truth behind Square & Nintendo "break up"

Square and Nintendo's bond seemed unbreakable until 1996, when Square revealed (in an announcement that stunned the industry) that it would cease all Nintendo projects and thereafter publish games exclusively on the Sony PlayStation, a CD-ROM based game system. With the massive data storage space of a CD-ROM drive, which Nintendo's new Nintendo 64 hardware lacked, Sakaguchi was able to bring FMV (full-motion video), or fully animated movie sequences, to his games. He explained that the shift was made entirely because the CD-ROM format "allowed for more artistic freedom." It appeared to be the right choice. Final Fantasy VII, was the RPG that single-handedly moved RPGs from "niche" to "mainstream" in the US by offering a 3D, computer-animated experience that appealed to America's desire for impressive graphics while retaining the RPG game play; in fact, it sold more copies in the United States than in Japan.

It is important to remember that Square had its choice of CD-ROM based hardware to program for. In 1995, the PlayStation and the Sega Saturn were locked in a dead heat for units sold in Japan, each with about 2.5 million units sold. Before the announcement of Final Fantasy VII, it seemed as if the Sega Saturn would be the victor; it had the immensely popular Virtua Fighter software. But after the announcement of Final Fantasy VII, the PlayStation began a meteoric rise. Within a few years, Sony's sales in Japan had grown to 17.4 million units compared to Sega's 5.7 million units.

Square's move to CD-ROM development was not singular among software publishers. In fact, every other formerly Nintendo-loyal publisher made the shift. The difference was that Square announced that it would not support Nintendo's systems, neither the Nintendo 64 nor the portable Game Boy line, whereas other major publishers like Konami, Capcom, and Enix only transfered the majority of their efforts to Sony's and Sega's systems while still supporting Nintendo.

To take Enix as a specific example, the company announced that Dragon Quest VII would appear on the PlayStation. But it continued to support the Nintendo 64 with the occasional title. One early effort, Mischief Makers, was published by Nintendo in the US and, perhaps more importantly, remade its earlier Dragon Quest games for Nintendo's portable Game Boy Color system, the first version of the handheld to have a full-color screen. Enix's Dragon Quest Monster titles, patterned after Nintendo's wildly successful Pokemon games, were particularly hot sellers.

By Square's own admission, the bridge between Square and Nintendo was not, as many speculated, burned because Nintendo president Hiroshi Yamauchi felt like a jilted bride. In a 2001 interview with the Nikkei business newspaper, Square president Nao Suzuki took all the blame, not merely for leaving Nintendo but for convincing other publishers to go with them:

"Our true enemy," he admitted, "was our pride". This was pride that resulted from the heady years of the original PlayStation. When Square originally announced back in 1997 that the Final Fantasy series would be PlayStation exclusive from now on, Nintendo president Hiroshi Yamauchi treated the affront lightly, saying that the console selection "couldn't be helped." Suzuki responded by publicly bashing the N64 and convincing Enix to join the PS camp along with them, which, looking back at it now, he realizes wasn't an incredibly smart move. The little grudge match between them that resulted was the main reason Square failed in their bid for a Nintendo license earlier this year.

At this time, Square had been publishing portable versions of its classic games on a system called the Wonderswan, made by the company Bandai. Although Final Fantasy was the hottest-selling title on the system by far, Square knew that a Game Boy Advance license was what they really needed. It was clear from this public admission of culpability that Square wanted to patch things up. Within a year, Square had their Nintendo license. So far, Square has published three Game Boy Advance games: Chocobo Land, Final Fantasy Tactics Advance, and Sword of Mana. Final Fantasy Crystal Chronicles, a title for the Nintendo Gamecube, launched in Japan in 2003 and in the US in February 2004.

Source: Power Up: How Japanese Video Games Gave the World an Extra Life - Chris Kohler

Well I have to give some respect to Square, as the move to CD-ROM was made primarily for artistic reasons rather than monetary reasons. It is a bit of a puzzlement as to why they dropped Nintendo support altogether, though, when other companies that also made the move to the PlayStation were still supporting the N64. It makes me wonder if the other companies only kept supporting the N64 because they knew how much they needed to be on good terms with Nintendo to keep licenses for the GBA. If the GBA wasn't as successful as it is, how many companies would still support the Gamecube?

But then on the other hand, if they initially went with Sony because of the disc-based media, why is Square Enix now focusing on the DS instead of the PSP? The PSP's UMD media can hold 14x the information a DS cartridge will hold.