An influential investor has raised significant concerns about Square Enix, the renowned developer behind Final Fantasy. The investor released a detailed 100-page document urging the company to reevaluate its business operations due to what it describes as “sluggish” financial performance.
Investor’s Call for Change
In a press statement, 3D Investment Partners, which holds a 14% share in Square Enix, criticized the company for a “significant deterioration in earning power.” Despite owning some of the most celebrated franchises in the gaming world, the investor believes that the company has not been able to capitalize on its potential.
The document questions whether Square Enix is still capable of producing groundbreaking content or if it has lost its innovative spirit. It challenges the company to “surprise us, move us, and ignite that passion we once felt,” emphasizing the need for a return to its roots.
Over the past three years, under new management, Square Enix has faced stagnating revenues and declining profitability. This has led to a reduced operating income and other essential performance indicators.
Addressing Management Challenges
The investor describes this as the “most critical management challenge” for Square Enix and calls for immediate action to tackle these issues. The suggested measures include addressing the fragmented development portfolio, refining product designs, and optimizing promotional strategies. The company is urged to reassess its medium-term management plan to fully leverage its intellectual property and maximize corporate value.
3D Investment Partners compared Square Enix with other Japanese giants like Capcom and Nintendo, highlighting differences in performance. The firm has been in discussions with Square Enix since last year, presenting its concerns and recommendations to the company’s leadership. However, responses have been limited and lacking in substance.
The investor is now seeking input from all shareholders to foster productive discussions with Square Enix and enhance the company’s value.
Industry Reactions and Developments
Former Square Enix executive Jacob Navok has also commented on the situation, summarizing the investor’s concerns as twofold: poor sales and high development costs. He noted similar issues when discussing expectations for FF16 sales, which fell short due to high production expenses.
This critique comes shortly after Square Enix announced layoffs affecting over 100 employees as part of a consolidation effort in Japan. The company has also sold off several studios to Embracer Group and laid off workers in its Western operations.
Looking ahead, Square Enix plans for 70% of its QA operations to be managed by AI by 2027, reflecting its stated commitment to aggressively integrate AI in its processes.