Square Enix expects loss of $140 million from cancelled video game title(s)

[derby_440]

Square Enix announced on April 30 that they are expecting an extraordinary loss of 22.1 billion yen (over $140 million based on recent conversion rates) in the fiscal year ending March 31, 2024. The losses are related to the revision of Square Enix’s development policy and the scrapping of ongoing projects* (source: Takashi Mochizuki).
*The report does not clarify whether this relates to one or multiple titles.

According to the announcement, Square Enix’s board of directors decided in a meeting held on March 27 to revise the company’s development policy for HD video game titles “due to diverse changes in the environment and in an attempt to allocate and concentrate development resources.” As a result, they expect to record losses of approximately 22.1 billion yen related to the cancellation of ongoing title(s). Square Enix are currently revisiting their consolidated financial forecasts for FY 2023 based on these and other factors and will publish a revision if necessary.

Square Enix expects loss of $140 million from cancelled video game title(s) - AUTOMATON WEST

Square Enix have reported that they expect a 22.1 billion yen loss in fiscal year 2023 due to cancelled video game project(s).

automaton-media.com

 

[Celestial]

Damn. That sounds pretty bad. So only focus on dragon quest and final fantasy?

 

[Kye]

From what I understand, SE has put out a lot of smaller games in the past few years, implying that smaller releases are just not profitable enough for the firm. This goes against the narrative "More AA releases that are less risky and less focus on AAA production will benefit the industry!"

That's a narrative I personally support as well, but it seems like SE might just be too large for that strategy to be effective (maybe being unwilling to lay too many people off).

A lot of those games have also been of the Final Fantasy IP, which could be diluting the brand a bit.

 

[KarlRemarx]

From what I understand, SE has put out a lot of smaller games in the past few years, implying that smaller releases are just not profitable enough for the firm. This goes against the narrative "More AA releases that are less risky and less focus on AAA production will benefit the industry!"

That's a narrative I personally support as well, but it seems like SE might just be too large for that strategy to be effective (maybe being unwilling to lay too many people off).

A lot of those games have also been of the Final Fantasy IP, which could be diluting the brand a bit.

Their smaller releases have low profitability because there is no logical reasoning behind their scheduling and often even their platform choices. Tactics Ogre, Various Daylife, Harvestella, Diofield, SaGa, Crisis Core, Theatrythm, Octopath 2 were all released in a 6 month window between late 2022 and early 2023, with Theatrhythm arbitrarily skipping Xbox/PC. Even if you are a diehard S-E fan this is far too much to ask customers to support - couple this with the presence of competing RPGs and the complete lack of marketing and it's completely impossible for these games to succeed. Sane management would never do this, Nintendo for example would have spread these over 18-24 months to fill out their schedule of major releases.

Cancelling AA releases will do nothing to address S-E's problems. Those at the company who proposed and agreed to the schedule I described above are the problem.

 

[Astrogamer]

Their smaller releases have low profitability because there is no logical reasoning behind their scheduling and often even their platform choices. Tactics Ogre, Various Daylife, Harvestella, Diofield, SaGa, Crisis Core, Theatrythm, Octopath 2 were all released in a 6 month window between late 2022 and early 2023, with Theatrhythm arbitrarily skipping Xbox/PC. Even if you are a diehard S-E fan this is far too much to ask customers to support - couple this with the presence of competing RPGs and the complete lack of marketing and it's completely impossible for these games to succeed. Sane management would never do this, Nintendo for example would have spread these over 18-24 months to fill out their schedule of major releases.

Cancelling AA releases will do nothing to address S-E's problems. Those at the company who proposed and agreed to the schedule I described above are the problem.

You forgot two titles, Star Ocean 6 and Valkyrie Elysium (plus the Switch Nier Automata port, the Switch Life is Strange port and PC port of Triangle Strategy). I feel the Q4 games were paced relatively fine and in turn, performed acceptably. But that doesn't offset the 2022 failures and Forspoken.

 

[Kye]

I will admit that I was surprised at how soon Rebirth released after FF16, after the fact.

But I also didn't like the latter much, so it left my consciousness pretty quickly.

