Square Enix Looks To Global Market Amid Falling Revenue In Japan

Square Enix is a Japanese conglomerate that practically leads all aspects of Japan’s entertainment industries. From video development to manga publications, they are everywhere. But globally they are more known for developing video game series like Dragon Quest, Final Fantasy, Valkyrie Elysium, and Drakengard series.

MAJOR TAKEAWAYS

• Square Enix has seen a lowering income from the Japanese market over the few years, as reported in the company’s annual report for the fiscal year 2022.
• The company has been looking to cement its business foundations abroad.
• Recently it also sold three of its overseas studio and an IP to Embracer Group from Sweden.
• The company has vowed to invest more in globally hit titles.

Now in an annual financial report, Square Enix has revealed that they have been struggling in the Japanese market. They have seen particularly stagnating growth over the past few years. So to secure their business, they are looking to increase and diversify their global game releases. In the message to shareholders, the company said,

Achieving major growth in the game industry is difficult now for companies that compete primarily in the Japanese market, given its graying demographics. As such, it is critical for our business that we produce hit titles that speak to the global market, which offers greater scale in terms of both customers and sales volumes.”

The report further says that the company can not rely on the Japanese market alone to achieve its annual income goals.

Square Enix has also sold three of its overseas studios to “build stronger business foundations” abroad. The sold studios include Eldos-Montreal, Square Enix Montreal, and America-based Crystal Dynamics to a Swedish-based Embracer Group. They also sold one of their IPs to them. The other reason for their sale, as mentioned in the report was,

Their portfolios were focused on the development of major titles, which presented the risk of a serious cannibalization of our Group’s financial resources over the medium to long term. We, therefore, decided to divest the studios to achieve further growth through the optimal allocation of our resources and the creation of a more robust product pipeline.”

Square Enix is also looking to use social media platforms to make information about its games more accessible to its customers.

Furthermore, Square Enix has posted profits for all its bar publication business, in the fiscal year which ended on 31 March 2022, taking their total assets from ¥336,144million to ¥380,902million. Their net sales had a jump of almost ¥33,000million as well, bringing the total to ¥365,275million from ¥332,532million in the previous fiscal year.

Square Enix struggled in the HD gaming section, in a year-on-year comparison, as compared to the previous year in part due to the release of major titles in the 2021 fiscal year. Operating income saw an increase of 25.5% to ¥59,261 million, and ordinary income 41.5% to ¥70,794million.

Digital Entertainment contributed the most with 76.6% of net sales, while Amusement 12%, Publication 7.9%, and Merchandising 3.5%.

Square Enix has vowed to invest more in “robust” titles, and use its resources more diligently instead of investing in more than necessary titles at a given time.

Will this help Square Enix to revamp their struggling business in the Japanese market? Discuss your opinions below.