Expanding on Square Enix’s recent shift towards a multiplatform release strategy in response to underperforming titles, the latest financial results reveal an even graver situation than initially anticipated.
When the Tokyo Stock Exchange closed on Monday the company’s share price was sitting at ¥6,268 yen ($40 USD) however as it currently stands at this moment Square Enix share prices are now holding at ¥5,018 yen ($32.08 USD), this is a drop of 19.94% and the sole reason for this is undoubtedly their poor quarterly results.
By now, it’s apparent that Sony’s gambit with limited time exclusivity releases of major Final Fantasy titles on the struggling PlayStation 5 console hasn’t paid off.
Square Enix has reported an operating loss of ¥8.1 billion ($51.77 million) for their HD games segment, encompassing titles like Final Fantasy VII Rebirth, FOAMSTARS, and Final Fantasy XVI, among others.
Previously, we discussed Foamstars, a Splatoon-inspired clone released on Sony’s PlayStation platform, disguised as a free-to-play title for PlayStation Plus subscribers for a limited duration.
The game lacked creativity, heavily relying on microtransactions in what was essentially a $40 purchase. Within just two months, Foamstars witnessed a staggering 95% decline in active player numbers.
Regarding their Final Fantasy titles, the situation is familiar. Final Fantasy XVI and Final Fantasy VII Rebirth debuted as “exclusives” on the PlayStation 5 platform, a platform still grappling with meeting Sony’s sales expectations.
Priced as $70 AAA experiences, both games encountered difficulties resonating with consumers, particularly given the relatively brief gap between their releases. Final Fantasy XVI launched on June 22, 2023, followed by the continuation of Final Fantasy VII’s remake, Rebirth, on February 29, 2024.
Ironically, Final Fantasy VII Rebirth, a title that undoubtedly should’ve been more popular than a new mainline installment given how it’s essentially a nostalgia spit in the face of arguably Square’s most popular entry across the series.
Regardless of that face, Final Fantasy VII Rebirth faced even greater disappointment among consumers compared to the preceding release of Final Fantasy XVI, which Square Enix themselves acknowledged as falling short of expectations.
Their missteps are self-inflicted, with Square Enix effectively sabotaging their own free marketing campaign for VII Rebirth by retroactively censoring the four-year-old release of Final Fantasy VII Remake Intergrade.
Both games were “exclusively” launched on a struggling system, and Square Enix’s reliance on censorship, catering to the ideals of the west’s ESG agenda thanks to their “ethics department,” has undermined their financial stability on their one and only cash cow. The Final Fantasy Franchise.
As per a Bloomberg report, Square Enix President Takashi Kiryu informed analysts that the sales of Final Fantasy VII Rebirth, Final Fantasy XVI, and FOAMSTARS failed to meet revenue and profit expectations.
Consequently, Square Enix anticipates achieving an operating income of ¥40 billion ($255 million) for this fiscal year, falling well short of the ¥57 billion ($364 million) estimated by analysts.
The company revealed that its net sales increased from ¥343.2 billion yen, roughly $2.192 billion, to ¥356.3 billion yen, approximately $2.279 billion. However, the operating income also declined, dropping from ¥44.3 billion yen ($283.15 million) to ¥32.5 billion yen ($207.56 million).
Despite the rise in net sales, the company’s profitability dwindled from ¥49.2 billion Japanese yen to ¥14.2 billion yen. This translates to a decrease from about $314.54 million to $90.66 million. In other words, despite the uptick in sales figures, Square Enix’s profits have suffered a significant 69.7% decline.
This is catastrophic for any company, particularly one like Square Enix. They’ve been hemorrhaging capital for years, prioritizing exclusivity contracts for quick financing, while their games have gradually become more westernized and heavily censored compared to their predecessors.
It becomes clearer when you consider their sudden inclination to cater to modern audiences by censoring controversial elements, such as one of the most iconic characters in the Final Fantasy franchise, Tifa from Final Fantasy VII, who is known for having breasts.
Despite Square’s continuous launch and termination of mobile games in the Japanese market, possibly due to the immense popularity of the Final Fantasy 14 MMO, the majority of their game sales originate from western regions, particularly Europe and North America, rather than Japan and other parts of the world.
That’s why Square Enix recently announced a shift in strategy. No longer will they rely solely on Sony’s financial backing to release subpar Final Fantasy games as timed exclusives for PlayStation platforms.
Instead, they’re shifting towards widespread multiplatform releases, referencing Nintendo’s Switch console, Microsoft’s XBOX, and PC.
However, for PC gamers, don’t hold your breath for their censored offerings to swiftly arrive on platforms like Valve’s Steam Store. Take, for example, Final Fantasy VII Remake Intergrade, which launched as an Epic Games Store exclusive on December 16, 2021.
It took six months for it to finally reach Valve’s platform. If I were to speculate, it’s likely that Square Enix will still prioritize the free financing offered by Epic Games over launching their upcoming AAA titles on the PC’s most commonplace storefront from day one.
Frankly, I doubt that multiplatform releases alone will rescue this company. It’s apparent that Square Enix has transformed into yet another Western development studio.
Their staff numbers are bloated, with the total employee count rising from 4,712 to 4,770 over the quarter. Their game production costs are excessively high, mirroring a trend prevalent in the AAA industry. Consequently, they’re bracing for layoffs in the United States and Europe.
They’ve offloaded their western development studios and iconic IPs like Tomb Raider and Deus Ex for pocket change. The Final Fantasy games they create nowadays are censored and continue to deviate from the series’ iconic roots.
Their actions toward the franchise are unforgivable, and the cancellation of a sequel to Sleeping Dogs was equally egregious.
A temporary boost from multiplatform sales won’t suffice to salvage them as they’re unwilling to correct course and offer fans uncensored, large-scale turn-based RPGs.
It’s becoming increasingly more likely that Square Enix will soon start hemorrhaging money, and in such a scenario, I wouldn’t be surprised if they were acquired, as their lifeline once again remains to be Final Fantasy 14.
