Square Enix shares have plunged nearly 30% since June. The commercial performance of Final Fantasy XVI and recent financial downturns have some market analysts worried about the company’s long-term prospects.
According Bloomberg, Square Enix has seen a huge decline in its share price in recent months. The stock started declining shortly after the launch of Final Fantasy XVI in June. And the latest drop happened in August when the Japanese company posted a 79% drop in operating profit.
As a result, Square Enix has long $2 billion of its value during this period, currently having a market cap of ¥654.5 billion ($4.4 billion). The stock went from its June peak of ¥7,540 per share to ¥5,342 per share.
Final Fantasy XVI and a nearly 80% profit drop sent Square Enix shares plummeting
Some experts believe that the reason behind the company’s financial failures lies in its production pipeline and approach to game development in general. Developer Michael Prefontaine told Bloomberg that Square Enix “has overstretched itself on too many titles without proper oversight.”
The Final Fantasy publisher seems to give its producers too much reign over the scope and direction of games. According to several employees, “there’s a shortage of proper documentation and team structure.” Contractors working with Square Enix also told the publication that this approach results in project goals shifting without warning.
Takashi Kiryu, the company’s new CEO, wants to focus only on big-budget titles that can generate profits and improve the publisher’s financials. However, one of the analysts quoted by Bloomberg noted that Square Enix’s development structure and QA could limit its long-term performance.
According to Kantan Games CEO Serkan Toto, the biggest problem is that the majority of Square Enix games have no chance of becoming big hits: “These titles get a 70% rating on Metacritic, are kind of OK and are just very forgettable.”
Although Final Fantasy XVI received positive reviews and sold 3 million units in its first week, it didn’t meet the high end of the company’s expectations. In addition, Square Enix has some big flops in its portfolio, such as Marvel’s Avengers and Forspoken. So it looks like the company will have to revise its producer-centric approach to game development if it wants to see positive growth in the future.