Square Enix has been a mainstay in the industry for years, but it looks like the Japanese publisher and developer is struggling, having reported declining financial results for Q1 2023 (besides the huge success of its MMORPG, Final Fantasy XIV). And, following the publication of those results, Eurogamer reports that the company is looking to "improve capital efficiency" by selling stakes in its studios.
This comes from an internal conference call held after the results were shared, with MST Financial analyst David Gibson breaking down the discussion on Twitter.
Square Enix recently sold a number of its Western studios to Embracer Group, but that was only phase one of the company's plans. The next stage is for Square Enix to diversify the studio's capital structure, and be more selective with resources due to rising costs.
- Further reading - Embracer Group To Acquire Crystal Dynamics, Square Enix Montréal, Eidos-Montréal, Plus IPs For $300 Million
Resources will be focused on Japanese-developed games, with European and American studios impacted the most.
One way Square Enix thinks it will improve its capital efficiency and offset rising costs is by selling stakes in some of its studios. Gibson suspects that the likes of Sony, Tencent, and Nexon would be among the interested parties. What this means is that Square Enix won't entirely sell studios, but rather a percentage of them,
Interestingly, once the sale with Embracer Group goes through, Square Enix will gain $1.4 billion and potentially remove any debt they have, Gibson states.
Following the call, Square Enix's shares have risen. At the time of writing this, Square Enix Holdings Co Ltd has seen an 11% increase today.
The company has a huge slate of releases coming out at the end of this year, including on the Switch. The DioField Chronicle launches on the 22nd September, followed by the Switch port of NieR: Automata in October, farming sim Harvestella and Tactics Ogre: Reborn in November, and Dragon Quest Treasures in December. Crisis Core: Final Fantasy VII Reunion is also due out in the winter.
It's also already released two fantastic games earlier in the year, and a long-awaited port — Triangle Strategy, Live A Live, and Chrono Cross. So it's been a busy year for Square Enix. We'll have to wait and see what happens with the company for the rest of the year.
What do you think of this announcement? Do you think Square Enix will sell stakes in any of its studios? Let us know.
[source twitter.com, via eurogamer.net]
Comments 94
Never had any interest in any of their games really although I did try octopath but didn’t enjoy its structure
How can they be struggling financially when they have all those NFTs at their disposal? SURELY they hopped on the NFT bandwagon while the market was thriving, right?
I would never consider investing in a company so mired in its past - while chasing every trashy trend (NFTs, cloud gaming) it can trying to grab the ring it lost decades ago.
The first thing I thought about was Tencent eyeing this or Saudi Arabia since they already put $1B into the Embracer Group.
Again Tencent, that Chinese company is getting way to big in the gaming industry. And for me they are worse than EA. This is not good news.
@sanderev Tencent isnt interested in games that don't track Western gameplay habits. Can you solve the puzzle as to why?
“Diversify capital structure” and “be selective with resources” sound like two opposing ideas.
How are those NFT's working out for ya?
Can we all agree the pandemic created a boom in gaming that was bound to decline?
No? Just expect unfettered growth. I guess that's run of the mill Capitalism. Infinite growth or else...
Hopefully Sony does the purchasing. At least Sony has been a partner with them for a long time. I’d hate to see a Tencent or Nexon get a piece of the pie.
Perhaps if S-E stopped chasing live services they wouldn't be stumbling and bumbling. Chocobo GP, Babylon's Fall, Marvel's Avengers, Outriders...they weren't great.
Live A Live and Triangle Strategy were both fantastic. I hope any changes don’t ruin relations with Nintendo. Plus, all the IP and history of the company... would hate to see that fall apart before they eventually give me HD-2D remakes of Xenogears and FFVI (please...)
@somnambulance I'd rather not with the way Sony forces censorship onto Japanese developers. Would hate to see Dragon Quest stuck on the PS5.