 

[StardustTraveler]

This lines up with previous statements by Takashi Kiryu about reducing the amount of games in their lineup:

Square Enix plans to slim down their future games lineup to ensure higher quality

Square Enix has released a steady stream of high quality titles over the last year, though not all of them have been commercial successes. Speaking to investors, the company CEO Takashi Kiryu…

mynintendonews.com

Q: Has the way that your development function has spread to cover so many bases made controlling your development efforts more difficult?
A: It has less to do with our development function and more to do with the numerous entries in our lineup. I want to structure our development function so that we are able to ensure higher quality from each title by slimming down our lineup.

Q: Why have you been unable to slim down your lineup until now?
A: As our customers’ needs and the types of devices available have diversified, we have tried to produce hits by developing a wide variety of titles rather than by focusing only on certain ones. I believe that this has resulted in the splintering of our resource pool. Meanwhile, there have been clear winners and losers among the major titles released recently in the gaming market, and it has become possible for even indie titles to make their presence felt. The market is increasingly polarized between blockbuster and indie titles, but I feel that we have developed many titles that fell somewhere in the middle. I want to make clearer distinctions going forward.

Obviously the big IPs like DQ, FF and KH will continue to get new entries, but what I want to know it exactly which kind of titles are being axed by Square Enix. Is it new AAA IPs like Forspoken and Foamstars? Existing AA IPs like SaGa, Mana and Team Asano games? New AA IPs like Diofield Chronicle and Harvestella? Or remasters of older titles like Chrono Cross and Live A Live? And how will this affect their platform strategy going forward?

 

[KarlRemarx]

You forgot two titles, Star Ocean 6 and Valkyrie Elysium (plus the Switch Nier Automata port, the Switch Life is Strange port and PC port of Triangle Strategy). I feel the Q4 games were paced relatively fine and in turn, performed acceptably. But that doesn't offset the 2022 failures and Forspoken.

No publisher could release that many games into such a narrow window, even in the hypothetical scenario where all of these were of high quality, and have all of them reach their sales potential. Not even Nintendo. Only a handful of these games had flop written all over them, but the solution to that isn't throwing out the entire idea of releasing games at a variety of budgets. The solution is better scheduling and production. Production management in particular at S-E has a lot to answer for, they have been trigger happy on sending poor and/or unfinished concepts out to die in the last couple of years.

Obviously the big IPs like DQ, FF and KH will continue to get new entries, but what I want to know it exactly which kind of titles are being axed by Square Enix. Is it new AAA IPs like Forspoken and Foamstars? Existing AA IPs like SaGa, Mana and Team Asano games? New AA IPs like Diofield Chronicle and Harvestella? Or remasters of older titles like Chrono Cross and Live A Live? And how will this affect their platform strategy going forward?

S-E don't have a discernible "platform strategy", though. It's entirely based on vibes and sacks of cash from platform holders.

 

[Neo_arcadia7]

I have been saying this for years but SE needs to take a page out of capcoms book.

- Establishing a core development strategy that streamlines development

- stay consistent with releases & quality & expectations with those releases. While I appreciate SE when it comes to FF & the new take approach for each title unfortunately it doesn’t grow the brand it stays stagnant, sales number for each title just seesaw due to the constant change.

- revitalize your core brands (FF, DQ,) more so FF & in turn gain more market relevance as a company then start throwing out new or unique titles or back catalog titles once you built up a bit more consumer enthusiasm.

Bottom line is SE needs consistency & capcom has been crushing it with constant titles always meeting consumer expectations & growing the brand. While yes FF is different that each title is independent that doesn’t mean SE can stay with a winning formula & tweak it with every release.

