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Square Enix Holdings Co., Ltd.[b] is a Japanese multinational holding company, video game publisher and entertainment conglomerate. It releases role-playing game franchises, such as Final Fantasy, Dragon Quest, and Kingdom Hearts, among numerous others. Outside of video game publishing and development, it is also in the business of merchandise, arcade facilities, and manga publication under its Gangan Comics brand.

Key Information

The original Square Enix Co., Ltd. was formed in April 2003 from a merger between Square and Enix, with the latter as the surviving company. Each share of Square's common stock was exchanged for 0.85 shares of Enix's common stock. At the time, 80% of Square Enix staff were made up of former Square employees. As part of the merger, former Square president Yoichi Wada was appointed the president of the new corporation, while former Enix president Keiji Honda was named vice president. Yasuhiro Fukushima, the largest shareholder of the combined corporation and founder of Enix, became chairman. In October 2008, Square Enix conducted a company split between its corporate business and video game operations, reorganizing itself as the holding company Square Enix Holdings Co., Ltd., while its internally domestic video game operations were formed under the subsidiary Square Enix Co., Ltd. The group operates American, Chinese and European branches, based in Los Angeles, Beijing, Paris, Hamburg, and London respectively.

Several of Square Enix's franchises have sold over 10 million copies worldwide after 2020, with Final Fantasy selling 173 million, Dragon Quest selling 85 million, and Kingdom Hearts shipping 36 million.[6][7] In 2005, Square Enix acquired arcade corporation Taito. In 2009, Square Enix acquired Eidos plc, the parent company of British game publisher Eidos Interactive, which was then absorbed into its European branch. Square Enix is headquartered at the Shinjuku Eastside Square Building in Shinjuku, Tokyo, along with a second office at Osaka. It has over 5,000 employees worldwide through its base operations and subsidiaries.

Corporate history

[edit]

Origins and pre-merger (1975–2003)

[edit]

Enix (1975–2003)

[edit]
Main article: Enix § History

Enix was founded on September 22, 1975, as Eidansha Boshu Service Center by Japanese architect-turned-entrepreneur Yasuhiro Fukushima.[8][9] Enix focused on publishing games, often by companies who exclusively partnered with the company. In the 1980s, in a partnership with developers Chunsoft, the company began publishing the Dragon Quest series of console games.

Key members of the developer's staff consisted of director Koichi Nakamura, writer Yuji Horii, artist Akira Toriyama, and composer Koichi Sugiyama, among others.[10] The first game, Dragon Warrior, in the Famicom-based RPG series, was released in 1986 and would eventually sell 1.5 million copies in Japan, establishing Dragon Quest as the company's most profitable franchise.[11][12] Despite the announcement that Enix's long-time competitor Square would develop exclusively for PlayStation, Enix announced in January 1997 that it would release games for both Nintendo and Sony consoles.[13] This caused a significant rise in stock for both Enix and Sony.[14] By November 1999, Enix was listed in the Tokyo Stock Exchange's first section, indicating it as a "large company".[8][15]

Square (1983–2003)

[edit]
Main article: Square (video game company) § History

Square was started in October 1983 by Masafumi Miyamoto as a computer game software division of Den-Yu-Sha, a power line construction company owned by his father. While at the time, game development was usually conducted by only one programmer, Miyamoto believed that it would be more efficient to have graphic designers, programmers and professional story writers working together.[10]

In September 1986, the division was spun off into an independent company led by Miyamoto, officially named Square Co., Ltd.[16] After releasing several unsuccessful games for the Famicom, Square relocated to Ueno, Tokyo in 1987 and developed a role-playing video game titled Final Fantasy, which was inspired by Enix's success in the genre with the 1986 Dragon Quest.[1] Final Fantasy was a success with over 400,000 copies sold, and it became Square's leading franchise, spawning dozens of games in a series that continues to the present.[10]

Buoyed by the success of their Final Fantasy franchise, Square developed notable games and franchises such as Chrono, Mana, Kingdom Hearts (in collaboration with The Walt Disney Company), and Super Mario RPG (under the guidance of Super Mario creator Shigeru Miyamoto).[1] By late 1994 they had developed a reputation as a producer of high-quality role-playing video games.[17] Square was one of the many companies that had planned to develop and publish their games for the Nintendo 64, but with the cheaper costs associated with developing games on CD-based consoles such as the Sega Saturn and the Sony PlayStation, Square decided to develop titles for the latter system.[18] Final Fantasy VII was one of these games, and it sold 9.8 million copies, making it the second-best-selling game for the PlayStation.[1]

Merger (2003)

[edit]

A merger between Square and Enix was considered since at least 2000; the financial failure in 2001 of Square's first movie, Final Fantasy: The Spirits Within, made Enix reluctant to proceed while Square was losing money.[19][20] With the company facing its second year of financial losses, Square approached Sony for a capital injection, and on October 8, 2001, Sony purchased an 18.6% stake in Square.[21] Following the success of both Final Fantasy X and Kingdom Hearts, the company's finances stabilized, and it recorded the highest operating margin in its history in the fiscal year 2002.[22][23] It was announced on November 25, 2002, that Square and Enix's previous plans to merge were to officially proceed, intending to decrease development costs and to compete with foreign developers.[24] As described by Square's president and CEO Yoichi Wada: "Square has also fully recovered, meaning this merger is occurring at a time when both companies are at their height."[25]

