giving players just 13 days to accomplish the task at hand. Toriyama said his team looked to Hollywood films like In Time as inspiration for this new gameplay mechanic.

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Hollywood hasn't been kind to the Final Fantasy franchise. The 2001 $137 million computer-generated movie, Final Fantasy: The Spirits Within, which Square Enix funded and developed itself, tanked at the box office, making just $85 million worldwide, including a measly $32 million domestically. The company has since focused on making games, although the franchise continues to push the boundaries of cinematic beauty with the in-game cut scenes.

Wanda Meloni, founder of M2 Research, said that Square Enix has been able to expand the brand with a myriad of ancillary merchandise based on the game, including collectible action figures, graphic novels and plush toys.

"The franchise has always pushed its stunning graphics as a key selling point, and now with the age of mobile Square Enix needs to find a way to bridge that console experience with mobile devices," said Meloni, noting that the publisher recently released the 1994 Super Nintendo game Final Fantasy VI on iOS and Android.

"Square Enix has yet to really monetize their franchises and game development abilities on smartphones and tablets," said Newzoo's Warman. "Now that Japan is flocking to smartphone gaming in the millions, you would expect them to make a bigger effort. The fact that another traditional Japanese publisher has two games in the Top 20 grossing lists on smartphones might inspire them."

Mobile will play a growing role for the franchise. Despite a steady succession of sequels, there are signs of a slowdown. For example, Lightning Returns: Final Fantasy XIII sold 277,000 copies on PS3 in its first week out of 385,000 that Square Enix sent to retailers in its initial shipment, according to Media Create. The 2011 launch of Final Fantasy XIII-2 on PS3 sold 524,000 copies out of an initial shipment of 845,000 units.

Granted, even the weaker sales of the latest game are very good in the game industry today. Square Enix is also capitalizing on a relatively open Q1 period, where it's also launching its own re-imagined Thief game on Feb. 28 on the heels of its recently released next-gen Tomb Raider: Definitive Edition for PS4 and Xbox One.

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"As technology evolves with each new generation of consoles, our developers can widen their ideas and inspirations," said Hashimoto. "We will continuously strive to surprise our fans across the world with new games and new experiences from the Final Fantasy franchise."

Sony teased Final Fantasy XV on PS4 last year at E3, along with Kingdom Hearts III. That franchise blends Disney characters like Mickey Mouse and Donald Duck and Disney movie worlds like The Little Mermaid, TRON, and The Nightmare Before Christmas with Final Fantasy characters and worlds.

Warman said Square Enix has been successful in taking Final Fantasy game elements to a younger audience through its partnership with Disney (DIS). The Kingdom Hearts franchise has achieved lifetime sales of 21 million units, with slightly more than half coming from the U.S. He noted the game sold better on PlayStation 2 than it has on PS3, where it had trouble selling 1 million units. But things are changing for the better of late.

"Square Enix reported healthy figures over the last nine months of 2013, grossing about $1 billion in revenue during that period," said Warman. "Just one year before, Square Enix was in the red. Their difficult period has come to an end, and it's directly related to the launch of Final Fantasy XIV in 2013, which had been plagued by launch delays. The PC version of that game has sold approximately 1 million copies."

Meloni noted that there have been internal changes at Square Enix over the past 18 months, including Darrell Gallagher becoming Head of Studios for North America and Europe, and David Anfossi overseeing Eidos Montreal. She said those changes, along with the weaker financials from last year, seem to have helped jump-start the company to look at key franchises, cutting costs, and going back to its roots.

Thus far, the strategy seems to be working. And the Fantasy continues to evolve.

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