 

[Koni]

So here's every Square Enix game that isn't a rerelease or remaster from January 1, 2021 up until the release of Final Fantasy XVI:

Bravely Default II
Balan Wonderworld
Neo: The World Ends With You
Dungeon Encounters
The Voice of Cards trilogy
Babylon's Fall
Triangle Strategy
Chocobo GP
Stranger of Paradise: Final Fantasy Origin
The Centennial Case: A Shijima Story
Live A Live
Various Daylife
The Diofield Chronicle
Valkyrie Elysium
Star Ocean: The Divine Force
Harvestella
Dragon Quest Treasures
Crisis Core: Final Fantasy VII Reunion
Forspoken
Theatrhythm Final Bar Line
Octopath Traveler II
Paranormasight: The Seven Mysteries of Honjo

This is... a lineup alright. Quite a few of these games have actually been recieved pretty well, but from by admittedly brief Wikipedia search, the only games that have been confirmed to actually have shipped a million copies are Bravely Default II, Triangle Strategy, and Octopath Traveler II. That isn't to say some of these games haven't, as I'm sure the Final Fantasy games here and Forspoken have by now, but the fact that we dont have concrete numbers for the thing speaks volumes (pretty funny how FF7 Rebirth is in the same situation). In fact the only other game I could find where Square Enix was willing to share shipment numbers on was Live A Live, which sold 500,000 copies as of the end of September 2022.

One could reasonably say those four titles I mentioned above with shipment numbers are the ones that Square Enix is most impressed by...and all of those are Team Asano games. There's a reason Asano got promoted. Those games will stay, but everything else on this list iis gonna be something we'll be seeing much less of. The only exception might be Star Ocean as the SO2 remake is doing alright, I think.

 

[derby_440]

Damn. That sounds pretty bad. So only focus on dragon quest and final fantasy?

Don't forget about Kingdom Hearts.

Maybe this also mean they will not bother with smaller FF titles or spin off.

 

[Kiria]

I have been saying this for years but SE needs to take a page out of capcoms book.

- Establishing a core development strategy that streamlines development

- stay consistent with releases & quality & expectations with those releases. While I appreciate SE when it comes to FF & the new take approach for each title unfortunately it doesn’t grow the brand it stays stagnant, sales number for each title just seesaw due to the constant change.

- revitalize your core brands (FF, DQ,) more so FF & in turn gain more market relevance as a company then start throwing out new or unique titles or back catalog titles once you built up a bit more consumer enthusiasm.

Bottom line is SE needs consistency & capcom has been crushing it with constant titles always meeting consumer expectations & growing the brand. While yes FF is different that each title is independent that doesn’t mean SE can stay with a winning formula & tweak it with every release.

Uh latest capcom release didnt quite meet consumer expectation, critics yes but playerbase not really… word of mouth is pretty bad too

 

[SquidEnthusiast]

SE has dug itself into such a hole I'm not even sure what the best path forward is. This doesn't feel like the right one on the surface of it to me though, but we'll see.

 

[Rotimiade]

Uh latest capcom release didnt quite meet consumer expectation, critics yes but playerbase not really… word of mouth is pretty bad too

what games exactly? Dragons dogma 2 had performance issues but word of mouth is strong. SF6 and RE4 both had positive feedbacks

 

[Kiria]

what games exactly? Dragons dogma 2 had performance issues but word of mouth is strong. SF6 and RE4 both had positive feedbacks

DD2 post release word of mouth was fairly weak hence the legs was cutshort

initial sales/hype was very strong tho

atm 24hour CCU peak for dd2 (11,802) and horizon forbidden west (11,719) Even after dd2 debuting more than 4times CCU peak than forbidden west

Horizon forbidden west is at #118 steam top sellers atm and you cant even see dd2 here…

Steam Search

store.steampowered.com

 

[Belthazar]

I still don't understand why they did what they did in the last months of 2022. They released so many games in such a short period of time that nothing felt important. I still feel like if they staggered the release of those games they could've all succeeded a lot more.

I mean, I'm a big Square Enix fan and bought Diofield Chronicle at release... But then a week later they dropped Valkyrie Elysium and I just wasn't finished with the prior game, so I just skipped it and bought it way later at a heavy discount.

I just counted, between September 13 and and November 11 they released 7 games. That's 7 games in less than 2 months.

 

[Evilnemesis8]

I still don't understand why they did what they did in the last months of 2022. They released so many games in such a short period of time that nothing felt important. I still feel like if they staggered the release of those games they could've all succeeded a lot more.

I mean, I'm a big Square Enix fan and bought Diofield Chronicle at release... But then a week later they dropped Valkyrie Elysium and I just wasn't finished with the prior game, so I just skipped it and bought it way later at a heavy discount. And I just counted, between September 13 and and November 11 they released 7 games. That's 7 games in less than 2 months.

