Square says Japanese market no longer sufficient to sustain them

Derangel

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Its almost like they've realized the FFVII themed "Walking down straight paths" simulator remake and NFTs aren't what people really want.

FF7R seems to have sold pretty well and it's reignited excitement, worldwide, for FF7 related projects. Their smaller projects seem to do decently well also. The problem is that SE has never exactly been known for making the best business decisions. They've had to be bailed out multiple times due to their bad decisions and simply not understanding markets they were trying to get into. From the massive debacle of making an entire freaking movie studio in Hawaii of all places to their many, many, many, mistakes with Eidos, SE (and SquareSoft before it) has always struggled with anything outside of it's traditional wheelhouse.
 

Lakados

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With how much Sony is crying about MS buying ActiBlizz (and committing to keeping COD multiplatform) it would be hilariously hypocritical of them to purchase SE right now.
Which is why they will purchase the struggling SE so they can keep bringing their great games to market while hammering that Microsoft is evil for buying the big popular developers.
 

sk3tch

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I told you guys to buy Final Fantasy VIII Advent Dawn Extreme Retread Premium to support Square. Now look at what is happening...
 

vegeta535

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If they don't, microsoft will.
I doubt SE will even entertain a offer from a western company.
I told you guys to buy Final Fantasy VIII Advent Dawn Extreme Retread Premium to support Square. Now look at what is happening...
They don't deserve my support after the crap that was FF7r or just about anything they released in the past 10 years.
 

Armenius

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Which is why they will purchase the struggling SE so they can keep bringing their great games to market while hammering that Microsoft is evil for buying the big popular developers.
Don't know how you can say they're struggling when they have hit record revenues and profits this year. Perhaps Square Enix should look at trimming the fat instead of trying to expand outside its comfort zone if it's becoming hard to sustain the business in this economy.

https://www.macrotrends.net/stocks/charts/SQNXF/square-enix-holdings/financial-statements
 

Derangel

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If they don't, microsoft will.

I could see MS making an offer (I'd be surprised if they haven't already) but I don't really know if SE would sell to them. I could see Sony or perhaps merging with another larger Japanese company over MS. I don't really think MS would have any idea what to do with SE or how to capitalize on all of their IPs.

Don't know how you can say they're struggling when they have hit record revenues and profits this year. Perhaps Square Enix should look at trimming the fat instead of trying to expand outside its comfort zone if it's becoming hard to sustain the business in this economy.

https://www.macrotrends.net/stocks/charts/SQNXF/square-enix-holdings/financial-statements

This. Focus on the the things that work and people are excited about and less on half-assed projects like the new Valkyrie Profile game or all the failed attempts at copying everyone else's mobile games.
 

Lakados

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Don't know how you can say they're struggling when they have hit record revenues and profits this year. Perhaps Square Enix should look at trimming the fat instead of trying to expand outside its comfort zone if it's becoming hard to sustain the business in this economy.

https://www.macrotrends.net/stocks/charts/SQNXF/square-enix-holdings/financial-statements
Well, articles like the original sure make it "sound" like they are struggling, and lay the groundwork for an easier acquisition. As Sony can buy them to help "expand" them into other markets as like many other things SE is only huge in Japan.
 

jfreund

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gvx64

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Well it's not surprising for many reasons. Not the least of which is that calling Japan's fertility rate "sub-replacement" is the understatement of the century. Japan's absolute population is in decline let's not even think about what it's youth demographics look like right now (which of course is a key demo for companies like Square).

Will Sony try to buy square now?
I think that this is very likely. SE has been as about as close to Sony as a 3rd party developer can get since the Squaresoft days when Nintendo botched their relationship with them during the N64 era. I just don't see Microsoft being interested in a Japan-centric company like SE. The XBox has never been able to penetrate the Japanese market and I honestly think that Microsoft gave up trying after the XBox 360 barely cracked 1 million units sold. Honestly, I could see Nintendo buying SE before Microsoft does, which would be a major defeat and upset against Sony. I guarantee that hyper-protective Nintendo would not let SE release anything on non-Nintendo platforms which would absolutely route the Playstation. Sony better look seriously at buying SE given this kind of news, in my opinion. They are the most logical choice and the best fit. If they don't, somebody else probably will.
 

