Things are not looking good at Square Enix, as Final Fantasy 16 disappoints and they become an increasingly easier target for acquisition.
Despite a big marketing push by Sony and Square Enix, it seems Final Fantasy 16 hasn’t been the sales juggernaut they hoped it would be.
There were already rumours of Square Enix being worried about low pre-order numbers and although the company was apparently ‘delighted’ with the game’s three million sales in its first week, that trailed behind previous entries in the series.
Square Enix has yet to share updated sales figures, and a PC version is still on the way, but it’s reported that the company has lost nearly $2 billion (around £1.6 billion) since the game’s launch. As such, it’s been suggested by both investors and employees that Square Enix is allowing producers too much power, leading to poor project management and budgetary control.
Final Fantasy 16 isn’t just a one-off; a number of Square Enix projects have proven financial disappointment recently. Prime examples include its live service Avengers game (which is ending support and being delisted later this month, after just three years) and Forspoken back in January, which fell out of the UK sales charts after its first week.
Square Enix’s new CEO Takashi Kiryu has already said to improve profitability, he plans to bolster development for big budget games, meaning there’ll be less focus on smaller projects, since resources are ‘being spread too thin.’
However, it sounds like some aren’t confident that this strategy will improve things. Anonymous current and former Square Enix employees told Bloomberg that the real problem is it allowing games to become a producer’s personal fiefdom.
With these producers having full reign over a project’s development, there’s less of a team structure and proper documentation. Contractors add that project goals can often shift with no warning, which is why the results tend to vary so wildly from game to game.
Square Enix also hasn’t been seeing much success in the mobile market. Several of its mobile games have shut down after barely a year (e.g., Bravely Default: Brilliant Lights and Final Fantasy 7: The First Soldier) and sales of its latest release, Final Fantasy 7: Ever Crisis, have reportedly fallen short of investors’ expectations.
The company’s stock has dropped by around 30% since it’s last peak earlier in the year, and is on track to close at its lowest since May 2022.
One contractor says Square Enix is overhauling how it assigns producers and while analyst David Gibson says it can fall back on established franchises like Final Fantasy and Dragon Quest, there are genuine concerns about the company’s long-term future.
‘Rebuilding the storied maker of role-playing games would take years and there’s little hope of large upside potential on earnings in the near term,’ says Kenji Fukuyama, an analyst with UBS Securities.
‘Even if we look five years ahead, there isn’t much that can make investors confident about the company’s future.’
Macquarie Capital Securities Japan analyst Yijia Zhai told clients, ‘We remain concerned with the company’s game development structure and game quality control, which could limit the longer term performance.’
Such a large drop in stock value is going to make Square Enix a prime target for acquisition, with rumours last year already suggesting that Sony is interested. After all, the same thing happened with Activision Blizzard, whose fall in value, following the controversy over work conditions, made them cheap enough for Microsoft to make a bid for.
This means there’ll be a lot riding on Square Enix’s upcoming games. It has a few smaller scale ones to close out 2023 with, such as its Star Ocean: The Second Story remake, but its next major launch isn’t until early 2024 with Final Fantasy 7: Rebirth.
After that, it has Dragon Quest 12 and Kingdom Hearts 4 in the works, but neither has so much as a launch window.
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