My best guess is that they took the FFXIV profits when it got going and went to invest that money into A/AA projects with as many external partners as they could.

 

[Belthazar]

My best guess is that they took the FFXIV profits when it got going and went to invest that money into A/AA projects with as many external partners as they could.

It's not about them making those games, it was a great initiative to rekindle those franchises and create new IP... It's just the release schedule that felt really haphazard.

 

[Kiria]

I think square enix would benefit alot on a reimagined parasite eve thats more resident evil like

no clue why they havent done it yet Since RE is stronger than ever

 

[Tbone5189]

SE has dug itself into such a hole I'm not even sure what the best path forward is. This doesn't feel like the right one on the surface of it to me though, but we'll see.

Releasing on nsw2/PC as well as PS5/PS6 should be a start. SE recovered a bit from DQ11 with S afterall

 

[Neo_arcadia7]

Uh latest capcom release didnt quite meet consumer expectation, critics yes but playerbase not really… word of mouth is pretty bad too

If you are referring to exoprimal then sure but regardless capcom has seen YOY increase in profit & rev & has essentially r revitalized most of their brands/IP. If you are referring to DDII it has already sold 2.5M copies & will likely be successful when everything is said & done (maybe not a 10M seller)

 

[Damage2]

I think square enix would benefit alot on a reimagined parasite eve thats more resident evil like

no clue why they havent done it yet Since RE is stronger than ever

They dont have people that know how to make these kind of games

 

[Kiria]

If you are referring to exoprimal then sure but regardless capcom has seen YOY increase in profit & rev & has essentially r revitalized most of their brands/IP. If you are referring to DDII it has already sold 2.5M copies & will likely be successful when everything is said & done (maybe not a 10M seller)

Dd2 yes it sold alot initially because of dd1 word of mouth

but meeting consumer expectation it is not… bad user reviewers/bad sales legs etc

 

[Remember_spinal]

They dont have people that know how to make these kind of games

TBF they didn’t ahve a lot of people that could make character action games like FFXVI either. You just hire for it, they got people from capcom and platinum to help with XVI they can do the same thing for PE.

 

[Damage2]

TBF they didn’t ahve a lot of people that could make character action games like FFXVI either. You just hire for it, they got people from capcom and platinum to help with XVI they can do the same thing for PE.

I feel like a character action game its easier to replicate that a survival horror game like RE2 Remake.

Who would they hire from Capcom to make something like that, Yasuhiro Ampo (RE2 Remake, RE4 Remake director)?

A big budget Resident Evil game its an easier sell for modern audiences these days too, its a series with live action movies and CG movies and all that.

Make a Big Budget Parasite Eve, a game unknown for 97% of gen Z audiences, its a hard thing to do.

 

[Astrogamer]

I still don't understand why they did what they did in the last months of 2022. They released so many games in such a short period of time that nothing felt important. I still feel like if they staggered the release of those games they could've all succeeded a lot more.

I mean, I'm a big Square Enix fan and bought Diofield Chronicle at release... But then a week later they dropped Valkyrie Elysium and I just wasn't finished with the prior game, so I just skipped it and bought it way later at a heavy discount.

I just counted, between September 13 and and November 11 they released 7 games. That's 7 games in less than 2 months.

I would assume it was mostly pandemic games that were delayed to that year and basically sacking FY3/2023 on the assumption they would recover with a double Final Fantasy year with a possible FFXIV expansion. The other option is that by stacking all those games together, they could offset Forspoken's loss.

 

[Rotimiade]

DD2 post release word of mouth was fairly weak hence the legs was cutshort

initial sales/hype was very strong tho

atm 24hour CCU peak for dd2 (11,802) and horizon forbidden west (11,719) Even after dd2 debuting more than 4times CCU peak than forbidden west

Horizon forbidden west is at #118 steam top sellers atm and you cant even see dd2 here…

Steam Search

store.steampowered.com

But it's already sold 2.5M copies with the potential to sell more, it will be successful. Games have longer tails and great word of mouth will drive that once the performance issues are improved. Exoprimal was one I didn't see doing well, and it was not critically acclaimed anyway. still its just one example

 

[Neo_arcadia7]

Dd2 yes it sold alot initially because of dd1 word of mouth

but meeting consumer expectation it is not… bad user reviewers/bad sales legs etc

We have to wait a bit longer to determine the games success.. so far it’s fine. Bottom line is capcom delivered a good product which they are consistently doing & SE is not.