Some shareholders expressed concerns about the merger, notably Miyamoto (the founder and largest shareholder of Square), who would find himself holding a significantly smaller percentage of the combined companies.[26] Other criticism came from Takashi Oya of Deutsche Securities, who expressed doubts about the benefits of such a merger: "Enix outsources game development and has few in-house creators, while Square does everything by itself. The combination of the two provides no negative factors but would bring little in the way of operational synergies."[27] Miyamoto's concerns were eventually resolved by altering the exchange ratio of the merger so that each Square share would be exchanged for 0.85 Enix shares rather than 0.81 shares, and the merger was greenlit.[28][29] The merger was set for April 1, 2003, on which date the newly merged entity Square Enix came into being.[1][30] At the time of the merger, 80% of Square Enix staff were made up of former Square employees.[31] As part of the merger, former Square president Yoichi Wada was appointed the president of the new corporation, while former Enix president Keiji Honda became its vice president.[32] The founder of Enix and the largest shareholder of the newly combined corporation, Yasuhiro Fukushima, was made its honorary chairman.[33]

As a result of the merger, Enix was the surviving company and Square Co., Ltd. was dissolved.[3][2] In July of that year, the Square Enix headquarters were moved to Yoyogi, Shibuya, Tokyo, to help combine the two companies.[16]

Post-merger and acquisitions (2003–2013)

[edit]

To strengthen its wireless market, Square Enix acquired mobile application developer UIEvolution in March 2004, which was sold in December 2007, and the company instead founded its own Square Enix MobileStudio in January 2008 to focus on mobile products.[34][35] In January 2005, Square Enix founded Square Enix China, expanding their interests in the People's Republic of China.[16]

In September 2005, Square Enix bought the gaming developer and publisher Taito, renowned for their arcade hits such as Space Invaders and the Bubble Bobble series; Taito's home and portable console games divisions were merged into Square Enix itself by March 2010.[36] In August 2008, Square Enix made plans for a similar expansion by way of a friendly takeover of video game developer Tecmo by purchasing shares at a 30 percent premium, but Tecmo rejected the proposed takeover.[37][38] Tecmo would later merge with Koei in April 2009 to form Koei Tecmo. In April 2007, Square Enix Ltd. CEO John Yamamoto also became CEO of Square Enix, Inc.[39] In 2008–2009, Square Enix was reportedly working with Grin on a Final Fantasy spin-off codenamed Fortress.[40] The project was allegedly canceled by Square Enix after introducing seemingly impossible milestones and without payments made, resulting in Grin declaring bankruptcy and its co-founders blaming Square Enix for being "betrayed".[41] On January 8, 2009, Square Enix signed an agreement with Ubisoft where the former would work to assist the latter in distributing their video games in Japan.[42]

In February 2009, Square Enix announced a takeover deal for Eidos (formerly SCi Entertainment), the holding company for Eidos Interactive. The UK-based publisher's assets include Tomb Raider, Hitman, Deus Ex, Thief, and Legacy of Kain franchises, along with subsidiary development studios Crystal Dynamics, Eidos-Montréal and IO Interactive that developed the games.[43] The acquisition of Eidos was completed in April 2009, and in November it was merged with Square Enix's European publishing organization, business unit Square Enix Europe.[44][45] Eidos' US operations were merged with Square Enix Incorporated.[46] In April 2010, a new Japanese label for Western games bearing CERO restrictions called Square Enix Extreme Edges was announced.[47] In July 2010, Mike Fischer was appointed CEO of Square Enix, Inc.[48][49] Square Enix founded the mobile development studio Hippos Lab in March 2011[50] and Square Enix Montréal in 2012.[51] In June 2011, Stainless Games had purchased the rights to Carmageddon from Square Enix.[52] In July 2011, it was reported that Square Enix closed their Los Angeles Studio.[53] In January 2012, Square Enix North American office could pursue smaller niche, mobile and social media games due to its existing revenue streams.[54] In October 2012, Square Enix was perceived as a "force in mobile" games by Kotaku. The price of Final Fantasy Dimensions and Demons' Score, $30 and $44 respectively, was criticized.[55]

Restructuring (2013)

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On March 26, 2013, citing sluggish sales of major Western games, Square Enix announced major restructuring, expected loss of ¥10 billion and resignation of President Yoichi Wada, whom Yosuke Matsuda replaced.[56][57] Phil Rogers was elected as a new Director, among others.[56][58] With the restructuring, Square Enix of America CEO Mike Fischer left the company in May, with former Square Enix Europe CEO Phil Rogers becoming CEO of Americas and Europe.[59][60] Further executive changes at Square Enix Western studios were mentioned in a statement.[61] Square Enix Europe was hit with layoffs[62] and Life President Ian Livingstone departed from the company in September 2013.[63][64]

It said with the fiscal year report in March 2013, sales of Tomb Raider (2013) and Hitman: Absolution were weak, despite critical acclaim. The North American sales force was said to be ineffective and price pressure was intense.[65] Matsuda noted the long development time of their important games and said they need to shift to a business model with frequent customer interactions, noting Kickstarter as an example.[66]

Post-restructuring and RPG development (2013–2021)

[edit]

