General Square Enix Thread

Dr Frasier Crane

Lv. 25 Adventurer
I think it’s clear now that Rebirth and XVI have underperformed. Both games would have been very expensive to produce and keeping them confined to one console has not been a recipe for success.

There are lots of threads to pull at around this topic, so please forgive the following brain-dump. I believe that emulating Capcom’s model is the right choice for now, but there are other issues at play that require a remedy.

- Development Timelines
It is incomprehensible to me that both Dragon Quest and Kingdom Hearts are requiring 5+ year development cycles following their last, successful mainline instalments. The same is true for Nier. I know there was a remake of the original Nier in 2020 but Automata was a breakout hit that acquired a lot of mindshare among the gaming public. I understand development cycles are longer than ever, but Square should be looking to emulate Capcom’s standardised and streamlined development pipelines (e.g. pick one engine and stick to it across the company; cross-platform development should be baked into projects from the start). They should also have alternating teams for each of their major franchises which allows for more regular releases. Resident Evil has come a long way as a franchise since the low of Resident Evil 6 in 2012 - with the lessons and foundations that Resident Evil 7 provided Capcom with, the franchise has gone from strength to strength in recent years. (Although I am still willing to debate whether or not a Resident Evil 4 remake was entirely necessary.)

- Japan and Nintendo
I know Square is already pivoting to a multi platform strategy, but I believe for the benefit of their tentpole franchises, Square need to revitalise their diminishing audience in Japan, and I think the only way to do this is by ensuring that Nintendo (and PC) platforms are scoped for all of their future major projects. The Switch 2 will launch next year, and Square needs to ensure that major new releases come to this platform as the Switch 2 will likely continue the success of the Switch and will find itself as the console market leader in Japan (unless Nintendo do something stupid and sell the console for $500). I imagine this is already in the plan for Dragon Quest 12 (which recently lost its producer - not the sign of a healthy project) but I am willing to bet that significant work will be required to get Kingdom Hearts 4 working on Switch 2 if the teaser from 2022 is anything to go by. The Switch 2 is estimated to be comparable to the PS4 Pro in power, with some modern features at its disposal, but it will not be competing with the PS5 and Xbox Series X in terms of polygon and pixel counts. While historically, directors and producers like Nomura and Kitase have wanted to push the envelope in terms of graphical fidelity with each new release and generation, I believe the survival of Square and their IPs is dependent upon day 1 versions of their major releases being available for a Nintendo platform. Therefore, games will have to be scoped in a way that allows them to perform comparatively well on the lower-powered Nintendo machine without the need for bespoke development / porting as Dragon Quest 11 required when it was ported from PS4 to Switch.

- Talent
Naoki Yoshida is the man, and FFXVI was the most robust mainline Final Fantasy release since 12, I would argue, but even his Midas touch did not achieve the success that Square was hoping for. Yoshi-P has fostered a great new team that will likely develop another Final Fantasy game, but I would argue that there is another rising star that needs to be at the helm of the next mainline Final Fantasy project, and that is Naoki Hamaguchi. What Hamaguchi achieved in 3-4 years of development for Rebirth needs to set the standard going forwards. Faster, well-managed (>80% of staff were retained from Remake to Rebirth) and iterative development is the way to go in order to deliver consistent and high quality products going forwards. Hitting the reset button for each Final Fantasy in terms of technology and design is not tenable anymore. Hamaguchi seems to be able to do what other directors at Square struggle with and for that, I believe he should be entrusted with the next mainline Final Fantasy title.