@sanderev A lot of the games that help Tencent get it's start were licensed properties games like Call of Duty, Street Fighter, PUBG. It was really the rise of free-to-play games and smartphone gaming that changed the landscape. If Tencent didn't exist it would just be some other company. Eventually Chinese game companies will go from making copycat games, to licensed property games, to creating mediocre original works, to creating great original works. And that's the problem with outsourcing, you create your future competition.
Square Enix have declining financial results? Hmm, I wonder why that could be. Maybe it's due to the fact that it feels like they've made an active effort to completely tarnish their reputation over the course of the last 2 years? JUST A THOUGHT?!
Square Enix trying their damnedest to get some money out of Balan Company
Guess that whole NFT investment didn't work out eh?
Declining sale, huh? It’s almost as if gamers ARE expecting their games to be fun. 🤔
lol so much for videogames being superior on CD than cartridges isn't it Square?
I hope Nintendo step up on this one, would hate a Sony or Tencent buyout.
The last thing I want is for Sony to buy Square Enix or be part owner. It would be a loss to the gaming industry if FF, DQ end up being Sony exclusive.
I’m shocked by this, I thought they were doing better than ever. This could even turn into a buyout when they are advertising this some companies might make bigger offers. I wish they would just stay on their own, this are only going to become more exclusive to single consoles off of stuff like this.
Having financial issues are we S-E? Oh my...🥱😴
Kind of hoping some better publisher scoops up the Life is Strange series, if only because of how progressively more eager to wring money out of people the series is and how obviously rushed and poorly put together the remasters are.
I’m still fully convinced Sony will pick them up next year.
Which I’m ok with, as long as they allow SE to continue to release smaller games and retro collections on Switch. I prefer my Switch over my PS5 for those types of SE games.
Judging how Octopath, Triangle and Live A Live have been successful, I wouldn’t be surprised if Nintendo increased their shares and grabbed a stake (or two). Square has become a pretty productive partner for Nintendo (not including the Eidos stuff).
@retroman64 sony censors the very rude game mechanics from the niche Japanese games, square enix games don't have those kinds of things so nothing would be getting censored.
@FX29 Final fantasy is already pretty much a playstation exclusive franchise and was back in the day as well, has been since the PlayStation 1
Also as mentioned in the article they only want to sell stakes in their western studios, so the likes of final fantasy, dragon quest and bravely default etc won't be effected
@UltimateOtaku91 it's the precedent that matters, I prefer Nintendo for not telling third parties what to do
Will they not learn? This often doesn't work. It's the payday loan of the business world.
@retroman64 sony aren't telling those third parties what to do, they still make the games they want to but remove the lude mechanics from the PlayStation version, omega labyrinth life is the perfect example, removed the body touching game from the ps4 version but kept it in the switch version.
Point is square enix don't have things like that in their games, So Sony buying them would bring no censorship
@retroman64 I’d hate that as well, but I’d rather have that than Tencent have any more control in the gaming sphere.
Given that Square Enix is probably the publisher I buy the most games from outside of Nintendo and Sony, I'd be very disappointed if they ended up being bought by someone who aims to make them a platform exclusive provider. Don't need more of that.
@locky-mavo Nintendo do not have enough cash resouces to buy Square Enix.
@Giancarlothomaz nintendo has the cash it is not in their nature to make such a huge purchase..
well if sony buys square does that mean the end to dragon quest and many other games for the switch?
@UltimateOtaku91 - they don't tell them what to do
Same thing, and their standards for lewd are very inconsistent judging by the gratuitous stuff that was allowed in TLOU2, but Silvero Trinity had bright lights censoring women who weren't even naked.
@somnambulance they're both trash to me
Think about these 3rd party publishers- EA,, Ubi, Sega, Warner, Activision, Bethesda…
…they’ve either had part or all of their business recently sold, or have been rumoured to be looking to sell.
Maybe the game making business isn’t as profitable as it once was?