In March 2013, Square Enix India opened in Mumbai; however the office was closed in April 2014 and reopened five years later.[67] As well as Square Enix Latin America in Mexico,[68] which was closed in 2015.[69] A mobile studio called Smileworks was founded in Indonesia in June 2013; however it was closed in January 2015.[70] In 2014, Square Enix Collective launched, an indie developer service provider headed by Phil Elliot.[71] Also in 2014, Square Enix signed a strategic alliance and cooperation with Japanese and French video game companies, Bandai Namco Entertainment and Ubisoft; it has served as the Japanese publisher of video games and crossover productions since 2009.[citation needed]

In March 2014, following the success of Bravely Default, Square Enix said it will "go back to their roots" and focus on creating content that will appeal to their core audience.[72] Karl Stewart, vice president of strategic marketing at Square Enix for North America and Europe, left the company that month.[73] In 2015, Square created a new studio known as Tokyo RPG Factory to develop what was then dubbed Project Setsuna.[74][75] Around 2015, Square Enix's Western divisions began "officially working across LA and London".[76]

In January 2017, Norwegian studio Artplant purchased former Eidos franchise Project I.G.I.[77] On February 21, 2017, the formation of a new studio Studio Istolia was announced. The studio, headed by Hideo Baba, would be working on the new RPG Project Prelude Rune.[78] In November 2017, IO Interactive conducted a management buyout from Square Enix and the Hitman IP was transferred to the studio.[79] In September 2018, COO Mike Sherlock died, with Square Enix's executive team assuming his immediate responsibilities.[80] In 2018, Square Enix branded their third party publishing division Square Enix External Studios, which is headed by Jon Brooke and Lee Singleton.[81][82] John Heinecke was appointed as CMO for Americas and Europe in October 2018.[83]

Baba departed the studio in early 2019, and shortly after this, Studio Istolia was closed, and Project Prelude Rune cancelled following an assessment of the project, with its staff being reassigned to different projects within the company.[84] In 2019, Square Enix opened an Indian office again, now in Bangalore,[85] which expanded into publishing mobile games for the Indian market in 2021.[86] In June 2020, Square Enix donated $2.4 million to charities around their Western studios and offices for the Black Lives Matter cause and COVID-19, which were partially raised from sales of its discounted Square Enix Eidos Anthology bundle.[87][88] In March 2021, Forever Entertainment, a Polish studio, was reported to be working to bring several of Square Enix's properties to modern systems.[89] A new mobile studio called Square Enix London Mobile, working on Tomb Raider Reloaded and an unannounced title based on Avatar: The Last Airbender with Navigator Games, was announced on 20 October 2021.[90]

Divestment of studios and business changes (2022–present)

[edit]

In March 2022, Square Enix announced that they would donate $500,000 to the United Nations fund for Ukrainian refugees in the Russian invasion of Ukraine.[91]

On May 1, 2022, Square Enix announced that it would sell several assets of subsidiary Square Enix Limited to Swedish games holding company Embracer Group for $300 million. This included studios Crystal Dynamics, Eidos-Montréal, and Square Enix Montreal, IPs Deus Ex, Legacy of Kain, Thief, and Tomb Raider and rights to "over 50 games". Square Enix stated that the sale will further help it in investment into blockchain and other technologies, and to "assist the company in adapting to the changes underway in the global business environment by establishing a more efficient allocation of resources". Square Enix also stated that it would retain the Life Is Strange, Outriders, and Just Cause franchises.[92][93] However, during the Japanese publisher's full-year financial results briefing on May 13, president Yosuke Matsuda clarified the past statement and said the money from the sale will be used to strengthen the company's core games business.[94] On July 25, 2022, Square Enix launched the English version of Manga Up!.[95] The acquisition was closed by August 26, 2022, with the assets being held under CDE Entertainment which is headed from London by Phil Rogers, former CEO of Square Enix Americas and Europe.[96]

In the company's financial statement for the following quarter, released in September 2022, Matsuda said they were moving away from outright owning studios due to rising costs of development, but were looking at means to invest in studios such as joint ventures or investment opportunities.[97] In 2022, Square Enix invested in seven business strategic cooperations in the blockchain and cloud services such as Zebedee (United States), Blocklords (Estonia), Cross The Ages (France), Blacknut (France), Animoca Brands-owned The Sandbox (Australia and Hong Kong), and Ubitus (Japan).[98]

On February 28, 2023, Square Enix Holdings announced that on May 1, Luminous Productions would reorganize and merge with Square Enix internally, citing the merging of the two would "enhanced the group's abilities to develop HD games" for the 20th anniversary.[99] On March 3, Square Enix issued a statement announcing a proposed change to the position of its president and representative director that, if implemented, would result in Yosuke Matsuda stepping down and being succeeded by Takashi Kiryu, who is presently the company's director. The change will become effective upon approval at the company's 43rd annual shareholders' meeting, which is planned for June 2023, and the board meeting which will follow ahead on the 20th anniversary of the merger.[100] Kiryu succeeded on May 18 and was seen as part of the Final Fantasy XVI launch event as one of his first appearances in public.[101][102]

In March 2024, Square Enix announced it would be more selective with the games it develops, resulting in numerous unannounced titles being cancelled. The company lost ¥22.1 billion (approximately $140 million) due to "content abandonment", they are now making the third installment of the Final Fantasy VII Remake their full focus after the release of Rebirth.[103]

Corporate structure

[edit]