- Branding (this is mainly about FF)
Square should be growing all their major brands, but with Final Fantasy, there is a sickness that cannot be ignored. The anthology nature of the Final Fantasy series and the insistence on each new installment of the series being a departure from the last has become an albatross around the series’ neck. New fans arrive with each new mainline entry only to hear vitriol from fans of older releases. FFVI fans resent FFVII for the latter being more popular than the former. FFXII fans dislike FFXIII because the latter removed the complexity of party management and gambits in favour of faster, rhythmic battles built around staggering. Older fans detest that the Stagger bar continues to be present in each new release! The identity of Final Fantasy is fractured and the brand now means so many things to so many different people. Fans of FFXIV largely engage with that one and that one alone. I believe the series would benefit from a standardised framework, similar to how the series iterated back in the 80s and 90s. Sure, the stories can be different, but the fundamentals should be largely the same. And I believe with Rebirth, we have arrived at a model that could work going forwards. People largely agree that the FFVIIR battle system is good, and with Rebirth, I believe that itch of exploring big open environments in a meaningful way is finally being scratched. Now I know that multiple people will disagree with the above opinion, and they will say that something along the lines of FFX or FFXII would be much better, and to that I say: while Rebirth didn’t find the sales numbers it should have, it was warmly received by critics and achieved a 93 metacritic average. Something that will not go unheeded by management at Square, I hope. Give Hamaguchi a blank slate and his team leaders from Rebirth and let him get to work not on “FFXVII”, but a reboot of sorts (I don’t know…“Final Fantasies”) that can break away from the shackles of what has come before it.

- The FFVIIR project
What does all of this silly conjecture mean for Part 3 of the Remake Trilogy? Well I certainly hope Part 3 gets made, that’s for sure, and I do agree with arguments that once Square finishes the trilogy, they can bundle it, re-release it and/or put it on sale for the next 20 years. I know the FFX remaster has enjoyed healthy legs over the years. Nevertheless I fully expect the budget for Part 3 to be tightened in light of Part 2’s underperformance and for key talent like Hamaguchi to be moved onto more promising ventures. Scope will be reduced, so aspects like flying the Highwind and fighting the Weapons may not be as grand as we might have first expected. Doubly so if Part 3 is to be scoped for the Switch 2. I think Toriyama or another member of staff will be given director duties and they will likely be asked to do what they can by a certain date in 2027.

Worst-case scenario: this Kiryu guy at Square is a real killer and cans the remainder of the Remake project.

But hopefully it doesn’t come to that. If it is suddenly announced that Kitase or Nomura are leaving Square Enix, then it’s time to worry.


Eyes of the Lord
The last thing I want is to Final Fantasy to homogenize, there's already too much of that in the AAA landscape.


Kaiju Member
SQUARE ENIX Consolidated Financial Results for the Fiscal Year Ended March 31, 2024 (Japan GAAP)

Brief report:
Full report:

Their HD Games division generated a loss despite having released FF16 and 7Rebirth.
Did the reports actually give any data numbers on how many units Rebirth had sold/shipped by March 31st? Or is it just overall SE financial numbers?


Eyes of the Lord
Did the reports actually give any data numbers on how many units Rebirth had sold/shipped by March 31st? Or is it just overall SE financial numbers?
This is just overall SE financial numbers, at most we only have this about Rebirth:

In the HD (High-Definition) sub-segment, consolidated net sales for the fiscal year ended March 31, 2024 increased compared with the previous fiscal year due to the release of titles including “FINAL FANTASY XVI,” “FINAL FANTASY PIXEL REMASTER,” “DRAGON QUEST MONSTERS: The Dark Prince,” and “FINAL FANTASY VII REBIRTH.” However, operating losses grew due to higher development cost amortization and advertising expenses, as well as higher content valuation losses versus the previous fiscal year.

Meaning how many copies Rebirth (and the other games) sold were not enough to cover the development and marketing budget. Absolute nuts the state of AAA games.


Kids these days are addicted to free-to-play shooters, gachas, or sandboxes.

Older gamers in my general age group seem to be spending more time with indies.

$100 is a lot of money and everyone is broke.

Maybe it's just me, but big AAA gaming doesn't feel like what it used to be.


Listen closely, there is meaning in my words.
Smooth Criminal
The upfront cash Sony provided S-E to develop exclusively for their console is no longer justifiable. It used to be that exclusivity meant higher profits thanks in part to the console maker giving you more money to ''stay" with their brand and focus on their hardware.