The biggest connection between a lot of these companies planning to be sold off is they massively focused on live service after Fortnite became a gigantic success. Will this be Sony in a few years?
@retroman64 sony aren't forcing them, they can easily just not put the game onto playstation.
And I'm an anime fan and big jrpg fan myself so I know about different genres etc and playstation see ecchi as either innapropiate due to characters ages in the game, or they are asking these anime games to provide the games an age rating of 18 (for UK) or A (USA) and those companies don't want to.
And if I'm being honest games with ecchi scenes or body touching mechanics should have the highest age rating on games.
@Giancarlothomaz
SE isn’t worth all that much.
Sony or Nintendo could do it. But Nintendo doesn’t have a reason to. That’s not how they roll.
For Sony it would make perfect sense to pick up SE. Microsoft locked up the western RPG development market for the most part. And ultimately Sony and Microsoft compete.
Nintendo has found success with their niche. They own the handheld market; always have. The Switch hybrid concept was the final bolt in the structure, allowing them to consolidate their resources and development studios on one hardware set up. Nintendo doesn’t need to compete with Microsoft or Sony. They have the enormous IP and the Japanese market on lock down. They’ll always be successful for those two reasons alone.
@Grumblevolcano
That’s the fear, but Sony does have a ton of studios. Currently they have ten Live Service games in the pipeline, one of which has already released (Gran Turismo 7). But they also have 15 other games in the pipeline. Chances are those are the more traditional Sony 1st party flair.
Just depends. Sony has hopefully learned the important lesson to never put all the eggs in one basket. Live service gives great rewards if it goes viral. But realistically there hasn’t been that many viral live service multiplayer titles.
1. Fortnite
2. Apex
3. Warzone
4. Overwatch
That’s the big four. PubG found success for a while. But every other attempt has either ended disastrously or saw mediocre results.
By selling their Western studios, it makes Square much more of a prospect for Nintendo! (Yeah, right.)
Imagine if Squareenix merge? They could just tack another company name on the end of the two they already have. I'm sure. Squareenixbandainamco lmao!
@OrtadragoonX Sony didn't count GT7 as live service, they only counted MLB The Show 22 as part of that batch of 10 live service games. So we know 2 of the other 9 live service games are MLB The Show but we also know that some of the games Sony doesn't count as live service may be live service because they didn't count GT7.
If they just released the Final Fantasy pixel remasters onto consoles all their problems would be solved.
@UltimateOtaku91 they're forced to comply with their arbitrary standards if they put a game on their system, and there would be no choice if Sony owned the company which I don't want to happen with Square.
Square Enix is not profitable, so...difficult to any business buy it.
Damn. Don’t die or sellout my beloved Squeenix!
… Wun can only hope.
So let's recap (imo) some Square Enix Recent Poor Decisions:
I mean I could be wrong on some of these (and I'm certain there's more), and perhaps being a bit harsh so forgive and correct me if so, but this is what I can recall off-top smh. Seems like too many seemingly- what should be good news from Square- far too often comes with a caveat or grain of salt... whereas tbh they should be pretty straight-forward wins and hard to mess up lol. Get it together Squeenix smh!
... Wun can only hope.
@SuperPotato316
Not really. In recent years they've been re-releasing the older titles to multiple platforms.
Well, they already sold 70% of their franchises to Embracer might as well get rid of the rest. Yuji Naka may be a shmock but i believe him that Square doesnt care about the quality of their games at all.
Here's your chance Sony......
Nothing I'm interested in now they're selling tomb raider except sleeping dogs but I don't see them ever reviving that
Could end up being the Saudi group, for sure won't be Nintendo. If it's Sony say goodbye to any new ff on Nintendo systems.
@FX29 The last thing I want is for Sony to buy Square Enix or be part owner. It would be a loss to the gaming industry if FF, DQ end up being Sony exclusive.