On October 1, 2008, Square Enix transformed into a holding company and was renamed Square Enix Holdings. At the same time, the development and publishing businesses were transferred to a spin-off company named Square Enix, sharing the same corporate leadership and offices with the holding company.[16][104][105] The primary offices for Square Enix and Square Enix Holdings are in the Shinjuku Eastside Square Building in Shinjuku, Tokyo.[104][106]

Currently, focusing in different industries, the company is divided as the following: Five Creative Business Units for game development and production in Square Enix Co., Ltd; a dedicated publishing business unit for manga and books publishing; a digital storefront business division for their e-Store and merchandise production; their media and arts business unit for music production, concert and live performance coordination, and visual contents production (live action, animation, and CG for TV, movies, and games); and a blockchain business division.[107][108][109][110][111]

Development organization

[edit]

After the merger in 2003, Square Enix's development department was organized into eight Square and two Enix Product Development Divisions (開発事業部, kaihatsu jigyōbu), each focused on different groupings of games.[112][113][114] The divisions were spread around different offices; for example, Product Development Division 5 had offices both in Osaka and Tokyo.[112]

According to Yoichi Wada, the development department was reorganized away from the Product Development Division System by March 2007 into a project-based system.[115][116] Until 2013, the teams in charge of the Final Fantasy and Kingdom Hearts series were still collectively referred to as the 1st Production Department (第1制作部, dai-ichi seisakubu).[117][118][119] The 1st Production Department was formed from the fall 2010 combination of Square Enix's Tokyo and Osaka development studios, with Shinji Hashimoto as its corporate executive.[120]

In December 2013, Square Enix's development was restructured into 12 Business Divisions. In 2017, Business Division 9 was merged into Business Division 8, while Business Divisions 11 and 12 merged to become the new Business Division 9, while a new Business Division 11 was created with some staff from Business Division 6.[121][122][123]

In 2019, Square Enix announced that their eleven Business Divisions would be consolidated into four units by 2020 with a new title, Creative Business Unit.[124] Naoki Yoshida, who was previously the head of Business Division 5, became the head of Creative Business Unit III.[125] Creative Business Unit III was renamed Creative Studio III in May 2024.[126][127] The current structure for the development and production division called Creative Business Unit is as follows:[128][129]

In those five divisions, most of the development is done outside of Square Enix under contracted development companies, while Creative Business Unit produces and oversees the title done by those developers. All of the internal development done by Creative Business Units are for titles such as mainline Dragon Quest, Final Fantasy and Kingdom Hearts, while their mid-size and smaller titles have the development outsourced to other companies for most of the cases such as "Team Asano" led by Tomoya Asano, a team of producers from Creative Business II who had Artdink and Netchubiyori developing Triangle Strategy or Historia developing the remake of Live A Live, while the team was mainly present to oversee, produce, concept, while the studios do the bulk of the project under their direction.[135]

Business model

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See also: Localization of Square Enix video games

The business model of post-merger Square Enix is centered on the idea of "polymorphic content", which consists of developing franchises on multiple potential media rather than being restricted by a single gaming platform.[136][137] An early example of this strategy is Enix's Fullmetal Alchemist manga series, which has been adapted into two anime television series, five movies (two animated, three live-action), and several novels and video games.[138] Other polymorphic projects include the Compilation of Final Fantasy VII, Code Age, World of Mana, Ivalice Alliance, and Fabula Nova Crystallis Final Fantasy subseries.[139] According to Yoichi Wada, "It's very difficult to hit the jackpot, as it were. Once we've hit it, we have to get all the juice possible out of it".[140] Similar to Sony's Greatest Hits program, Square Enix also re-releases their best-selling games at a reduced price under a label designated "Ultimate Hits".[141]

The standard game design model Square Enix employs is to establish the plot, characters, and art of the game first.[142] Battle systems, field maps, and cutscenes are created next.[142] According to Taku Murata, this process became the company's model for development after the success of Square's Final Fantasy VII in 1997.[142] The team size for Final Fantasy XIII peaked at 180 artists, 30 programmers, and 36 game designers, but analysis and restructuring were done to outsource large-scale development in the future.[143]

Business

[edit]

Video games and franchises

[edit]
Main articles: List of Square Enix video games, List of Square Enix Europe games, List of Square Enix mobile games, List of Taito games, and List of Square Enix video game franchises

Square Enix's primary concentration is on video gaming, and it is primarily known for its role-playing video game franchises.[144] Of its properties, the Final Fantasy franchise, begun in 1987, is the best-selling, with total worldwide sales of over 173 million units as of March 2022. The Dragon Quest franchise, begun in 1986, is also the best-selling; it is considered one of the most popular game series in Japan and new installments regularly outsell other games at the times of their release, with a total worldwide sale of over 85 million units. More recently, the Kingdom Hearts series (developed in collaboration with Disney beginning in 2002) has become popular, with 36 million units shipped as of March 2022. Other popular series developed by Square Enix include the SaGa series with nearly 10 million copies sold since 1989, the Mana series with over 6 million sales since 1991, and the Chrono series with over 5 million sold since 1995.[145] In addition to their sales numbers, many Square Enix games have been highly reviewed; 27 Square Enix games were included in Famitsu magazine's 2006 "Top 100 Games Ever", with 7 in the top 10 and Final Fantasy X claiming the number 1 position.[146] The company also won IGN's award for Best Developer of 2006 for the PlayStation 2.[147]

