Square Enix published the transcript of the Q&A from the latest financial results conference call, in which the new CEO Takashi Kiryu offered information about the publisher's business and plans.
In the document, we hear from Kiryu-san that sales of the upcoming Final Fantasy VII Rebirth are the greatest variable on which Square Enix's ability to reach its yearly operating income target hinges (55 billion yen, or just north of $371 billion at the current exchange rate).
As the feedback received so far has been strong, Square Enix expects it to sizably contribute to the earnings in the current quarter. Due to synergies with the game, the company also expects solid performance from Final Fantasy VII Ever Crisis, which is also celebrating its six-month anniversary in March.
Square Enix also hopes to see a stronger performance from Final Fantasy XIV due to the Fan Festival in Tokyo Dome which just happened. According to the company, it will gradually build up excitement ahead of the expansion Dawntrail, which will be released in the summer of 2024.
Earlier during the conference, Kiryu-san explained that while the game's revenue was down in the first half of the fiscal year compared to the previous two years due to a lull in the operating cycle, the performance of the MMO sub-segment is still considered strong.
With all the information shared at the Fan Festivals in Las Vegas and London, Square Enix expects the excitement build-up for the expansion will translate into good performance going forward.
Kiryu-san also mentioned that progress toward the full-year revenue target is in line with expectations, and releasing the PC version and DLC of Final Fantasy XVI when the timing is optional has the goal of maximizing sales of the game over a 18-month period.
Kiryu-san also acknowledged the harsh criticism received by Infinity Strash: Dragon Quest The Adventure of Dai, and the fact that the game has problems. Square Enix believes that the time gap from the airing of the anime and the difference between the game's advertised selling points and what customers were also factors in the flop.
Interestingly, Square Enix has started to incorporate feedback from customers who played its smart device games ahead of release into its development process. Now the company is working on mechanisms to do the same for its Console and PC games as well, incorporating customer feedback in the initial stages of development.
Kiryu-san was also asked what he believes Square Enix currently lacks to achieve sustained growth.
The first point he made is the lack of diversity in the company's portfolio. Since the company owns big IPs like Final Fantasy and Dragon Quest, Kiryu-san believes it has relied too much on certain gameplay styles or genres. On the other hand, the tastes of customers have diversified, and now customers like playing games from a variety of genres.
He also mentions that blockbuster games aren't the only source of popularity, citing Powerwash Simulator as an outlier that is well suited for casual play but has been able to steadily build up earnings.
His plans is to strengthen the company's internal development capabilities to encourage greater diversity.
For these reasons, I want to increase our development proficiency by strengthening our internal development capabilities so that we are able to achieve greater diversity in our title portfolio. I would also not rule out inorganic means as an option for strengthening our internal development capabilities.
If you're wondering, "inorganic growth" is technical financial lingo indicating possible acquisitions, the opening of studios, or basically measures that aren't related to growing the development resources Square Enix already has.
Kiryu-san also believes that Square Enix's marketing is lacking, with content increasingly being sold digitally and on a range of devices that is diversifying. He wants to establish stronger capabilities to market efficiently in such an environment.
Square Enix has tended to focus its resources on content development, but going forward, he also intends to strengthen the company's publishing arm that manages its marketing. He wants to focus on putting the right capabilities in place which will also involve some hiring.
He will go into specifics on these two points when he'll reveal the new medium-term business plan in May.
Specifically in the console subsegment, Kiryu-san mentions that some of Square Enix's games are developed internally, while others are developed by external companies. He wants to strengthen the internal development part to "concentrate development resources on carefully selected new titles that will be developed to a high level of quality."
That doesn't mean focusing only on big games. As a matter of fact, Kiryu-san wants to take on new challenges to increase the diversity of Square Enix's portfolio of titles.
That being said, this also doesn't mean more games. Kiryu-san's plans involve slimming down the portfolio to "ensure higher quality from each title."
Another interesting point he made involves making a clearer distinction between blockbuster games and indie games (some of which can make their presence felt in terms of earnings). He feels that many titles developed by Square Enix have been falling somewhere in the middle.
Last, but not least, Kiryu-san mentions that Square Enix is open to a "multifaceted approach to leveraging IP and wants to explore the possibility of cross-media adaptations of the Final Fantasy franchise as a means of further diversifying the sources of earnings."
The company intends to put Final Fantasy and possibly other IPs "in front of a global audience representing diverse age demographics through whatever channels may allow for that." Kiryu-san hopes to include some initiatives within this domain in the medium-term business plan.
Incidentally, if you'd like to read more about Kiryu-san's plans, you can find our article about his traditional New Year's Letter from the President.
