Square Enix Will be "More Selective" With Spending Following Huge Losses

Square Enix has published a "notification of recognition of extraordinary losses" for the fiscal year that ended on March 27th. The company expects these losses to be around ¥22.1 billion, which translates to about $140.3 million. In an effort to avoid similar losses in the future, the company plans to make some major changes to the way its video games are developed. According to the notification, the board of directors has voted "to revise the Group's approach to the development of high-definition (HD) games with the intention of being more selective and focused in the allocation of development resources." 

Changes at Square Enix

So what does this all mean? At this time, it's too early to tell, but we can take a look at some of the company's recent games to get a better idea of what's happening. Final Fantasy XVI and Final Fantasy VII Rebirth were AAA games that Square Enix released during that fiscal year; while both were critically-acclaimed, they have been failing to meet sales projections. It's possible those projections are simply too high (as some fans have argued) or that Square Enix is simply spending too much on development. It doesn't help that both of those games were timed exclusives on PlayStation 5, which may have cut down on the potential audience. 

It's also possible that some of Square Enix's games are simply taking too long to make, which could result in ballooning development costs. It's been seven years since the last numbered entry in the Dragon Quest series, and fans have no idea when the next game will be coming. Meanwhile, an HD-2D remake of Dragon Quest III was announced three years ago, and has yet to surface. Reports have suggested that Square Enix has been trying to make the production process shorter for its games, and that could help things along. 

Are AAA Games Too Expensive to Make?

The problems at Square Enix speak to a larger issue that has plagued the video game industry over the last few years. Not only have costs skyrocketed for AAA games, but development time has also increased. As a result, the margins on these games have gotten thinner, and it's much riskier to release a AAA game than ever before. Publishers are increasingly looking for ways of bringing in more revenue; several former Xbox exclusive games have been brought over to PS5 and Switch, while many of PlayStation's exclusives have been ported to PC. 

Rumors have suggested that Square Enix might follow suit this year, bringing former PS5 exclusives like Final Fantasy XVI to Xbox Series X|S. That increased audience could help to offset losses, and result in the game becoming more profitable at a faster pace. If that does help, it's possible we could start to see Square Enix move away from timed exclusives on PS5. 

What do you think Square Enix needs to change? Do you think the company is in trouble right now? Share your thoughts with me directly on Twitter at @Marcdachamp or on Instagram at @Dachampgaming!

[H/T: Wario64]