In a recent financial results briefing call, Square Enix President Takashi Kiryu revealed that the Japanese game development company is undergoing major structural changes. Read on to learn of the changes and what spurred them.
Square Enix "Undergoing a Fundamental Review" of its Development System
Plans to Outsource Less and Develop More In-House
As reported by Bloomberg.jp yesterday, Square Enix President Takashi Kiryu revealed in a financial results briefing for analysts last February 5, 2024, that they are currently reviewing its development system "with the aim to improve the quality of its works."
One such plan is to cut back on outsourcing development and instead focus on making games in-house to ensure better game quality and profit margins. This is in line with what Kiryu mentioned in the previous financial results briefing last November 2023, wherein he stated "I want to increase our development proficiency by strengthening our internal development capabilities so that we are able to achieve greater diversity in our title portfolio. I would also not rule out inorganic means as an option for strengthening our internal development capabilities."
The Japanese gaming company is currently in the process of its structural reform and will be announcing the specifics by spring at the soonest. Said new structure is reported to become live starting in April and will feature a new "checking mechanism that will make decisions about the quality of the work at an earlier stage of the game development process."
What Brought Forth the Changes?
In the same financial result briefing meeting, Kiryu observed that the digitization and advancement of technology in the gaming industry have made downloaded digital sales slowly eclipse physical sales. Moreover, new business models such as subscriptions, in-game microtransactions, and even free-to-play games have paved the way for more diversity to earn revenue besides the traditional one-purchase sales.
He states that from this continued growth of the gaming market, new releases, as a result, "tend to be met with either marked success or marked failure as players throng to a handful of major titles." In an industry saturated with games across multiple platforms, to catch and retain customer retention, companies must provide "richer gaming experiences" in order to achieve "greater diversity in game design and business models." Alongside that, more Asian competitors have been making a name for themselves in the Japanese market, and it has brought forth tougher competition in terms of consumers.
As such, Kiryu plans to have Square Enix evolve alongside the changing times by making use of the company’s strongest properties and resources within its new upcoming structure.
"Given the intense competition in both the consumer and smart device game markets, it will be important for the [Square Enix] Group not only to leverage existing intellectual properties but also to endeavor to create new intellectual properties and to recruit development resources if it is to continue to produce hits. By developing content in keeping with these environmental changes and diversifying its earnings opportunities, the [Square Enix] Group is endeavoring to establish a robust earnings base."
Bloomberg.jp | Square Enix to drastically reform game development system - President Kiryu
Square Enix Consolidated Financial Results Feb 5, 2024
