Financial Woes for Square Enix

[Ouch!]

Saw a discussion on ffxiah.com and thought I'd bring it up here. Whether you like the direction Square Enix has taken in the past couple years or not, it's become increasingly clear that it's not financially viable. Square Enix announced on their corporate website today a 91.7% decrease in expected earnings for fiscal year. This appears to be due to disappointing sales for multiple titles (most significantly Final Fantasy XIV), delays for the PS3 version of FFXIV and also Deus Ex: Human Revolution.

The net worth of Square Enix has been in decline the past two years, and has taken a drastic fall in the past six months since Final Fantasy XIV's release:

The brief increase before a major release followed by a sharp decline after a disappointing showing has become commonplace for Square Enix releases, and now it's reaching a low not seen since the drastic failure of The Spirits Within. For those interested, below is the stock value for a little over the past two years:


Before today's news, we learned that a majority of the development team for Final Fantasy XIV had been sacked. While I do think that a good deal of FFXIV's failure was due to the development team's inability to learn from the mistakes of FFXIV and that Tanaka did certainly share a deal of the blame, I think equally culpable are the Square Enix executives who likely pushed a release ahead of a reasonable time schedule.

Given the recent thread discussing the possibility that Square Enix should cooperate with a western developer to make the a Final Fantasy title, it's clear that many people feel like something needs to change, and the stock plummet which occurred as a result of today may be a catalyst to that change. Money talks. When Final Fantasy XIII was released, Wada apologized to fans who were disappointed with the title while still remarking on the game's fiscal success. Without that fiscal success to fall back on, what can we expect to happen in Square Enix's corporate structure?

How long until Wada has to resign in shame for running the company into the ground?

[Flying Arrow]

The Deus Ex delay absolutely gutted me yesterday. As far as gaming goes, it was basically the centerpiece of my 2011 (Skyrim doesn't come out until November and will no doubt get delayed anyway). Without DX, the whole year seems a whole lot emptier. Dragon Age II bleh.

And I disagree that SE needs to work with a Western developer to get Final Fantasy back on track. Given recent gaming trends, I doubt a Western developer would be able to set FF straight (straight enough for us FF fans, that is). No, Square just need to either get some talent in the helm or hand it off to a company that still knows how to make a solid JRPG. I haven't played many JRPGs in the last few years and am kind of out of the loop, but developer Level 5 comes to mind and would probably be do a good job. Dragon Quest VIII was effing glorious.

[Ouch!]

I only brought up the discussion about a western developer working on Final Fantasy as an example of how desperate fans have become for some change. I don't necessarily agree that it's a particularly good idea either.

[Vyk]

There's another topic going on about how Square refuses to put up most of their games on PSN for English audiences. English translated games. That they just have to turn into a digital copy that people can pay for and download. Not like making a whole new game. Its almost free money. Square makes some dumb decisions. So its really their own fault half the time and I find it hard to feel sorry for them. Maybe the execs should get a clue at some point

[ShinGundam]

It is all about 3rd, KH PSP FM, Dissidia012, Nomura is carrying the entire the entire fiscal year again.

[Ouch!]

Except those titles aren't part of the fiscal year in question. That's all in the next fiscal year, and I don't see any of them (especially Birth by Sleep Final Mix which will never be released outside of Japan) carrying significant weight. Square Enix needs Versus XIII to be a success. If they can manage to turn Final Fantasy XIV around for a successful PS3 launch, they have a chance of salvaging that game. A successful MMO is a cash cow if there ever was one, even just moderately successful ones with a loyal fanbase like Final Fantasy XI was.

I do think this downward trend is definitely indicative of a necessity for a change in Square Enix's corporate culture. They're constantly remaking older titles for relatively small profits while their attempts at new IPs (Infinite Undiscovery, The Last Remnant) fail dismally. Both Final Fantasy XIII and Final Fantasy XIV have spurned public acknowledgments from Wada as disappointing to fans. They're doing relatively successfully as a publisher, but as a developer they're quickly losing steam.

[Slothy]

I'd be more interested in how their cash flow and profit margins are looking as a measure of their financial health rather than how their stock price is doing. It's entirely probable that they could have tons of cash to carry them for a while but investors are simply panicked by some major title delays and some disappointing releases. Not to say the falling stock price doesn't indicate that there's a problem or to imply I don't personally believe they need to get their together. Just saying that financially they may be ok in the long run but are just going to have a hurting bottom line this year.

[Ouch!]

Aside from Final Fantasy XIV, their titles are typically financial successes. Such a significant drop in stock value over such a sustained period of time is not a positive outlook for the company, however, and such a dramatic decrease will have consequences for a company as a whole even if their bottom line is in the green.

[kotora]

stock value = fantasy value. Stock trading has never been about common sense and rational decisions.

doesn't matter anyway, if they didn't screw up like they did by taking FF fans for granted and releasing subpar products they wouldn't be in this position. Maybe they'll learn something out of it.

[Del Murder]

Yes, stock value is about faith, but when the outside world has lower faith in your company it's never a good sign.

Hopefully this will be the wake up call SE needs to produce products akin to what they have done in the past. Their games are still pretty good, but I feel they are no where near the epicness that they once were. Some of this is a matter of opinion, but when a lot of others share this opinion it speaks volumes.

[Vyk]

Excluding the artsy magical side of things, wouldn't it make more business sense to now play it safer than ever? It wouldn't surprise me if Square just gets worse because of this, trying to make the investors feel more secure by taking less risks.. Though I guess the changes and risks they've been taking have been part of the problem

[Del Murder]

If games like FFVI and FFIX are 'playing it safe' then by all means.

[Vyk]

Definitely. Let's hope that's how they see it haha

[champagne supernova]

Share values do fluctuate wildly, but there is a clear decline in the value of the share over the past several years. I think investors are worrying about the value of cash flows now that XI is falling off and XIV is not ideal - which are continuous cash flows unlike other normal games. Although MMOs are also quite costly to maintain, so it's not just pure profit.

I think Square-Enix should return to the roots of game making. Wada has seemingly become more focused on what the West/target markets want from games and the executives have forced this down on the creatives.

What they need to do is start off with a clear vision in terms of style, gameplay and story, and develop the game from that. Yes, you can take aspects of what has worked around the world, but it must end up as something cohesive. I think the executives are putting other focuses and interfering with the productive process, to the detriment of the game.

XIII redeemed itself somehow - in my mind at least - although it had definite room for improvement. But XIV has been an unmitigated disaster and that is mainly because it was released way ahead of schedule. The executives must be praying that the developers are able to get it together before the PS3 release, otherwise they are going to be sacked at the next shareholders meeting.

But I think becoming Western is the problem with not only Square-Enix, but Japanese companies in general. There have been some very good Japanese games in this development cycle (Metal Gear Solid, Valkyria Chronicles and Yakuza) spring to mind), but the majority have ranged from average to good (excluding the beat 'em ups which still remains a Japanese staple). And they are fairly Japanese in character (even MGS has its Japanese quirks). So, maybe developers should focus on being a modern Japanese developer instead of trying to copy the old-school JRPGs that were successful or try become Western.

That is a bit of a rant. Apologies.

[kotora]

they wish they were becoming "Western". At least we'd have some goddamn interactivity if that were the case. The problem is that them japanese don't know how to innovate and stick to the old ways of "bit of gameplay here followed by a smurfload of cutscene".