On November 26, 2002, Square of Japan and Enix Corporation, the two most prominent developers and publishers of console RPGs announced that they would merge at the beginning of April 2003. Surprisingly, given the relative prominence of the two companies in recent times, it is Square that is folding into Enix, and not vice versa, with each Square share being exchanged for 0.81 Enix shares. Nevertheless, Square CEO Yoichi Wada will head up the new entity, named Square Enix, Inc. The deal is worth 88.79 billion yen, and will create one of the largest third-party game developers in Japan.
There are two main catalysts for this surprising move. First, Square's financials have been in turmoil since their crippling loss of over $100 million US on the movie Final Fantasy: The Spirits Within. The lack of a large hit game in 2002 has exacerbated this situation for Square. Secondly, neither Square nor Enix was large enough to effectively compete with Western gaming behemoths such as EA and Infogrames. The merged company will be large enough to compete in that arena.
On the gaming side, many console RPG fans are excited about the possibilities created by this new cooperation between the two companies who created the console RPG genre. In particular, fans of the one minor example of Square-Enix collaboration, Chrono Trigger, think that increased cooperation between the two development teams will be a good thing. It is likely that the new company will develop for both the Playstation 2 and the GameCube, particularly now that Square will no longer be 1/5 owned by Sony.
Update, August 20, 2003: For something that seemed like such a big event when it was first announced, the Square-Enix merger has almost been a non-event from an external point of view. The Square Enix logo replaced the Squaresoft logo and Enix logo, Final Fantasy Crystal Chronicles and Star Ocean 3 show up under the same banner at trade shows, and the company is more stable financially, but otherwise life goes on as before. It's possible there'll be some amalgamation on the development end in the future, but for the moment the development teams are still separate and independent.
Sources include Reuters, Yahoo and Slashdot
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