 

[Kiria]

But it's already sold 2.5M copies with the potential to sell more, it will be successful. Games have longer tails and great word of mouth will drive that once the performance issues are improved. Exoprimal was one I didn't see doing well, and it was not critically acclaimed anyway. still its just one example

I’m not refuting the sales number what i’m replying is about dd2 meeting consumer expectation isnt true nor it having a good word of mouth

 

[Ryuichi Naruhodo]

Wait until the cancelled games turns out to be Just Cause V , Life is Strange IV and Outriders 2

Then they sell what remains of their Western Business to Embracer to Form the reunion

 

[ArkhamFantasy]

This is particularly frustrating because SEs platform strategy is so random that we can’t even focus on the actual games themselves because we don’t know how these games perform with a common sense strategy.

Forgive this dumb analogy, It’s like going into the doctors office with a large nail poking out of your head and complaining about headaches.

Its possible that you have some mysterious illness causing your headaches completely unrelated to the nail….but its kind of hard to tell when you’ve created this unnecessary self inflicted variable on yourself.

 

[Jaum]

This is particularly frustrating because SEs platform strategy is so random that we can’t even focus on the actual games themselves because we don’t know how these games perform with a common sense strategy.

Forgive this dumb analogy, It’s like going into the doctors office with a large nail poking out of your head and complaining about headaches.

Its possible that you have some mysterious illness causing your headaches completely unrelated to the nail….but its kind of hard to tell when you’ve created this unnecessary self inflicted variable on yourself.

Are you trying to say that this whole situation with SE is because they do exclusive deals for Final Fantasy? Most of their games that are underperforming are multiplatform. If anything, getting upfront money is preventing their situation from being worse than already is.

 

[Rotimiade]

I’m not refuting the sales number what i’m replying is about dd2 meeting consumer expectation isnt true nor it having a good word of mouth

once again you used one example of a game with clear issues to make a general statement

 

[Aostia82]

Are you trying to say that this whole situation with SE is because they do exclusive deals for Final Fantasy? Most of their games that are underperforming are multiplatform. If anything, getting upfront money is preventing their situation from being worse than already is.

Not sure about that
It's a matter of P&L
Voice of cards didnt cost that much for sure, for example
FF deal gave them money but is still unclear how its performance actually has been
Remember that FF surely is one of the most important pillars, so its financial results should be very strong within the company
I am not sure this cut happening now after FFXVI and FFVIIR releases and results is by cohincidence

Now, I am not saying FF is in shumble lol

But their key brands/games should be the pillars on top of which experimenting with smaller projects imho

If the smaller projects cause such a gigantic issue, that would be weird

 

[Bodokoh]

Are you trying to say that this whole situation with SE is because they do exclusive deals for Final Fantasy? Most of their games that are underperforming are multiplatform. If anything, getting upfront money is preventing their situation from being worse than already is.

FF franchise in the generation is supposed to sell over 10 million units, exclusive deals like that restricted its potential.

RE4R sold 7 million units in just a year while it took over 3.5 years for FF7 Remake to reach that milestone.

Multiplatform strategy is the only way to go for FF to reach its full sales potential. Capcom has shown that with Resident Evil games.

RE2R - 13.6 million units
RE7 - 13 million units
RE8 - 9.3 million units
RE3R - 8.4 million units
RE4R - 7 million units

 

[KarlRemarx]

Are you trying to say that this whole situation with SE is because they do exclusive deals for Final Fantasy? Most of their games that are underperforming are multiplatform. If anything, getting upfront money is preventing their situation from being worse than already is.