Verge

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Honestly, I could see Nintendo buying SE before Microsoft does
Oooooo, i didn't even think of them, and crap do they need it. My switch hasn't been powered on in 6 months, and probably won't be until the new zelda launches. They need a studio pretty bad. If square is in a dire financial situation though, it's gonna be a bidding war. Square could probably do alot of good at Nintendo. Either could pay cash for it but i don't follow foreign markets so well, so i'm not so sure how that works.
 

Verge

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I doubt SE will even entertain a offer from a western company.
Well i thought it was a public company, but i'm not entirely sure how buying foreign companies works. I know they have common shares that are traded, but not so sure you can takeover with board approval like in the US.
 
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You can't have all of the money on earth if you only concentrate on a single market.

It costs a lot of money to manufacture NFTs.
 

gvx64

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Oooooo, i didn't even think of them, and crap do they need it. My switch hasn't been powered on in 6 months, and probably won't be until the new zelda launches. They need a studio pretty bad. If square is in a dire financial situation though, it's gonna be a bidding war. Square could probably do alot of good at Nintendo. Either could pay cash for it but i don't follow foreign markets so well, so i'm not so sure how that works.
Nintendo fans will go nuts and if Nintendo is smart they will milk the nostalgia factor hardcore. I can imagine Switch 2 launching next year with Zelda Tears of the Kingdom (which would co-release on the original Switch) + FFVII remake + the next mainline Final Fantasy entry in late '23 as a Switch 2 exclusive. Between that and the Blizzard/Activision loss, though, I am pretty sure that the Playstation platform will be toast.
 

LukeTbk

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For the complete part,

Revamping our studio portfolio On May 2, 2022, we announced that we would be selling some of our overseas studios and IP to Sweden-based Embracer Group AB. The sale covered the three studios of Crystal Dynamics, Eidos-Montréal, and Square Enix Montréal, as well as related business assets and IP. The objective of the sale was to build stronger business foundations by revamping our portfolio of titles and studios, thereby enabling us to be selective and focused in leveraging our resources, as game development efforts become more sizable and sophisticated.

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. Furthermore, game development efforts are becoming more sizable and sophisticated as the result of technological advancements in the devices on which they are played, such as consoles or smart devices. The investment required to develop game titles is therefore an order of magnitude greater than in the past. In other words, the Japanese market is no longer sufficient for achieving a level of earnings that enables us to recoup our development investment and generate a profit, and we therefore need to approach our development efforts based on the assumption that we have to succeed in the global market.

Another change is how easily accessible information on games has become for our customers. We find ourselves in a world where social media spreads information instantaneously, enabling customers the world over to simultaneously obtain the same information on games through a variety of different devices and outlets. For our Group to better focus on developing titles for the global market in this changing environment, we need to concentrate our limited resources on the development of strong and robust titles. We need to enhance our presence in the global market by quickly establishing an organizational structure that enables us to consistently roll out high-quality content produced through selective and focused resource allocation, which requires the revamping of our title and studio portfolio.

Since our acquisition of Eidos in 2009, the three studios included in the recent sale made major tangible and intangible contributions to our Group as our core overseas studios. However, 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 in order to achieve further growth through the optimal allocation of our resources and the creation of a more robust product pipeline. We look forward to seeing Crystal Dynamics, Eidos-Montréal, and Square Enix Montréal further develop through their new partnership with Embracer Group AB.
 

jfreund

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For the complete part,

Revamping our studio portfolio On May 2, 2022, we announced that we would be selling some of our overseas studios and IP to Sweden-based Embracer Group AB. The sale covered the three studios of Crystal Dynamics, Eidos-Montréal, and Square Enix Montréal, as well as related business assets and IP. The objective of the sale was to build stronger business foundations by revamping our portfolio of titles and studios, thereby enabling us to be selective and focused in leveraging our resources, as game development efforts become more sizable and sophisticated.

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. Furthermore, game development efforts are becoming more sizable and sophisticated as the result of technological advancements in the devices on which they are played, such as consoles or smart devices. The investment required to develop game titles is therefore an order of magnitude greater than in the past. In other words, the Japanese market is no longer sufficient for achieving a level of earnings that enables us to recoup our development investment and generate a profit, and we therefore need to approach our development efforts based on the assumption that we have to succeed in the global market.