Square and Enix initially targeted Nintendo home consoles with their games, but Square Enix currently develops games for a wide variety of systems.[148][149] In the seventh generation of video game consoles, Square Enix released new installments from its major series across all three major systems, including Final Fantasy XIII on both the PlayStation 3 and Xbox 360 and Dragon Quest X on the Wii.[150][151][152] Square Enix has also developed titles for handheld game consoles, including the Game Boy Advance, Nintendo DS, PlayStation Portable, Nintendo 3DS, and PlayStation Vita.[148] Also, they have published games for Microsoft Windows-based personal computers and various models of mobile phones and modern smartphones.[153] Square Enix mobile phone games became available in 2004 on the Vodafone network in some European countries, including Germany, the United Kingdom, Spain, and Italy.[154]

Before its launch, Michihiro Sasaki, senior vice president of Square Enix, spoke about the PlayStation 3, saying, "We don't want the PlayStation 3 to be the overwhelming loser, so we want to support them, but we don't want them to be the overwhelming winner either, so we can't support them too much."[155] Square Enix continued to reiterate their devotion to multi-platform publishing in 2007, promising more support for the North American and European gaming markets where console pluralism is generally more prevalent than in Japan.[156] Their interest in multi-platform development was made evident in 2008 when the previously PlayStation 3-exclusive game Final Fantasy XIII was announced for release on the Xbox 360.[157]

In 2008, Square Enix released their first game for the iPod, Song Summoner: The Unsung Heroes.[158] Square Enix made a new brand for younger children gaming that same year, known as Pure Dreams.[159] Pure Dreams' first two games, Snoopy DS: Let's Go Meet Snoopy and His Friends! and Pingu's Wonderful Carnival, were released that year.[159] After acquiring Eidos in 2009, Square Enix combined it with its European publishing wing to create Square Enix Europe, which continues to publish Eidos franchises such as Tomb Raider (88 million sales), Deus Ex (4 million), Thief and Legacy of Kain (3.5 million).[153][160][161][162] Square Enix were served as the Japanese publisher for Activision Blizzard and Ubisoft from 2009 to 2024 (followed by the Microsoft acquisition and Ubisoft's partnership with Tencent and Sega Sammy Holdings).[163] In May 2022, Square Enix sold several assets of Square Enix Europe $300 million to Embracer Group, including former Eidos Interactive franchises such as Tomb Raider, Deus Ex, Thief, Legacy of Kain and more than 50 others.[164]

Square Enix owned franchises and games include:

Game engines

[edit]

In 2004, Square Enix began to work on a "common 3D format" that would allow the entire company to develop titles without being restricted to a specific platform: this led to the creation of a game engine named Crystal Tools, which is compatible with the PlayStation 3, the Xbox 360, Windows-based PCs, and to some extent the Wii.[165][166] It was first shown off at a tech demo shown off at E3 2005 and was later used for Final Fantasy XIII based on the demo's reception.[167][168] Crystal Tools was also used for Final Fantasy Versus XIII before its re-branding as Final Fantasy XV and its shift onto next-gen platforms.[169] Refinement of the engine continued through the development of Final Fantasy XIII-2, and it underwent a major overhaul for Lightning Returns: Final Fantasy XIII.[170][171] Since that release, no new titles have been announced using Crystal Tools, and it is believed that the development of the engine has halted permanently.[172]

Luminous Engine was originally intended for eighth-generation consoles and unveiled at E3 2012 through a tech demo titled Agni's Philosophy.[173][174][175] The first major console title to be developed with Luminous Engine was Final Fantasy XV;[169] the engine's development was done in tandem with the game, and the game's development helped the programming team optimize the engine.[176]

In addition to Luminous Engine and custom engines made for individual games and platforms before and since Square Enix often uses other companies' engines and programming languages for their video game properties. Epic Games' Unreal Engine 3 was used for games such as The Last Remnant, and more recently, Unreal Engine 4 has been used for projects including Dragon Quest XI, Kingdom Hearts III, and the most recent Final Fantasy VII Remake. Unity has also been used internally for titles including I Am Setsuna, Lost Sphear, and SaGa: Scarlet Grace. The Squirrel language had also been used for the WiiWare title Final Fantasy Crystal Chronicles: My Life as a King.[177][178]

Online gaming

[edit]

Before the merger, Enix published its first online game Cross Gate in Japan, mainland China, and Taiwan in 2001, and Square released Final Fantasy XI in Japan in 2002 for the PlayStation 2 and later the personal computer.[179][180] With the huge success of Final Fantasy XI, the game was ported to the Xbox 360 two years later and was the first MMORPG on the console.[180][181] All versions of the game used PlayOnline, a cross-platform internet gaming platform and internet service developed by Square Enix.[182] The platform was used as the online service for many games Square Enix developed and published throughout the decade.[183] Due to the success of their MMORPG, Square Enix began a new project called Fantasy Earth: The Ring of Dominion.[184] GamePot, a Japanese game portal, received the license to publish Fantasy Earth in Japan, and it was released in Japan as "Fantasy Earth ZERO".[185] In 2006, however, Square Enix dropped the Fantasy Earth Zero project and sold it to GamePot.[185] Square Enix released Concerto Gate, the sequel to Cross Gate, in 2007.[186]

