Square Enix president bemoans weak Final Fantasy sales and says his restructure is existential: 'Our winning formula is no longer effective'

The relatively new Square Enix president Takashi Kiryu has been making some big decisions in reviewing the company's development process "from scratch". The reasoning behind such moves is now becoming clearer thanks to Square Enix's financial results, with the company warning investors earlier this month they could expect to see heavy losses, alongside which it announced the cancellation of various projects with a sunk development cost of around $140 million, and layoffs across Europe and the US.

Square Enix says it expects operating income of ¥40 billion in this financial year, against an expectation of ¥57 billion. Its sales and dividend outlook were also down. Since the announcement of these results and the ongoing restructuring, Square Enix's shares have suffered badly, with Bloomberg reporting that the fall of 16% is "their biggest decline in 13 years" (and bear in mind, the Japanese stock market has a daily limit on how far a stock can fall).

Kiryu told shareholders and analysts that the company had failed to meet its expectations because of low sales of Final Fantasy VII Rebirth, Final Fantasy XVI and Foamstars. Notably these games are all PlayStation 5 exclusives—the last estimate Square Enix gave for FF16 placed it at three million sales, with no further update here beyond Kiryu saying initial sales were good before tailing off.

Foamstars also fell short of expectations, though I'm not sure why Square Enix ever thought a B-tier Splatoon would set the world alight. Reading between the lines, however, what has really set the cat among the pigeons at Square Enix HQ is FF7 Rebirth. The second instalment of a trilogy remaking perhaps the company's most beloved RPG, Kiryu said only that sales were short of expectations and their internal targets.

What he didn't share were any sales numbers whatsoever. This game's been out for three months, it's the type of game that depends on that launch period for most of its sales, it's a major entry in the company's flagship series… Kiryu claimed sales weren't especially bad, but the absence of a sales figure says a lot.

The most relevant aspect of Square Enix's brave new world for PC gamers is that it has had enough of console exclusives (or is certainly talking like that—never underestimate what a big cheque can do). Kiryu is re-focusing the publisher on big-budget games, with the emphasis on quality, and more importantly wants them available on as many platforms as possible. The president reckons that over time FF16 will achieve what Square Enix expects, though with Rebirth he's not quite yet ready to say the obvious (it is definitely coming to PC).

Thing is, this all sounds… well, like music to my ears. I used to love Square Enix games but I've found their output recently pretty underwhelming, and the style the mainline Final Fantasy games have pursued seems to have left behind some of the series' soul with it. A new approach there, perhaps, plus everything Square Enix makes coming to PC? Fantastic. This re-shaping of priorities seems to make some sense.

But analysts are not so easily pleased, and in fact are almost comically brutal about their one and only concern. Here's Toyo Securities analyst Hideki Yasuda via Bloomberg: "It may be great that the company’s overhauled its game-making pipelines and is rebooting the company, but what do they have to sell this year and next?"

There's always Dragon Quest 12 I suppose. That aside it's stating the obvious to say that we won't see the fruits of Kiryu's approach for many years to come and, regardless of how bold the president intends on being, studios the size of Square Enix tend to turn like oil tankers. But Kiryu clearly feels things must change at the venerable Japanese publisher, and offers a stark reason why: "Our winning formula is no longer effective."