S-E is unfortunately seeing that such money is no longer viable and they're leaving a helluva lot of money on the table sticking only on the Sony side with their biggest releases.

S-E's expectations for profit are heavily skewed and against the grain of reality. This isn't a problem of sales, per se, but an issue of management and business decisions.


Pro Adventurer
I think exclusivity is bad anyway (although I won’t lie, as someone who grew up on PlayStation consoles I will admit to some slight bias on Sony’s part). However, I think everyone should be allowed to experience these games without needing to justify a whole console purchase.

I’m hoping Remake Part 3 releases on PC immediately along with the PlayStation release.

Wonder if the Switch 2 will be able to handle it.


Eyes of the Lord
I think exclusivity is bad anyway (although I won’t lie, as someone who grew up on PlayStation consoles I will admit to some slight bias on Sony’s part). However, I think everyone should be allowed to experience these games without needing to justify a whole console purchase.

I’m hoping Remake Part 3 releases on PC immediately along with the PlayStation release.

Wonder if the Switch 2 will be able to handle it.
It probably could but under heavy compromises.


Double Growth
I think exclusivity is bad anyway (although I won’t lie, as someone who grew up on PlayStation consoles I will admit to some slight bias on Sony’s part). However, I think everyone should be allowed to experience these games without needing to justify a whole console purchase.

I’m hoping Remake Part 3 releases on PC immediately along with the PlayStation release.

Wonder if the Switch 2 will be able to handle it.
I defend the existence of first party exclusives. Because they exist primarily to sell the console rather than wring every conceivable dollar out of a potential audience, they're much less likely to contain mtx or other predatory bullshit. They are afforded the ability to focus on design and artistry instead of being a money vacuum.

Purchased timed exclusives are less defensible.
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Eyes of the Lord
From former Square Enix director of bussiness: A thread on the recent Square Enix news regarding FF sales numbers and expectations.

As a reminder I reported to two CEOs of Square Enix for the better part of a decade and ran a subsidiary. I also correctly predicted last year that Square Enix was going to break exclusivity. I'll note I have no confidential information that I'm basing my arguments on. To start, we need to look at decisions made on the titles under development within the lens of 2015-2022, not the lens of 2023. For example, FF16 would have started pre-production prior to the release of FF15, which was released in 2016. This is a pre-Fortnite era. Budgets for FF7 Remake and into Rebirth would have been around this period too. This is important to note and we will get back to it.

There's a misunderstanding that has been repeated for nearly a decade and a half that Square Enix sets arbitrarily high sales requirements then gets upset when its arbitrarily high sales requirements fail to be met. This was not true when I was there and is unlikely to be true today. Sales expectations generally come from a need to cover the cost of development plus return on investment.

If a game costs $100m to make, and takes 5 years, then you have to beat, as an example, what the business could have returned investing $100m into the stock market over that period. For the 5 years prior to Feb 2024, the stock market averaged a rate of return of 14.5%. Investing that $100m in the stock market would net you a return of $201m, so this is our ROI baseline.

Can the game net a return higher than this after marketing, platform fees, and discounts are factored in? This is actually a very hard equation though it seems simple; the $70 that the consumer pays only returns $49 after 30% platform fees, and the platforms will generally get a recoup on any funds spent on exclusivity meaning until they are paid back, they will keep that cash. Plus, discounts start almost immediately.

Assume marketing expenses at $50m, and assume that you're not going to get $49 but rather an average closer to $40 given discounts, returns and other aspects. Now let's say in that first month you sold 3m copies with $40 net received (we will ignore the recoup). You need to surpass $254m to make expectations. (That's $100m + $101m in ROI baseline + $50m in marketing). At 3m copies with $40 per copy received, you've only made $120m. You're far off.

From the statements made, it will take FF16 eighteen months to hit expected sales. (I used the stock market as an example but actual ROI should be higher than stock market averages).

The sales figures required aren't wild expectations; the number of copies sold were too low. And my numbers are actually much lower than realities (game dev costs are probably 2x as high, and marketing is also likely 2x as high, and this makes ROI requirements higher too).