A next-gen MMORPG code named Rapture was developed by the Final Fantasy XI team using the company's Crystal Tools engine.[187] It was unveiled at E3 2009 as Final Fantasy XIV for PlayStation 3 and Microsoft Windows and would be released on September 30, 2010.[188] Dragon Quest X was announced in September 2011 as an MMORPG being developed for Nintendo's Wii and Wii U consoles, which released on August 2, 2012, and March 30, 2013, respectively.[189] Like XIV, it used Crystal Tools.[190]

Square Enix also made browser games and Facebook games, like Legend World, Chocobo's Crystal Tower and Knights of the Crystals, and online games for Yahoo! Japan, such as Monster x Dragon, Sengoku Ixa, Bravely Default: Praying Brage, Star Galaxy, and Crystal Conquest.[191][192][193][194]

Cloud gaming

[edit]

In 2013, Dragon Quest X was brought to iOS and Android in Japan using NTT DoCoMo as the release platform and Ubitus for the streaming technology.[195] In 2014, it was also brought to 3DS in Japan using Ubitus.[196]

On May 8, 2012, Square Enix announced a collaboration with Bigpoint Games to create a free-to-play Cloud gaming platform that "throws players into 'limitless game worlds' directly through their web browser".[197] The service was launched under the name CoreOnline in August 2012.[198][199] Stating "limited commercial take-up", the service was cancelled on November 29, 2013.[200]

In September 2014, a cloud gaming company called Shinra Technologies (previously Project Flare[201]) was created; however, it was closed in January 2016.[202][203] On October 9, 2014, Square Enix launched another online game service in Japan called Dive In, which allowed players to stream console games to their iOS or Android devices.[204] The service was monetized by the amount of time the players spent playing, with each game offered for free for thirty minutes.[205] The service was cancelled on September 13, 2015.[205] Some Square Enix games are available in Japan on the G-cluster streaming service.[206][207]

Arcade facilities

[edit]

With the merger of Taito businesses into Square Enix, the company gained possession of Taito's arcade infrastructure and facilities and entered the arcade market in 2005.[208] In 2010 Taito revealed NESiCAxLive, a cloud-based system of storing games and changing them through the internet instead of acquiring physical copies.[209] This system was added to its many arcade gaming locations.[209] The company continues to cater to the arcade audience in Japan with arcade-only titles, with game producers in 2015 stating that Square Enix has a loyal fan base that values the arcade gaming experience.[210] In November 2019, Square Enix announced a "Ninja Tower Tokyo" theme park by its newly established Live Interactive Works division.[211][212]

Film

[edit]

The company has made three forays into the film industry. The first, Final Fantasy: The Spirits Within (2001), was produced by Square subsidiary Square Pictures before the Enix merger; Square Pictures is now a consolidated subsidiary of Square Enix.[213] Its box-office failure caused Enix to delay the merger, which was already under consideration before the creation of the film until Square became profitable once again.[214] In 2005, Square Enix released Final Fantasy VII Advent Children, a CGI-animation film based on the PlayStation game Final Fantasy VII, set two years after the events of the game.[215] A Deus Ex film was in pre-production in 2012 and, as of 2014, was undergoing rewrites.[216][217] In 2016 Square Enix revealed a film called Kingsglaive: Final Fantasy XV based in the world of Final Fantasy XV and a new web series released on YouTube and Crunchyroll entitled Brotherhood: Final Fantasy XV.[218]

Publishing

[edit]
Main articles: List of Gangan Comics manga franchises and List of Square Enix companion books

The company has a manga publishing division in Japan (originally from Enix) called Gangan Comics, which publishes content for the Japanese market only.[213] In 2010, however, Square Enix launched a digital manga store for North American audiences via its Members services, which contains several notable series published in Gangan anthologies.[219] Titles published by Gangan Comics include Fullmetal Alchemist, Soul Eater, and many others.[219] Other titles include manga adaptations of various Square Enix games, like Dragon Quest, Kingdom Hearts, and Star Ocean.[220][221][222] Some of these titles have also been adapted into anime series.[223] Fullmetal Alchemist is the most successful title of Square Enix's manga branch, with more than 64 million volumes sold worldwide.[224] It is licensed in North America by Viz Media, while its two anime adaptations were licensed by Funimation (now known as Crunchyroll) in North America.[225][226] Starting in Q4 2019, Square Enix began publishing some of its manga series in English.[227]

Merchandise

[edit]

Square Enix has created merchandise for virtually all of their video game franchises. Starting in 2000, Square Enix's former online gaming portal PlayOnline sold merchandise from game franchises including Parasite Eve, Vagrant Story, Chocobo Racing, Front Mission, Chrono Cross, and Final Fantasy.[228] Mascots from game franchises are a popular focus for merchandise, such as the Chocobo from Final Fantasy, which has been seen as a rubber duck,[229][230] a plush baby Chocobo,[231] and on coffee mugs.[232] Square Enix also designed a Chocobo character costume for the release of Chocobo Tales.[233] The Slime character from Dragon Quest has also been frequently used in Square Enix merchandise, especially in Japan.[234] On the Japanese language Square Enix shopping website, there is also a Slime-focused section called "Smile Slime".[235] Slime merchandise includes plush toys, game controllers, figurines, and several board games, including one titled Dragon Quest Slime Racing.[235][236][237][238] In Japan, pork-filled steam buns shaped like slimes have been sold in 2010.[239] For Dragon Quest's 25th anniversary, special items were sold, including business cards, tote bags, and crystal figurines.[235] Rabites from the Mana series have appeared in several pieces of Square Enix merchandise, including plush dolls, cushions, lighters, mousepads, straps, telephone cards, and T-shirts.[240] Square Enix has also made merchandise for third party series, including figures Mass Effect and Halo in 2012.[241] Beginning in 2012, it operates shops called "Square Enix Cafe" in Tokyo, Osaka and Shanghai, which display and sell merchandise, as well as serve café food.[242][243][244]

