Square Enix reviewing production pipeline amid spluttering sales

Final Fantasy maker Square Enix is looking to reshape its production pipeline to revitalize its game business.

As reported by Bloomberg (via Google translate), company president and representative director Takashi Kiryu announced the pivot during a financial briefing.

Kiryu suggested that Square Enix will become less reliant on outsourcing studios and focus on producing large-scale titles internally with a focus on improving the quality of its releases and driving profit.

Multiple people who attended the conference call told Bloomberg that Square wants to implement its new system in April and will bake additional procedures into its workflow to better assess the quality of projects at an earlier stage

Bloomberg's latest report tallies with another from Genki in January, which indicated Square was assessing its production process with the goal of making better, fewer games.

Latest Square Enix financials highlight sales downturn

The news comes with the company reporting a net sales decrease within its Digital Entertainment segment for the third consecutive year (as shown in the graph below). 

As noted in Square Enix's fiscal report for the nine months ended December 31, 2023, net sales fell by 2.6 percent to 179.6 billion yen ($1.2 billion) year-over-year and operating income decreased by 20.7 percent to 30.7 billion yen ($207.4 million).

Although net sales and operating income were down, unit sales of both packaged and digital software increased to 18.51 million units from 16.43 million units. That upswing, however, couldn't prevent a revenue slide.

Discussing those results, Square Enix said the "weak performance" of existing titles within its Smart Devices/PC Browser sub-segment and waning sales in its MMO Game sub-segment negatively impacted results. It also cited "increased development cost amortization and advertising spending." 

The silver lining was that net sales within the company's HD Game sub-segment increased thanks to the release of titles like Final Fantasy XVI, Final Fantasy Pixel Remaster, and Dragon Quest Monsters: The Dark Prince.

Last year, Bloomberg reported that Square had been forced to reckon with how its ad-hoc development practices might have caused titles like Final Fantasy XVI to underperform, and now it seems the company is attempting to chart a new path forward.