But that's not even the core of the problem, this is just me proving that expectations aren't set immodestly. The core of the problem is that the budgets were set in a period where the expectation was that audiences would grow.

Total audience growth was a reasonable expectation in the 2015-2022 era and still is today. Not only had the industry grown significantly each year, but each day that new generations were coming of age, they were coming of age as gamers. Meaning that your total addressable population should be increasing and you should be increasing your revenue.

What's happened? Not just to Square Enix, but to the industry as a whole? Audience behavioral patterns are radically different than expected in 2015. Remember, I said 2015 was pre-Fortnite. The way it used to work was that you'd pick your release date similar to a Hollywood movie, stick to it, and consider the competition to be the titles releasing the weeks before and after.

We would look at a Hitman or a Deus Ex release and consider whether there was a Call of Duty or Assassin's Creed coming out around that time, assuming that gamers had X amount of money to spend and Y amount of time, and that if we wanted to get the full sticker price (remember, discounts eat into cash received and also at that time, used disc sales were $0 cash received) we needed to get as many sales in the first two weeks as possible.

At that time, as a gamer, once you finished the most recent game you were on, you moved onto the next. You were looking for your next title once you finished the prior one. We wanted one of our titles to be the next title you bought to fill your gamer needs. This world radically changed in the last 6 years.

Earlier this month Kotaku had an article called "9 Great Games We Can't Stop Thinking About." There's a surprise 10th slide, and that is Fortnite.
writes in the article: "And once again, another weekend arrives and I realize that I'll be spending most of it playing Fortnite. I'm very close to maxing out both my battle pass and Festival pass, so that's the plan. I hate how deep Fortnite has its hooks in me–to the point where I'm choosing to play it over brand-new, cool-looking video games–but I can't help it. I must finish these damn passes, get all the rewards, and earn the right to play other stuff. Well, until the next season starts up and I once again return to Fortnite to drop in and level up all over again. It's sick. I hate myself. I can't wait to play more this weekend."

This is indeed the point. Square Enix are not competing against just the latest new installments, they are competing against every F2P online game that is constantly adding content and getting more robust over time.

The assumption was that people would jump between products when they finished one. But, as you know, F2P games like Fortnite or Warzone are evergreen, they never get old. They are always updating with new content and experiences. They can continue for decades. Candy Crush has had its best years ever the last few years. And companies like Epic can continue to invest back into the products to make them better, creating even higher barriers to entry for competitors.

The game industry is still growing in revenue but that revenue is increasingly captured by fewer live services games that are generating a level of stickiness seen in social media companies. There are reasons there are very few competitors to Facebook. Once the network effect starts, it can keep going for a long time. Since Instagram (also FB), the only real competitor in an entire decade that showed up and could quickly reach 1bn+ people was TikTok. And this is in a trillion dollar valued industry.

I expect Fortnite, Roblox, Warzone, and similar products to continue to grow revenue. Meanwhile, put yourself in an older gamer's shoes: if you're a gamer with disposable income but less free time, and you have the choice of paying $70 to play 100 hours in FF16 or to just continue playing Fortnite with your friends for free, you'll wait to see the FF16 reviews before you decide whether to switch off FN. In other words, your switching costs (how good a game is, how exciting it needs to be) are now substantially higher than when you'd finish the latest Assassin's Creed and look for the next title to fill your time, because you’re awash with content options. Fortnite doesn't end.

This is the reason we see trends where games are either spectacular 10/10 successes, or disasters, with little in between; there is no "next hit" being searched for in many cases. And this polarization makes risks higher, and costs higher too (we will get to this in a moment.)