No, not just the exclusivity deals (which are bad and are not only reducing the reach of FF, but they are pursuing a PS exclusive strategy that even Sony themselves no longer follow). The upfront money is meaningless - a well received FF/DQ/KH release should be performing at the level of other prestigious brands, but the delayed multiplatform releases are basically flushing all of the initial marketing spend down the toilet, because a huge amount of the potential audience is being exposed to marketing that says "we aren't on the platform you own". The follow-up marketing that says "lol just kidding, we're on Steam/Xbox/whatever now" is a tiny fraction of the initial marketing spend and so reaches only a fraction of the audience. When you couple that with the fact that JRPG sales tend to be front-loaded and are also typically linear and narrative-heavy, the media attention cycle is usually much shorter than for more replayable genres. S-E's major franchises would almost double their full-price sales if the PC audience knew they could play every game on release on day 1 on Steam. It's that simple.

The problem with their smaller multiplatform games is that their entire release strategy for those has involved flooding the market with so many titles in such a narrow window that not even die-hard S-E fans could buy them all on release. When you couple that with how narrow those games are in terms of both genre and aesthetic, almost none of them will achieve their actual sales potential, because the environment S-E is releasing them into is self-defeating.

 

[SquidEnthusiast]

I've maintained for a long time that SE's biggest problem is that they have absolutely no idea how to manage a budget whatsoever. Not a soul in that company (except maybe Yoshi P but I question that too nowadays) seems to have any care for the scope of their projects, bigger is better and the consequences be damned. Well you've not the United States government SE, you can't just get away with spending infinite money and never expect it to come back and bite you in the ass eventually.

 

[Djehuty]

Are you trying to say that this whole situation with SE is because they do exclusive deals for Final Fantasy? Most of their games that are underperforming are multiplatform. If anything, getting upfront money is preventing their situation from being worse than already is.

No it’s multiple problems.

But as a company everything they do is out of touch and decades behind.

Their problems are exclusively their own, no other dev is having the issues they are in the way they are.

 

[Remember_spinal]

I feel like a character action game its easier to replicate that a survival horror game like RE2 Remake.

Who would they hire from Capcom to make something like that, Yasuhiro Ampo (RE2 Remake, RE4 Remake director)?

A big budget Resident Evil game its an easier sell for modern audiences these days too, its a series with live action movies and CG movies and all that.

Make a Big Budget Parasite Eve, a game unknown for 97% of gen Z audiences, its a hard thing to do.

For the record i wouldn’t make it a Resident Evil Game to begin with except for maybe just being semi-over the shoulder. It would still have some kind of turn based mechanics like the first game.

 

[Neo_arcadia7]

FF franchise in the generation is supposed to sell over 10 million units, exclusive deals like that restricted its potential.

RE4R sold 7 million units in just a year while it took over 3.5 years for FF7 Remake to reach that milestone.

Multiplatform strategy is the only way to go for FF to reach its full sales potential. Capcom has shown that with Resident Evil games.

RE2R - 13.6 million units
RE7 - 13 million units
RE8 - 9.3 million units
RE3R - 8.4 million units
RE4R - 7 million units

It’s not at simple as multi - plat. Fundamentally something has to change with the FF brand. It needs consistency with each release & a somewhat unified formula. The past RE titles have sold incredibly well & ushered the franchise into new heights sales wise not just because it was multi-plat but because capcom really honed in on what RE was & has delivered consistently, quality titles. FF has yet to really usher in a new audience in the sense of breaking that glass ceiling (sales wise) it could very well do it but SE definitely needs to really think on how they want to deliver these titles going forward & what kind of experience fans can expect.

 

[master94ga]

Wait until the cancelled games turns out to be Just Cause V , Life is Strange IV and Outriders 2

Then they sell what remains of their Western Business to Embracer to Form the reunion

None of the studios working on this games is owned by Square Enix.

 

[cm2]

I hope Front Mission 3 Remake is not one of the canceled games. Front Mission 3 is a really excellent Mecha JSRPG game, one of my favorites.

 

[Astrogamer]

I hope Front Mission 3 Remake is not one of the canceled games. Front Mission 3 is a really excellent Mecha JSRPG game, one of my favorites.

That would be Forever Entertainment. Those are safe from these kinds of slashes since it's only a licensing deal. Forever might have gotten something upfront but Square can't really take it back at this point