Square Enix has issued a special notice to shareholders, warning in advance that the company will have to record a loss of 22.1 billion yen (approximately 5.2 billion baht) due to a shift in focus towards developing big-name games (referred to as HD games by the company, not mobile games or budget games), emphasizing fewer projects.
This loss will be reflected in the financial statements for the fiscal year ending in March 2024, which will be announced shortly (this notice serves as a preemptive warning to shareholders). The announcement signifies that Square Enix will be canceling certain game development projects and incurring abandonment losses without specifying the games (indicating that multiple projects may have been canceled).
In February, Bloomberg reported that Takashi Kiryu, the new president of Square Enix, announced a review of the quality guidelines for games, reducing game development through outsourcing and focusing on larger-scale games developed in-house. This may be a contributing factor to the reported loss.
Square Enix’s business performance in the past year has been lackluster, with revenue remaining stable while expenses have increased, resulting in a decrease in profit margin for the first 9 months of this fiscal year compared to the previous year. Additionally, the flagship game of the latest quarter, FF7 Rebirth, may not have performed as well as expected in terms of sales.
Revenue for Square Enix’s gaming business group for the first 9 months of the fiscal year 2023/2024.
Source: Square Enix, Kotaku
TLDR: Square Enix anticipates a large financial loss due to a shift towards developing big-name games, with the new president focusing on in-house development to improve game quality. This decision follows lackluster business performance in the past year and a decrease in profit margin.
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