Now if you're a younger gamer in your teens, you may not even be thinking about FF. If you are 13 years old now, you were 5 years old when the last mainline FF, FF15, came out. Your family may not own a PS5 and you may not care. You're satisfied with Fortnite or Roblox or Minecraft with your friends on your phone or laptop. I'm not say that this is the case for everyone. But it is certainly a trend. The old AAA franchises do not seem to be converting the younger generations that the industry was counting on for growth, and instead F2P social games on mobile are where they spend their time. This is the reason every publisher chased live service titles; audiences clearly gravitated toward them, and profits followed in success. (It is surprising that Square Enix, which had successful F2P live service mobile titles in Japan, left the AAA live-service attempts to Eidos rather than try to build those products in Japan, but dissecting this problem would likely require an entirely different thread.)

Regardless, the Fortnite-ization of the industry was not entirely predictable in 2015 when budgets were being planned. Even after FN came out and well into the Covid period it felt like industry growth was pulling all ships forward, not just a handful. But that isn't what happened.

Now we have to get to the cost of development. Asset generation, motion capture, textures, animation, engineering, infrastructure are incredibly expensive. Making games costs a lot of money. The recent layoff wave is generally a consolidation toward a new expected sales average in the number of titles being produced, not the cost of an individual title, which is going to continue to increase. (Spider-Man 2 cost $380m!)

Development costs have gone up, and switching costs of the consumer has gone up, and as a result companies have to invest even more because it has to be a 10/10 or gamers will stick to Fortnite. (I don't literally mean FN, but similar types of products.) Meanwhile, FF7 Rebirth, which has a 92% Metacritic rating, can't get the sales it needs (though that's also complicated due to it being a sequel.) These factors mean the status quo must change.

There are three levers you can pull to make the equation work for return on investment at a game company. You can decrease costs, increase price, or increase audience size. As noted, any non-service game is having trouble increasing audience size. Meanwhile, on the cost side, inflation is up, salaries are up, and consumers require sophisticated, beautiful products to get them to fork over cash rather than keep playing F2P titles.

It is true that there are many smaller games or less beautiful games that generate audiences and are profitable. But something like Balatro is not a good example to point to. It's made by one person. AAA games can take hundreds, thousands of people to make. A single person making $2-3m in sales is life changing, a hundred people trying to split that is not enough money. And products like Balatro are lightning in a bottle, you can't generally capture that twice, and there are hundreds of thousands of competing products on Steam or App Stores that fail for every Balatro.

This leaves only price left as a lever to pull. Since the price of games hasn't substantially increased, relative to inflation, package disc games have gotten cheaper over the last two decades. The assumption was that this was okay because the audience size would grow instead of price. But the audience went to the platform titles.

Prices for packaged disc games will go up. Game companies have no choice, it is the only lever left. Just look at Kotaku's article about GTA6’s price point from this week:

You're also seeing this trend with Ubisoft's Star Wars game:
It's not because game companies are penny pinchers looking to fleece their users. It's because this is the only path left to make non-F2P service titles workable in the AAA space given cost and competition.

Something has to give; if SQEX can’t get its cost of dev down (it will go further up) and is getting good reviews but isn’t increasing audience, they and the rest of the publishers are going to have to increase price point. Otherwise live service titles will be all we have left.

There's another path that I can think of, which is increasing the take rate. If publishers can capture more of the platform side revenue, they can moderate price point increases while capturing a better return on investment because they'll be capturing say $50 or $55 out of $70.

@TimSweeneyEpic knows this which is why he's fighting the good fight on platform fees, both at EGS and with the app stores, to open up PC and mobile ecosystems.

This is also why you'll see MS and others take advantage of his fight and start their own app stores. (You would think MS would chip in for Epic's legal fees given they're capturing the benefits with no risk!)

But this path will take time, and is very hard on consoles, where the AAA publishers make a lot of their money, so expect price increases to still be the norm.


Double Growth
Fascinating, thanks!

It's pretty interesting to hear someone from Square actually address the "disappointment over unrealistic sales figures" thing. I would argue that even if the expectations weren't arbitrarily high, if you're needing Tomb Raider to do Call of Duty numbers to recoup costs, the issue might be on the other side of that budget then :monster:

But still a very interesting perspective. Sucks that games such as Fortnite which I find boring as hell could nonetheless kill the types of games that I actually like.
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