Another change is how easily accessible information on games has become for our customers. We find ourselves in a world where social media spreads information instantaneously, enabling customers the world over to simultaneously obtain the same information on games through a variety of different devices and outlets. For our Group to better focus on developing titles for the global market in this changing environment, we need to concentrate our limited resources on the development of strong and robust titles. We need to enhance our presence in the global market by quickly establishing an organizational structure that enables us to consistently roll out high-quality content produced through selective and focused resource allocation, which requires the revamping of our title and studio portfolio.

Since our acquisition of Eidos in 2009, the three studios included in the recent sale made major tangible and intangible contributions to our Group as our core overseas studios. However, 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 in order to achieve further growth through the optimal allocation of our resources and the creation of a more robust product pipeline. We look forward to seeing Crystal Dynamics, Eidos-Montréal, and Square Enix Montréal further develop through their new partnership with Embracer Group AB.
TLDR: We fucked up and now we have to rely on our Japanese developers for worldwide megahits.
 
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Derangel

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Oooooo, i didn't even think of them, and crap do they need it. My switch hasn't been powered on in 6 months, and probably won't be until the new zelda launches. They need a studio pretty bad. If square is in a dire financial situation though, it's gonna be a bidding war. Square could probably do alot of good at Nintendo. Either could pay cash for it but i don't follow foreign markets so well, so i'm not so sure how that works.

Nintendo really doesn't need it though. Your experience with the console is not how it is for all owners. The Switch and games continue to sell pretty well, especially considering it's age. While SE titles would certainly be a big get for Nintendo and it's platform, they're already selling almost every system they put on shelves.
 

Armenius

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Nintendo really doesn't need it though. Your experience with the console is not how it is for all owners. The Switch and games continue to sell pretty well, especially considering it's age. While SE titles would certainly be a big get for Nintendo and it's platform, they're already selling almost every system they put on shelves.
Not to mention Switch games absolutely dominate the sales charts every month, and that is without digital sales data.
 

Derangel

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Not to mention Switch games absolutely dominate the sales charts every month, and that is without digital sales data.

Yep. They had four first-party titles sell over a million copies in the second quarter of the year. The Switch itself will likely eclipse both the PS4 and Gameboy lineup in terms of unit sales by the 3rd quarter of next year, putting it as the 3rd best selling system of all time. It's absolutely crazy how well that thing sells and it's 100% why we haven't seen a Switch Pro or Switch 2 yet and probably won't until late next year or 2024.
 

Verge

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Nintendo really doesn't need it though. Your experience with the console is not how it is for all owners. The Switch and games continue to sell pretty well, especially considering it's age. While SE titles would certainly be a big get for Nintendo and it's platform, they're already selling almost every system they put on shelves.
Their revenue is basically 1/2 from where it was in the wii days.
 
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Lakados

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Yep. They had four first-party titles sell over a million copies in the second quarter of the year. The Switch itself will likely eclipse both the PS4 and Gameboy lineup in terms of unit sales by the 3rd quarter of next year, putting it as the 3rd best selling system of all time. It's absolutely crazy how well that thing sells and it's 100% why we haven't seen a Switch Pro or Switch 2 yet and probably won't until late next year or 2024.
That and Nintendo bought a huge surplus of the Silicon for the switches just before things went to hell. So they got them “cheap”, once that surplus has dwindled I’m sure they have the new console ready to go probably based on the NVidia TX2 platform as that is the replacement for the Tegra X1 platform.
 

Derangel

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Their revenue is basically 1/2 from where it was in the wii days.

You mean at a time when they had both the Wii and the DS, two systems that basically printed money for them? One of which is the second best selling platform of all time (just a million sales under the PS2) and the other that, prior to the PS4 and Switch, was in the top five.
 

Verge

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You mean at a time when they had both the Wii and the DS
What does it matter? The goal of a corporation is shareholder return. It's much worse than it used to be, they need to do something to grow the company aside from reminisce about the glory days like IBM.
 

hesho

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like legit.... besides chrono cross remake, i have no idea what game they have even released. I seem to remember chocobo racing was a mobile game on a console and babylon something was a total disaster. I used to be such a huge fan of squenix but i haven't cared about them in years.
 