Remember Sony will got Censorship on all games because oh they can't take skimpy body... lol That would be the death coffin for S-E obituary.
Hope to God Sony doesn't buy SE outright. I just want the Switch and its successor to continue to get games like Octopath, Triangle Strategy, Dragon Quest, DioField and Harvestella.
@retroman64 If it’s Sony putting stake in Square, Tencent putting stake in Square, Nexon putting stake in Square, or Square folding up, Sony is the best option of the four. At least Sony has largely understood Square’s vision and has been supportive of them for the entire time that they’ve shared the industry. I mean, Final Fantasy has been a Sony flagship since VII. Even if Sony puts some investment into Square, that doesn’t have to mean full ownership or anything of the like.
S-E's market value is 5.7B. Nintendo is as likely a home for S-E as Sony could be, with Sony's value being 135B and Nintendo's being 95B. I imagine MS isn't even a consideration since they're in the middle of the 70B acquisition of Activision Blizzard.
If SE is selling steaks, I'll take a rib eye, medium and please hold the Final Fantasy.
For breakfast, I'll take a Chocobo Egg's Benedict
@somnambulance At least Sony has largely understood Square’s vision and has been supportive of them for the entire time that they’ve shared the industry. I mean, Final Fantasy has been a Sony flagship since VII.
Pretty one sided story here...more like Forced partnership with Sony along with bully others from making it for other consoles is more like it.
@retroman64 Censorship problem seems to float from company to company. User base just needs to keep making a stink so they stop censoring and start utilizing the rating system as it was intended. Remember Nintendo use to have the same problem and not just during the NES/SNES eras.
Sony I'd rather buy them out in full, but if I had to choose who would have stakes in the company, Sony and Nintendo would be it. Strangely EA, to help publishing of titles. I would not be surprised if external groups will invest as well.
@SwitchForce That's a hot take. There was nothing forced about their partnership with sony over the last 25+ years. Nintendo didn't back Square when they said they needed CD technology on the N64, so they took their toys to the one company with the right hardware who was looking to help with publishing. Sony said FF7 and I believe 3 or 4 titles under their publishing deal. Wasn't long after that they were partnered with EA, Square EA and EA Square was fruitfull for a time. It was sony that helped them publish their films, they didn't need to go to sony and they werent bullied by Sony to do so. When Square needed funding for their projects, they entered publishing deals with sony. Square could have just as easily done it on their own, but they aren't without blame for their current position. Constantly making one bad decision after another, over burdening the Final Fantasy franchise to keep them afloat, instead of exploring their many IP and bringing Dragon Quest up to par. That isn't even getting into their many other poorly advised decisions, like Driving Emotion Type S, The Bouncer, Their exclusive releases on the Xbox 360 (no bullying there from sony), and the plathora of cheap cashins. If you want to talk about bullies, you need not look further than the Nintendo prior to 2002.
the only soured Square / Sony relationship was the one between Ken Kutaragi and Hironubo Sakaguchi. Two men who aren't even a part of the conversation anymore.
This gibson dude sounds like a stock manipulator
Maybe if they wouldn't have release KH in cloud form they could have made many more millions from Switch fans.
Also, I guess FF 1-6 Pixel are due for consoles next year... That will net them serious cash too! I'm hoping the delay is because they are adding GBA extra content (fingers crossed).
And since they've been doing a good job of going back into their vault lately I'll cut them some slack, but a release of Chrono Trigger seems obvious, but has not happen.
I bet Nintendo will pay some good money to put Super Mario RPG on NSO as well.
@NotSoCryptic more cryptic talk but believe what one wants but they didn't allow S-E to publish any FF series to Switch that tells you whom controlled whom in development. Rather then be open and getting others consoles on board it was play my game or no pay. And Sony Censorship because Adult men in Sony NA can't take it that is childish - I'll leave that up to the Adult buyers to decide that for themselves. And making a Cloud game thinking Switch owners would buy that cost them dearly as well.
