Following 70% Decline In Profit, Square Enix To “Shift From Quantity To Quality” And Focus On Developing “Fun” Titles
In finally coming to perhaps the most obvious realization of all time, Square Enix has admitted that following an annual profit decline of roughly 70%, their best hope for financial recovery is to take a more “quality over quantity” approach to their video game development ambitions.
The Kingdom Hearts developer provided this insight into both their current financial struggles as well as their forward-looking plan of action as part of their the company’s annual fiscal reports for the period between March 31st, 2023 and March 31st, 2024.
Opening their report with a general overview of their operations over the past year, Square Enix explained to investors that while “Net sales for the fiscal year ended March 31, 2024 totaled ¥356,344 million (an increase of 3.8％ from the prior fiscal year), operating income amounted to ¥32,558 million (a decrease of 26.6％ from the prior fiscal year),” which when coupled with the Yen’s ongoing loss in purchasing power resulted in their ordinary income dropped to “¥41,541 million (a decrease of 24.1％ from the prior fiscal year).”
As a result of these factors, as well as the recent cancellation of multiple, in-development console titles as part of a previously announced cost reduction plan, the company reported that “Profits attributable to owners of the parent amounted to ¥14,912 million (a decrease of 69.7% from the prior fiscal year)”.
Regarding their video game operations specifically, it should be noted that of the company’s four main divisions – Amusement (arcade games and amusement park facilities), Publication (manga and game-related books), Merchandising (the production and sale of items related to Square Enix IP), and Digital Entertainment (video games) – Digital Entertainment was the only one that failed to increase its performance over the last year, with the segment’s operating income decreasing a total of “38.3% from the prior fiscal year”due to alleged “higher development cost amortization and advertising expenses, as well as higher content valuation losses versus the previous fiscal years”.
To this end, in seeking to turn their fortunes around, Square Enix then announced that they would be committing to a “new medium-term business plan” aimed at “rebooting” their operations “for long-term growth”.
This plan, said the Final Fantasy VII studio, would see them work over the next three-years to achieve four specific goals: Refocusing themselves on the “development of titles delivering fun”, shifting their video game release plans “to a multiplatform strategy”, rebuilding their and “overseas business divisions from the ground up”, and allocating “a maximum of ¥100 billion for total strategic investments (growth investments or shareholder returns).”
As part of their commitment to ‘fun’ titles, Square Enix shared a new “corporate philosophy structure” wherein they asserted that their new goal moving forward would be to “enrich people’s own life with our help of creating precious ‘unforgettable experiences’.”
“The experience that people are impressed is etched in my mind as ‘unforgettable experiences’ over time,” posited the developer. “‘Unforgettable experiences’ will be part of people’s sense of value over time, leading to moral support. ‘Unforgettable experiences’ enrich people’s own life. We would like to help creating precious “Unforgettable experiences’ by delivering contents filled with ensured fun.”
Further, Square Enix noted that as part of their “shift from quantity to quality”, they would be aiming to “to create the optimal portfolio, striking a balance between a ‘product-out’ approach that gives creators’ imaginations free rein as they develop content, and a ‘market-in’ approach that references customers’ voices and data to inform our development efforts,” “engage honestly with our customers and strive for a regular launch cadence,” and focus their “efforts and investment on titles with strong potential to be loved for years.”
Interestingly, the developer specifically noted that this shift would see them turn once again to “attempting to create new IP,” as well as “prioritizing novel forms of excitement, and striking the right balance with earnings potential”.
As of writing, Square Enix has yet to announce any future titles as part of their new shift towards delivering players what they actually want as opposed to nickle-and-diming them with mobile live-service title after mobile live-service title.
However, here’s holding out hope that one of them will be the in-development Kingdom Hearts 4.
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