Armenius

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Their revenue is basically 1/2 from where it was in the wii days.
Looks like revenue is about the same looking at their most recent financial report, but their net income has doubled since the Wii days.
 

gvx64

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You mean at a time when they had both the Wii and the DS, two systems that basically printed money for them? One of which is the second best selling platform of all time (just a million sales under the PS2) and the other that, prior to the PS4 and Switch, was in the top five.
I am certainly not denying that the Switch has been a good success for Nintendo, much bigger than expected for sure. It got a second wind in early 2020 when Animal Crossing basically coincided with the start of the lockdowns and ever since then the console has been selling close to or above 300k units per week (see VGChartz.com for sales estimates).

That said, the Switch's best days are behind it. The PS5 will likely overtake it either this year or early next year and from there it will be downhill for the Switch. We also have to remember that even during the dark Wii U days when Iwata took a 50% pay-cut and Nintendo sold off the Mariners, the total sales between the Wii U and 3DS were 75M + 13M =~ 90M. So yes, the Switch is absolutely doing better for Nintendo than its previous generation of console + handheld but 120-140M Switch sales for Nintendo is nowhere near the days of the Wii + DS (250M combined sales) and Nintendo is probably not making killer profits like in those days either.

What more, Nintendo now has to figure out how to re-catch lightning in a bottle with the Switch 2. Unlike the Wii U days, they no longer have a handheld line to catch their fall if they screw-up the launch. Hopefully, Nintendo is wise enough to know that their track record with home consoles is inconsistent and that historically they have difficulty repeating previous successes to the same degree. Nintendo has always been a bit out of touch with the real-world, sometimes it puts them on the cutting edge of cool and they sell gangbusters but equally as much they end up with awkward failed platforms that either need to be saved with desperate price cuts (eg. the 3DS) or simply can't be saved and sink badly (Gamecube, Wii U, and N64 to a lesser degree). I think that they should do everything they can to minimize the risk of a botched launch.

I think that a SE acquisition could be a smart move by Nintendo especially if Sony turns down the opportunity and Nintendo can make the purchase at a bargain. Nintendo has always struggled with 3rd party support. 3rd parties (especially western 3rd parties) generally come only when Nintendo consoles are super popular and the install base is too big to ignore but if the console is a dud then Nintendo is basically on their own. SE has been no exception here. The Switch is the first non-handheld Nintendo console that has seen any kind of meaningful support from SE in decades but even here it is mostly half-hearted efforts. For example, the Switch gets the 1997 version of FFVII while the PS4 gets the remake. Also, the Switch gets the "pocket editions" of the mainline FF games when I am sure that the hardware could do way better than this even if the Switch's hardware isn't quite at the level of PS4/XOne. I think that if Nintendo could flip the tables with Switch 2 and have it be the console that gets the next mainline FF game first (if not have it be an exclusive) it would definitely be a killer app for the company. That said, I do think it is unlikely that Nintendo will do something like this. Unfortunately, they tend to be reactive in their business decisions and stick with lazy releases and remasters until they are already in a bunch of trouble at which point they finally bring their A game.
 

Flogger23m

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The investment required to develop game titles is therefore an order of magnitude greater than in the past. In other words, the Japanese market is no longer sufficient for achieving a level of earnings that enables us to recoup our development investment and generate a profit, and we therefore need to approach our development efforts based on the assumption that we have to succeed in the global market.

You'd think they would have understood this when Sony and Microsoft realized that it would be hard to sustain studios by selling on a single platform. Different situation but similar problem. A single platform or region isn't enough to cut it in many cases.

So yes, the Switch is absolutely doing better for Nintendo than its previous generation of console + handheld but 120-140M Switch sales for Nintendo is nowhere near the days of the Wii + DS (250M combined sales) and Nintendo is probably not making killer profits like in those days either.

