Square Enix Has Lost Their Minds

Originally Written on April 4, 2016

The people running Square Enix have officially lost their minds.  On Friday, they held the Uncovered: Final Fantasy XV event to reveal new information about the game, including the September 30 release date.  However, instead of revealing information about the game, they just revealed a bunch of ancillary projects that they are working on alongside it.  The main takeaway was that Square thinks Final Fantasy is the biggest thing in the world, and if it’s not then they desperately want it to be.  And I have to say, I kind of love that.  More developers should treat their franchises like they matter, and Square Enix did a great job of that on Friday.  But I also think this is a dangerous endeavor that could blow up in their faces.  And when I look at their recent financial reports, I see two opposite directions that this could go in.

But let’s start with the announcements themselves.  Putting aside things such as trailers, special editions, and a piece of artwork, there were five products announced at the event that are not Final Fantasy XV.  Brotherhood is an anime that will be releasing online for free up to the launch of the game.  Square teamed up with Audi to make a replica version of the car that appears in the game.  Justice Monsters Fire is a mobile game that will tie into Final Fantasy XV.  The Platinum Demo is a prequel story that was released for free.  And the big one, Kingslaive, is a CGI movie starring Lena Heady, Sean Bean, and Aaron Paul.  None of this matters or will greatly effect the final product, yet Square is spending time and money on these things to build excitement for the game.  I think that’s great, until we get to the financial part.

To start, Square Enix has a bad history with CG movies.  Final Fantasy: The Spirits Within was a notorious bomb, that almost lead to the downfall of Square.  Kingslaive is not on that scale and won’t be getting a theatrical release, but it still isn’t something that Square should want to invoke.  Also, Final Fantasy XV has been in development for a long time.  It was announced in 2006 as Final Fantasy Versus XIII.  Of course, they have not been actively developing the game since then, but even if we go off of the time it entered full production, that’s still five years.  The game suffered as a product of bloat, mismanagement, and ambition.  And what worries me is that they are doing it again.  They are putting way too much into this game.  It made me immediately wonder how many copies they expect it to sell, and we got an answer.  This answer has been retracted somewhat, but it was stated that Final Fantasy XV is expected to sell over 10 million units.

So what are the prospects of a Final Fantasy title selling 10 million units?  Not likely.  The most recent entry, the Final Fantasy XIII trilogy, has sold 11 million over three games.  Those games were poorly received though, and there was a huge drop off after the initial game sold 6 million.  But even if you go to the peak of the series, which is Final Fantasy VII, the game only sold 9.8 million units.  If XV sold 10 million units, it would be the best selling Final Fantasy to date.  I’m not saying it is impossible.  There is a lot of excitement for the brand right now with XV and VII-Remake in the works, and Square is clearly trying to build a lot of hype for this game.  So while it isn’t impossible to think that Final Fantasy XV will sell 10 million copies, I would peg it as highly unlikely.

But what would Final Fantasy XV failing to make a profit mean for Square Enix?  I took a look at their previous four financial reports to see how the company is doing.  Taking a look at what they refer to as “HD games”, there are some worrying and some encouraging trends here.  In 2012, Final Fantasy XIII-2 and Deus Ex: Human Revolution were both favorable for the company.  The same can be said for Tomb Raider: Definitive Edition, Final Fantasy X/X-2 HD, and Thief in 2014 as well as Dragon Quest Heroes and Final Fantasy Type-0 HD last year.  Throw in the fact that we know Bravely Default exceeded their expectations, and it would look like Square is having success with traditional games.  The problem is 2013.  In 2013, Square Enix announced that Hitman: Absolution, Tomb Raider, and Sleeping Dogs all failed to meet their expectations.  We won’t know about Rise of the Tomb Raider, Just Cause 3, and Hitman until May, but my expectations aren’t very high for those games sales either.  2013 is the only one of these years where Square failed to report a profit.  It is also the year in which the most “hardcore” focused games released.

The interesting thing to note is that Square never reported financials for Lightning Returns, which would have fallen in the 2013 window.  From what we do know, that game sold poorly.  But Square’s silence on it is in stark contrast to their disappointment with their Western titles.  So what would Final Fantasy XV’s failure mean?  Well, it could mean that Square will stop investing in their Western studios and IPs.  Sqaure Enix is a Japanese company–notice that the Eidos name doesn’t appear alongside the other two.  It would make sense that they would want to protect their Japanese franchises in order to save face, even if that means throwing their Western properties under the bus.  Keep in mind that Deus Ex: Mankind Divided is the only game that Square has announced that is coming from the West, whereas Star Ocean V, Kingdom Hearts 3, Final Fantasy VII-Remake, Dragon Quest XI, Nier: Automata and more are all announced Japanese titles.

But that is an incredibly cynical and not an entirely fair way to look at Square.  Instead of throwing everything behind Final Fantasy XV because they can blame everything on the West if it goes poorly, they might just be doing this because they can.  Square reported a net income of 9.8 billion Yen last year, which was up 3.3 billion from the year prior.  A main reason for this is their mobile division which brought in 44.2 billion in net sales, up 17 Billion from 2014.  Many view this as a reason for Square to focus entirely on mobile.  However, I like to remain more positive about this.  I view Square’s mobile games as a revenue stream that can be pumped into more ambitious products.  There are creative minds at Square that need to be satiated, and they seem to show no interest in following the path of Konami.  Square has stated that they remain committed to both the mobile and console markets.  I think Friday night was proof of this, in addition to the fact that they are funding projects such as a Nier sequel that nobody expected to see.

I think Final Fantasy XV could be a great game, and I am glad to see Square treating it like a big deal.  However, I do not think this will sell what they want it to.  If it doesn’t I have some worries about the direction Square could go, but overall I think their financial status is beneficial to them remaining a major force in the AAA games industry.  And even if they crash and burn, it will be a hell of a thing to watch.