@SuperPotato316
FF7 Remake is available on PC now, yes it was a timed exclusive but it's still available on a different platform. FF15 was multi platform, same with the 13 series. I doubt 16 or rebirth will remain PS5 exclusives for long.
@FX29 FF is pretty much PS anyway. However, DQ should always stay multiplat.
@NotSoCryptic @SwitchForce Definitely agree with NotSoCryptic here. Sony has supported Square to let them do what they wanted to do for generations. They’ve not forced them to do things in any particular way. The evidence shows that the two companies work well together and understand the type of gaming that is synergistic with their brands’ success.
@locky-mavo I would be in shock and awe if Nintendo bought SE.
@BloodNinja
At the very least, they should take Mario RPG and Xenogears off their hands.
@locky-mavo Agreed
I love when people think Sony has deep pockets like Microsoft to just go out and buy major publishers. Sony as a whole is barely holding on so they need to be much smarter with their purchases and since Square, as of late, has made or published some real clunkers they are a terrible company to even look into buying any part of.
@steventonysmith sony is a japanese company they have a leg up on microsoft for that reason.. and calling square enix a terrible company is totally false..
@johnedwin
Please tell me some quality games they've released in the past couple years?
Whether or not Sony thinks PC is a competitor doesn't matter, modern FF games are still available on a different platform besides PS.
If the entire FF series became Sony exclusive I say that's a huge loss for everyone who doesn't support PS. Imagine not being able to play FF6 on future Nintendo consoles? But anyways the main point I'm trying to say is that it's bad if Sony owns Square Enix. I was using FF as an example since it's their flagship title.
If Sony owns Square Enix or became part owner then a huge chunk of iconic IP's are no longer available.
Square and Enix games, respectively, we’re almost entirely Sony exclusive (handheld notwithstanding) from 1997 to 2003; it could happen again, only this time in a permanent manner.
I wouldn’t put it past Sony to make an offer soon.
I always suspected DQXII would be PS5 exclusive…
@SuperPotato316
Final Fantasy 7 Remake - Hurray I get to spend $60-70 per chunk that will come out years and systems apart. What a wonderful not dumb idea at all. Also it's only sold 5 million copies so about half of it's previous Final Fantasy game FF 15.
Triangle Strategy - Has sold 800,000 copies which again is probably why they are hurting financially.
Live A Live - congrats on finally translating and releasing a niche 30 yr old game. I bet it's overall sales numbers will be very low
Final Fantasy 14 anything is the only thing truly making them money. But you have to remember the original release of 14 was so bad they had to pull it, spend more development time and re-release it.
This is also the company who will spend a decade making the next Final Fantasy only for it to sell Ten Million copies which sounds like a lot but not for the time and money invested. Then they waste even more money by publishing gems like Babylon's Fall or Outriders. If Square does sell assets to another company or get bought out completely they will go under due to their lack on consistency and quality control.
Again Sony doesn't have enough spare cash to probably afford a company like Square just due to the sheer volume of expensive IPs they own. Also for those thinking Sony would have a better chance than Microsoft, the Xbox Series S is weirdly popular in Japan. Probably due to it's rampant availability and the fact it's small and compact and not a giant behemoth like the PS5
@Nameless_Shame
Sony's total assets is $223 billion but their equity is only a little over $50 billion. I doubt they would drop the required (presumably) $10+ billion to aquire Square. That's a lot of money for a studio who cranks out their only big games like Final Fantasy at a glacial pace
@SuperPotato316
So why waste 5.7 billion on a company that won't make that money back for them ever, it take decades to break even?
@SuperPotato316
I'm not going to because I know my answer, they won't buy Square because they don't have enough free cash to take that risk.
