Square Enix Shareholder Demands Major Overhaul of Final Fantasy Maker
▼ Summary
– A major shareholder, 3D Investment Partners, has publicly criticized Square Enix for poor sales and is demanding a fundamental reassessment of the company’s management plan.
– The shareholder’s report attributes Square Enix’s declining profit margins to factors like platform exclusivity, high development costs, and a reliance on the domestic Japanese market.
– The document compares Square Enix unfavorably to competitors and criticizes its cross-media strategy, claiming it lacks synergy with non-gaming businesses like films and merchandise.
– Square Enix is already addressing some criticisms, such as by moving Final Fantasy games to multiple platforms, and has seen recent profit increases from titles like Dragon Quest 3 HD-2D Remake.
– The report comes as Square Enix undergoes restructuring, including layoffs and a push to use generative AI, following sales disappointments for major titles like Final Fantasy 16 and Final Fantasy 7 Rebirth.
A significant investor in Square Enix has issued a detailed critique, calling for a major strategic overhaul at the renowned game publisher. 3D Investment Partners, which holds a substantial stake in the company, argues that current management has failed to reverse a troubling decline in profitability and market relevance. The firm’s extensive analysis points to several core issues, including stagnating profit margins, an over-reliance on the Japanese market, and a multiplatform strategy it views as insufficient.
The investment group, now the third-largest shareholder, began building its position earlier this year. After private discussions with CEO Takashi Kiryu yielded unsatisfactory responses, the firm decided to make its concerns public. The document positions Square Enix as a premier developer with iconic franchises like Final Fantasy and Dragon Quest, yet one whose earning power has deteriorated significantly. It contends the existing management plan lacks the vision and rigor needed for a true turnaround.
A central complaint focuses on financial performance. The report attributes weaker game sales and shrinking margins to several factors: costly platform exclusivity deals, inefficient advertising spending, disappointing sales of older catalog titles, and ballooning development costs. It draws unflattering comparisons with rivals like Capcom and Konami, suggesting Square Enix is falling behind its peers. The analysis also criticizes the company for failing to capitalize on international growth, remaining too dependent on its domestic audience.
While the publisher has begun addressing some critiques, such as bringing Final Fantasy XVI to Xbox and planning multiplatform releases for the Final Fantasy 7 Remake trilogy, the investor remains unconvinced. It labels the current “Reboots” strategy as an excuse for poor performance rather than a coherent plan for the future. The document further highlights a lack of synergy with non-gaming ventures, noting that efforts in film, anime, and merchandise are lagging, while arcade and manga publishing divisions underperform.
This public challenge arrives during a turbulent period for Square Enix. The company recently acknowledged that high-profile titles like Final Fantasy XVI and Final Fantasy 7 Rebirth initially fell short of sales targets. Although a recent earnings report showed increased profit, driven largely by the successful Dragon Quest 3 HD-2D Remake, overall sales for its single-player games have declined year-over-year. Concurrently, the firm has announced a fundamental restructuring involving significant layoffs in its Western offices and an ambitious goal to use generative AI for most quality assurance work within a few years.
The activist investor’s report offers more criticism than concrete solutions, leading some observers to question its ultimate motive, which may involve pushing for a leadership change. It selectively uses data and player sentiment to bolster its arguments, even regarding commercially successful titles. Nevertheless, the detailed critique underscores mounting pressure on Square Enix’s management to deliver a clearer, more effective strategy for revitalizing its storied brands and improving its financial standing.
(Source: EuroGamer)
