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Jaws were on the floor when Square Enix showed the three minute Agni's Philosophy demo earlier this year in Los Angeles. They were on the floor this weekend when Square Enix once again showed off the tech. To dazzle like that takes time. A lot of time.
While showing off the mind-blowing demo this weekend, Square Enix said (via Game Watch) that planning took six months and developing it took another six months. That's an entire year for three minutes of footage.
Square Enix wanted to use the demo to show off its new engine, the Luminous Engine, so no doubt the game company put much effort into the demo and wanted everything perfect and stunning so they could show they're ready for the next generation.
With any new tech, there was learning on the go, which might be what made the clip's development take so long. From what Kotaku saw this weekend, the Luminous Engine *seemed* to be manageable for developers. In the above clip, from 4Gamer, you can see the engine in action.
As with anything, the early experiences using new tech will be time consuming, but development will gradually become more streamlined. It better, because months and months is okay for a short tech demo, but not for actual game development.