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The Decline Of Square Enix Since 2003

The Decline Of Square Enix Since 2003

Written by Darryl — 14 Feb 2009

Before 2003, Square Enix didn't literally exist. Instead, two companies called Square and Enix did, both producing competing RPGS; Square with their famed Final Fantasy franchise, and Enix with their insanely popular Dragon Quest franchise. However, when Square came into financial difficulties due to the ill-fated Final Fantasy: The Spirits Within movie, the two merged and formed Square Enix.

The president who took Square down its slippery slope (Tomoyuki Takechi) left the company, and Yoichi Wada was promoted to be the new president of Square, and then Square Enix. Since then, many people have become more and more disillusioned about Square Enix's conduct and the games it produces.

The games, first and foremost are the most important product for the company. It's how they make their revenue and also showcase their talents as developers. However, despite releasing more games year-on-year since 2003, their total yearly sales haven't actually increased by much. For example, in 2003 Square Enix published 5 titles and sold approx 7.5m units, but in 2008 they published 23 titles and only managed to sell 8.03m units.

As you can see from the graph, over time, the average amount of units that Square Enix sells per game decreases. You could say that this is obviously going to be the case, as they're releasing more titles. So the question is, why do they need to? If you look at recent releases, most of it's just shovelware that the majority of people aren't going to buy, like DS Bookkeeping Level 3. Plus, there are the remakes and ports, which are a desperate attempt to try and bring in some extra revenue. Wouldn't it be better if they spent the money on extra resources for new IPs which will actually inspire people? The Last Remnant has so far sold approx 500,000 units, which for a game that has a metacritic average review score or 65 percent isn't half bad. If Square Enix had actually invested more into the game and made it better, would it have sold more? More than likely. Kingdom Hearts is a good example of a new franchise which has done exceptionally well.

This is further shown when looking at how much games sell on average per console (below). Since 2003, the Nintendo DS has actually been Square Enix's most supported console, with 29 games published. However, the biggest selling DS game is a remake of Final Fantasy III. Compare this to the Playstation 2, where games sold on average almost double and it's clear to see that if Square Enix actually supported the DS and stopped releasing so-called 'cheap wins' they might actually be able to gain some sales.

Surely it doesn't take a rocket scientist to realise that if they released less titles a year, but made these titles a lot better, they would probably a) sell more units and b) reduce their development costs. Sure, it probably doesn't cost much to develop Arkanoid on the DS, but when the game struggles to sell 10,000 units, that's clearly not cost effective. If the budget had been spent somewhere else, they could have recouped that and probably more on one of their bigger titles i.e. marketing The Last Remnant better, or making sure the game actually worked properly.

It's been widely reported that 2008 was an awful year for Square Enix in terms of revenue, and this has to be down to how much they are spending on releasing titles. While the first few years of Square Enix were good, since 2006 it's been a steady decline (see below graph), and 2009's fiscal projects are the worst since the company formed. Dragon Quest IX was supposed to factor into this year's projections, but even if that was released and sold as well as Square Enix expected, it would still have only meant the company would have equalled the results of 2008 at best. Bearing in mind that this total is actually lower than when the company first formed, it's not exactly something to be proud of. The fact they had to slash those projections by 42% is even worse, and it suggests they had all their eggs in one basket.

The fiscal year of 2010 should see things pick up slightly, with Dragon Quest IX on the Nintendo DS and Final Fantasy XIII maybe arriving. However, it's whether Square Enix can sustain it beyond 2009 that's the important point. Wada was quoted after the release of The World Ends With You, saying that Square Enix will invest less in the development of new IPs and more into the development of name brand titles (i.e. Final Fantasy / Dragon Quest / Kingdom Hearts spinoffs) and this is certainly a dangerous game to play. Innovation is the lifeblood of any company and writing that off narrows the future prospects for the company.

To compound all of this, Square Enix have also been dogged with massive amounts of negative press in the last 12 months, most of which has been stemming around their policies and delays. While I don't think anyone begrudges them for wanting to release games on the Xbox 360, the way it was handled was very poor. Telling gamers for some time that it would be a Playstation 3 exclusive, then suddenly saying otherwise as it was always going to be the case wasn't well received, especially considering the majority of their fans were of the Sony breed. Since then, they have also very publicly supported Microsoft at every opportunity when there is no need to do so.

While times haven't been great for Square Enix since its formation in 2003, things could get even rockier in the future. Whether it's Yoichi Wada's fault remains to be seen, but he is the person who runs the company, and while things were rosy to start off with, since 2006, things have been going from bad to worse. Maybe it's time for a change at the helm?

Darryl was playing Final Fantasy before he was even born - quite a feat! Often very opinionated on the Final Fantasy franchise, you will often find him musing about small details. Feel free to follow him on Twitter.