It's possible to depart with a company on amiable terms, but if you poach some of the company's other talent after you leave, you can make a safe bet that any goodwill you had when you left will be gone no matter how amiable the original parting was. At the time, Dragon Quest still made a lot more money for Nintendo than Final Fantasy did. So I can definitely see Yamauchi being disappointed but accepting over Square leaving but going apeshit over the idea that Square took Enix with them.

It would be nice to get some perspective from Yuji Hori (DQ producer) or Keiji Honda (Enix president who still holds an honorary chairmanship at Square Enix) on why Dragon Quest VII was moved beyond the usual speculations of low CD-ROM costs and whatnot. Keeping DQVII would have made things much more evenly balanced between N64 and PS1 in Japan, though it wouldn't have made a difference in the US. At least Nintendo would have had a major RPG to appease US N64 owners who were complaining about N64's almost complete lack of RPGs, and the difference in Japanese sales would have enticed more Japanese devs to stay on board with Nintendo.

Great read.

Ultimately, Nintendo's own arrogance and strong arming led to the creation of their strongest competitor who has dominated them and the industry for 3 generations.

Not only that but it more importantly marked the end of Nintendo being the home to Japanese third parties, replaced with Sony and third parties for the large part have not looked back ever since. I can only imagine how dominant Nintendo would be if Sony never stepped in and if SE and others continued to focus on Nintendo only.

Don't know much about Japanese corporate culture and so can't say how outstanding these reactions from Nintendo and Square were or still are but whats clear is that for Square it was a massively risky move.

A massively risky move, that paid of above anyone's expectations. FF7 became the best selling Square game in history, the second best selling PS1 game, sold almost triple the amount of FF6, and revolutionized the JRPG genre on a global scale, a genre Square excelled at. Sqaure just put out hit after hit on PS1 and with PS1's global success was able to get a global audience that they would have never gotten with Nintendo. PS2 was a continuation of those efforts allowing SE to launch their new blockbuster IP Kingdom Hearts.

Square fully backing Playstation is what allowed Playstation to be the behemoth it is now and in turn in built Square to a level of success unseen by Japanese third parties.

This is still to this day, imo, the biggest betrayal in the gaming industry considering how it forever changed the landscape going forward.

It's a weird situation. Sony definitely did well with the arrangement, no question. But Square ended up collapsing under its own weight within a few short years after FF7. According to the interview they were teetering on the edge of bankruptcy in 2000, when FFIX was released. The movie was merely the nail in the coffin. They also ended up losing Sakaguchi and a lot of their other talent over the fallout from TSW. FFX-2 was what saved them from total collapse before Enix absorbed them into Square Enix. They were successful, but they spent money like drunken sailors at a Bangkok brothel. And Sakaguchi hasn't been a roaring success since he left. I haven't even seen any mobile games from his studio since Terra Battle, let alone console games.  Maybe they'd ultimately have been better off in the long term staying with Nintendo, who knows? In retrospect, Square didn't seem capable of coping with their sudden global success. 

They lost Sakaguchi and let Tetsuya Takahashi walk. They didn't then and still don't have talent as great as those two and I cannot stand Nomura. I liked TWEWY but Nomura is a one-trick pony and his trick sucks for the most part.

Yes but FF was important to Nintendo in the US market. The move to PS alone without including the Enix thing had to ruffle some feathers, specially on Yamauchi who was supposedly specially petty on these sorts of things.

That's the way I read it anyway. I can agree to disagree with you.

Retrospectively, yes. Again, at the time, not so much.  Yamauchi could be petty (and according to others who knew him, like Henk Rogers of the Tetris Company, he could also be a sweet guy if he felt like it), but he was also very myopic and Japan-focused in a lot of ways, and RPGs were one of those things he was culturally myopic about. At the time, they were a niche product in the US. Nobody believed in them in the US. They tended to be expensive to localize but gave poor returns on the investment. Bernie Stolar, the infamous Sega of America president, started out as president of Sony Computer Entertainment when the PS1 launched, and he had the same anti-RPG attitude at Sony that he did later on at Sega, saying that RPGs would never sell enough to be profitable. Had he still been president of Sony in 1997, FF7 probably wouldn't have been localized unless Square did it themselves, and they'd have been on their own as far as marketing. He kept Arc the Lad out of the US until years after he was gone. For its part, Nintendo took a loss localizing Earthbound (though the advertising campaign didn't help any), and Yamauchi would have been looking more at Dragon Quest sales numbers in Japan than Final Fantasy sales numbers overseas, as well as the much greater fan loyalty DQ tends to inspire compared to FF. Sakaguchi has said on numerous occasions that FF6 was an expensive sales flop outside of Japan, mostly when Western fans ask him why it doesn't get localized more often, so I doubt Yamauchi expected VII to do any better overseas.

The merger between Square and Enix was in talks long before then though. It was FF:TSW that led Square taking a massive loss and posting their first quarterly loss. They weren't really bleeding dry but it led to doubts about the merger. The timing of the movie's loss was also bad, as it was during the generational leap so PS2 titles were still in development and needed funding before release. Hence the Sony share buyout.

Once FFX and KH were out, 2002, Square posted record breaking profits. The merger went ahead and SE was formed.

Talent leaving is part of the gaming industry. Creatives want to take hold of their own projects, work on different franchises etc and since each company only has a set amount of projects/ directorial positions, talent moves a lot in the gaming industry.

Honestly, Sakaguchi leaving hurt Sakaguchi far more than Square.

Definitely not. Sony saw that the gaming market did not have to be concentrated in NA and JP. They opened up a market, EU, larger than both NA and JP, and with the PS2 showed how to sell gaming consoles on a truly global level to less developed countries on a level that Nintendo could have never dreamed of. Even to this day, Sony has presence in far more countries, many of which Nintendo does not even officially sell in.

Its hard to argue that Square and Sony did not make their best move.

The gap in power between ps5/xbox se and switch is way bigger than ps4/xbox 1 and switch. Gaming cost keeps increasing each gen with more power so not so sure about that.

And at least for the first 2 years, 3rd party games will use base xbox 1 as target platform, so nothing will change.

The problem is, not everyone who criticize Nintendo , Sony or Microsoft means they hate the company. You need to learn to be open minded, is like you hate every critique and input people have towards Nintendo. jeesh