They'll never get those numbers back as that was two consoles. The people that bought both a Wii and DS are buying a single Switch. There will be a Switch 2 eventually but the console is just over 5 years old. I don't know why people have been expecting a successor to the Switch every year since 2019. The console only released in March 2017. It will probably come 2024.
 

gvx64

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They'll never get those numbers back as that was two consoles. The people that bought both a Wii and DS are buying a single Switch. There will be a Switch 2 eventually but the console is just over 5 years old. I don't know why people have been expecting a successor to the Switch every year since 2019. The console only released in March 2017. It will probably come 2024.
That's a fair point. Switch is still selling north of 250k/week and I suspect it can still be selling 150k/week this time next year which is still decent and sustainable for Nintendo. I wouldn't be surprised if Switch 2 is currently being planned for a 2024 release like you are saying. That said, I just hope that Nintendo is making plans now for the success of their next console and not sitting on their laurels like they were at the end of the Wii era when they thought that the Wii U would just make itself successful and that developers would figure out how to take advantage of its gimmick when they, themselves, didn't know.
 

Armenius

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I am certainly not denying that the Switch has been a good success for Nintendo, much bigger than expected for sure. It got a second wind in early 2020 when Animal Crossing basically coincided with the start of the lockdowns and ever since then the console has been selling close to or above 300k units per week (see VGChartz.com for sales estimates).

That said, the Switch's best days are behind it. The PS5 will likely overtake it either this year or early next year and from there it will be downhill for the Switch. We also have to remember that even during the dark Wii U days when Iwata took a 50% pay-cut and Nintendo sold off the Mariners, the total sales between the Wii U and 3DS were 75M + 13M =~ 90M. So yes, the Switch is absolutely doing better for Nintendo than its previous generation of console + handheld but 120-140M Switch sales for Nintendo is nowhere near the days of the Wii + DS (250M combined sales) and Nintendo is probably not making killer profits like in those days either.

What more, Nintendo now has to figure out how to re-catch lightning in a bottle with the Switch 2. Unlike the Wii U days, they no longer have a handheld line to catch their fall if they screw-up the launch. Hopefully, Nintendo is wise enough to know that their track record with home consoles is inconsistent and that historically they have difficulty repeating previous successes to the same degree. Nintendo has always been a bit out of touch with the real-world, sometimes it puts them on the cutting edge of cool and they sell gangbusters but equally as much they end up with awkward failed platforms that either need to be saved with desperate price cuts (eg. the 3DS) or simply can't be saved and sink badly (Gamecube, Wii U, and N64 to a lesser degree). I think that they should do everything they can to minimize the risk of a botched launch.

I think that a SE acquisition could be a smart move by Nintendo especially if Sony turns down the opportunity and Nintendo can make the purchase at a bargain. Nintendo has always struggled with 3rd party support. 3rd parties (especially western 3rd parties) generally come only when Nintendo consoles are super popular and the install base is too big to ignore but if the console is a dud then Nintendo is basically on their own. SE has been no exception here. The Switch is the first non-handheld Nintendo console that has seen any kind of meaningful support from SE in decades but even here it is mostly half-hearted efforts. For example, the Switch gets the 1997 version of FFVII while the PS4 gets the remake. Also, the Switch gets the "pocket editions" of the mainline FF games when I am sure that the hardware could do way better than this even if the Switch's hardware isn't quite at the level of PS4/XOne. I think that if Nintendo could flip the tables with Switch 2 and have it be the console that gets the next mainline FF game first (if not have it be an exclusive) it would definitely be a killer app for the company. That said, I do think it is unlikely that Nintendo will do something like this. Unfortunately, they tend to be reactive in their business decisions and stick with lazy releases and remasters until they are already in a bunch of trouble at which point they finally bring their A game.
The only market the Switch is losing to the PS5 is the UK, and that only started happening recently. With only two months left in the year, there is no way the PS5 outsells the Switch in 2022. The Switch has nearly sold as much as the Series X|S and PS5 combined so far this year.

1667422566305.png
 
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gvx64

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The only market the Switch is losing to the PS5 is the UK, and that only started happening recently. With only two months left in the year, there is no way the PS5 outsells the Switch in 2022. The Switch has nearly sold as much as the Series X|S and PS5 combined so far this year.
Edit: I deleted what I previously wrote here because I looked into it further and I made some questionable assumptions.

You're right, I do think we need to wait a bit longer before jumping to conclusions about the fall-off regarding Switch sales. It's weekly sales are slumping right now on VGChartz/com and I thought that this was evidence of the PS5 overtaking it, but something similar did happen last year and Switch sales spiked back up again for Christmas and stayed elevated for quite a while. I think it might be premature for me to say that its sales are in end-of-life decline right now. Thanks for the correction.
 
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