Subsidiaries

[edit]
Name Became subsidiary Location Purpose Ref.
Domestic
Gangan Comics March 12, 1991 Shinjuku, Tokyo, Japan Manga and Magazine imprint in its publishing business. [245][non-primary source needed]
Taito Corporation September 28, 2005 Square Enix Holdings arcade gaming subsidiary, Space Invaders series, Bubble Bobble series, Groove Coaster series. [246][non-primary source needed]
Square Enix Co., Ltd. October 1, 2008 Shinjuku, Tokyo, Japan
Osaka, Japan 		Game development and publishing company, Final Fantasy series, Dragon Quest series, Kingdom Hearts series. Also referred to as Square Enix Japan. [16][105][247] [non-primary source needed]
Square Enix Business Support, Co., Ltd. April 1, 2010 Shinjuku, Tokyo, Japan Operational support of group company businesses including office services, information-processing and development of arcade game machines [248][non-primary source needed]
Square Enix AI & Arts Alchemy Co., Ltd. March 2, 2020 R&D/business involving products that combine AI, computer graphics, and art. [249][non-primary source needed]
Square Enix Image Studio Division April 1, 2021 CGI animation company focused on cutscenes and movie production [250]
International
Square Enix, Inc. (originally Square Soft Inc.) March 1989 El Segundo, California, United States American publishing and Japanese Intellectual Property localization. Founded as Square Soft, Inc. and merged in 2003 with sister subsidiaries Square USA and Electronic Arts Square to become Square Enix USA, renamed Square Enix Inc the following year. Also referred to as Square Enix America. [251][45][252][247]
Square Enix Ltd. (originally Square Europe Ltd.) December 1998 Blackfriars, London, United Kingdom European publishing. Contains divisions Square Enix External Studios and Square Enix Collective, and offices in Paris, France and Hamburg, Germany. Founded as Square Europe Ltd. and absorbed Eidos Interactive in 2009. Also referred to as Square Enix Europe. [253][45][non-primary source needed]
Square Enix (China) Co., Ltd. February 28, 2005 Haidian District, Beijing, China Chinese publishing. The successor to Square Enix Webstar Network Technology (Beijing) Co., Ltd. [254][non-primary source needed]
Huang Long Co., Ltd. August 2005 China Sale and management of online games in Asia-Pacific. [255][non-primary source needed]
Square Enix Pvt. Ltd. (originally Square Enix India Pvt. Ltd.) 2019 Bangalore, Karnataka, India Mobile games publishing subsidiary for the Indian market. Also referred to as Square Enix India. [85][86]

Former subsidiaries

[edit]
Name Became subsidiary Closed or sold Location Purpose/Fate Ref.
Enix America Corporation Inc. 1990 November 1995 Redmond, Washington, United States Enix's first American subsidiary. [256][257]
Square USA, Inc (previously Square L.A., Inc.) August 1995 April 1, 2003 Costa Mesa, California, United States Square Co. Ltd's American research and development studio. [258][non-primary source needed]
DigiCube February 6, 1996 November 26, 2003 Tokyo, Japan Square Co. Ltd. marketing and distribution subsidiary in Japan. [259]
Square Electronic Arts April 27, 1998 April 1, 2003 Costa Mesa, California, United States Joint venture with Electronic Arts for American publishing. [260]
Visual Works (previously Square Visual Works) June 1999 April 1, 2021 Tokyo, Japan CGI animation company focused on cutscenes and movie production. Merged with Image Arts Division to form Square Enix Image Studio Division [250]
Taito Soft Corporation (previously The Game Designers Studio) June 22, 1999 March 11, 2010 Hirakawa-cho, 2-chome, Chiyoda-ku, Tokyo, Japan Square Enix Co., Ltd. game development brand. [261][262]
Enix America Inc. 1999 April 1, 2003 Seattle, King County, Washington, United States A joint venture between Enix and Eidos Interactive to publish Enix games for Western markets. [263][264]
Square Enix Webstar Network Technology (Beijing) Co., Ltd. (previously Enix Webstar Network Technology (Beijing) Co., Ltd.) 2001 February 28, 2005 Beijing, China Enix Chinese publishing division. [254][non-primary source needed]
UIEvolution March 2004 December 17, 2007 Bellevue, Washington, United States Square Enix mobile software development division. [34]
Taito Art Corporation September 28, 2005 July 28, 2008 Tokyo, Japan Taito travel and insurance agency subsidiary. [265][non-primary source needed]
Taito Tech Co., Ltd. September 28, 2005 July 28, 2008 Tokyo, Japan Taito subsidiary for maintenance and transportation of amusement equipment. [265][non-primary source needed]
Smile-Lab Co., Ltd. February 29, 2008 May 2017 Tokyo, Japan Development and operation studio for social games and community services. Sold to the management of the studio.
Square Enix of Europe Holdings December 4, 2008 April 26, 2016 London, England Holding company for the group's operations in Europe. [266][267][non-primary source needed]
Beautiful Game Studios April 22, 2009 2013 London, United Kingdom Square Enix Europe game development subsidiary, Championship Manager series. [44][non-primary source needed]
Eidos Hungary (previously Mithis Entertainment) April 22, 2009 April 19, 2010 Budapest, Hungary Square Enix Europe game development subsidiary. [268]
Eidos Interactive April 22, 2009 November 10, 2009 Wimbledon, London, United Kingdom Western intellectual properties publishing subsidiary. Merged with Square Enix Europe. [44]
IO Interactive April 22, 2009 June 16, 2017 Copenhagen, Denmark Square Enix Europe game development subsidiary. Sold to the management of the studio. [269]
Crystal Dynamics April 22, 2009 August 26, 2022 Redwood City, California, United States Square Enix Europe game development subsidiary. Sold to Embracer Group [44]
Eidos Montréal Montréal, Quebec, Canada [44]
Studio Onoma (previously Square Enix Montréal) November 21, 2011 Montréal, Quebec, Canada [51]
Hippos Lab Co., Ltd. March 7, 2011 May 1, 2015 Tokyo, Japan Original content mainly focusing on smartphones social games. Sold to United, Inc. [50]
Smileworks June 17, 2013 January 14, 2015 Jakarta, Indonesia iOS, Android, Windows Phone and Nokia smartphones. [270][271]
Tokyo RPG Factory August 2014 January 31, 2024 Shinjuku, Tokyo, Japan Square Enix Holdings Co., Ltd. game development subsidiary. Merged with Square Enix Co. Ltd. [272]
Shinra Technologies September 18, 2014 January 2016 New York City, United States Cloud services. [202][203]
Studio Istolia February 21, 2017 May 15, 2019 Shinjuku, Tokyo, Japan Square Enix Co., Ltd. game development subsidiary. Shut down. [273][84]
Luminous Productions March 27, 2018 May 1, 2023 Shinjuku, Tokyo, Japan Square Enix Holdings Co., Ltd. game development subsidiary. Merged with Square Enix Co. Ltd.
Square Enix London Mobile October 2021 2022 London, United Kingdom Square Enix Europe game development subsidiary. Merged with Square Enix Montréal [274]