@SuperPotato316
Nope I'm using my brain and a basic level knowledge of business finance to make a solid statement. If they did but Square and wasted that much money I would be immediately worried about Sony's future
@somnambulance
That would impose a large amount of negativity from the Enix side of SE, namely with Dragon Quest being a staple on Nintendo consoles, especially throughout Japan. That franchise sells, and if they were to exclude it from the best-selling home console in Japan, that would be a big problem on their end.
@OrtadragoonX Dragon Quest is worth a lot in Japan... and keeping it away from Nintendo consoles imposes more issues than benefits.
@ModdedInkling Sony investment does not mean that games wouldn’t come to Nintendo consoles. MLB the Show, for instance, is developed by a Sony studio and has been brought to all consoles. How many Microsoft Studios make games that make it to the Switch? In some respects, the gaming industry has changed a bit from its previous state of forced exclusives. Sony wouldn’t want to give up on that Switch revenue because they understand there’s a place for that market now. The industry is certainly evolving and I feel that, in these times of high cost acquisitions, there are some concessions investors need to do to accomplish their investment that were not previous requirements.
@ModdedInkling
Which is why I think if Sony purchased SE they wouldn’t mess with most of the status quo.
Nintendo Handheld Platform + Dragon Quest equals big bucks. That’s a big chunk of change for Sony.
This isn’t the same Sony that existed back in the PS3 era, for better or worse. They wouldn’t make the series PS exclusive.
@steventonysmith for the switch bravely default 2 triangle strategy dragon quest 11
@OrtadragoonX
I'm afraid you're forgetting about Spider-Man. Sony had every reason to make Insomniac Spider-Man games release on other platforms (save for PC which is starting to blur lines). This is a franchise previously released on all platforms at a time when Sony still owned the property, during PS1, PS2, and PS3 eras.
Other Sony games aren't really out of that exclusivity either. MLB The Show only exists on other platforms because MLB asked Sony to do so, and other games have only hit PC rather than throwing in Xbox (natively ported to Xbox).
@somnambulance
MLB The Show only exists on other platforms because MLB requested Sony to do so. Otherwise, it would've been a selling point to casual players who wanted "overglorified Baseball merchandise" and had to buy a Sony console.
@ModdedInkling Not really, Sony wants it to be multiplat for extra revenue, it isn't just MLB. MLB is not the only game, did we forget they are also releasing games on PC?
@Switch_Pro
As stated before, PC is starting to blur the lines as a platform of its own. It still doesn't explain why games aren't brought over to other consoles.
@johnedwin you right, i don't expect Nintendo Nintendo making huge aquisition like Sony/Microsoft did.
@SwitchForce
"more cryptic talk but believe what one wants but they didn't allow S-E to publish any FF series to Switch "
Not a single lick of truth to that, out side of the original FF7. Which had its publication rights re-negotiated as part of the deal for FF7 Remake exclusivity. Which btw sony paid for.
If a Square Enix game doesn't release on Switch it's because one three reasons:
1) Nintendo didn't pony up the cash to pay for development. They didn't think it was worth while to negotiate the project.
2) Square didn't think there was a market on the Switch for that game. This isn't something that is a Switch problem, plenty of Square games do not make it to PS4/5 or Xbox. They don't see the value in doing the port as a result. how many years has Octopath Traveler been out and I still can't get that on PlayStation? Where is the Pixel Remasters? Why is Square's Second Biggest franchise still having a hell of a time getting Dragon Quest X on PlayStation and Xbox? Man I'd love to play Live A Live on my PlayStation instead of my Switch, when will that happen?
3) Most certainly not the least of the three, the damn game just wouldn't run on the platform. Why do you think switch go the pocket edition of FF15 and not the full game. It just wouldn't run on the system. hell it barely runs on the Steam Deck. I'm willing to bet FF7 R would have the same issue. Don't even get me started on Nier Automata, absolute lunacy trying to get that game going on Switch.
Nothing you say will change that. What you suggest is against the law in several regions. So good luck with all your tap dancing. Sony isnt a monster here, its just business, you need to realize that.
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