Notes

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References

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Square Enix

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Square Enix Holdings Co., Ltd. is a Japanese multinational holding company specializing in the development, publishing, and distribution of digital entertainment content, primarily video games and related media.[1][2] Formed on April 1, 2003, through the merger of Enix Corporation—established in 1975—and Square Co., Ltd.—founded in 1986—with Enix as the surviving entity absorbing Square's operations, the company consolidated two pioneers of console role-playing games (RPGs) to strengthen their position amid industry competition.[3][4][5] The firm operates through segments including Digital Entertainment, which encompasses game software planning, development, and sales; Amusement, involving arcade operations; Publishing, covering books and merchandise; and Rights and Related Businesses, managing intellectual property licensing.[6] Its core franchises, such as the Final Fantasy series—launched by Square in 1987—and the Dragon Quest series—published by Enix since 1986—have driven substantial commercial success, with titles like Final Fantasy VII and Dragon Quest XI achieving multimillion-unit sales and influencing global RPG design through innovative storytelling, turn-based combat, and expansive worlds.[7][8] Additional notable series include Kingdom Hearts (developed with Disney) and NieR, alongside acquisitions like the Tomb Raider reboot rights before their 2022 divestment to Embracer Group as part of a strategy to prioritize Japanese-developed titles and reduce Western studio dependencies.[9][10] Square Enix has achieved milestones in expanding RPG accessibility, pioneering 3D graphics in games like Final Fantasy VII on PlayStation, and adapting to digital distribution and mobile platforms, though it has faced challenges including post-merger financial strains—such as a 5.4 billion yen net loss in 2012—and criticisms over development delays and inconsistent quality in high-profile releases.[11][12] Headquartered in Tokyo, the company maintains subsidiaries worldwide, including in North America and Europe, to handle localization and global publishing, while emphasizing original IP creation over Western-style open-world trends.[13][5]

History

Origins of Enix and Square (1975–2002)

Enix originated as Eidansha Boshu Service Center, founded on September 22, 1975, by Japanese entrepreneur Yasuhiro Fukushima as a mail-order business focused on real estate information and tabloid publishing.[14][15] In August 1982, the company, then operating as Eidansha System, formally changed its name to Enix Corporation, marking its pivot toward software distribution amid Japan's emerging personal computer market.[14] By the late 1980s, Enix had established a publication subsidiary and shifted emphasis to video game software, launching its business in March 1988.[14] Enix's breakthrough came with the publication of Dragon Quest on May 27, 1986, for the Famicom, developed externally by Chunsoft; the title sold over 1.5 million copies in Japan, establishing Enix as a key player in console role-playing games.[16] Subsequent entries in the Dragon Quest series, including Dragon Quest II (1987) and Dragon Quest III (1988, which sold 1.1 million copies within months), solidified its dominance in the genre, with the franchise driving Enix's growth through licensed merchandise and media adaptations.[14] Enix went public with over-the-counter trading in February 1991 and listed on the Tokyo Stock Exchange's first section in August 1999, reflecting stable expansion focused on publishing rather than in-house development.[14] Square Co., Ltd. was founded in September 1986 by Masafumi Miyamoto as an independent spin-off from the software division of Den-Yu-Sha, a power line construction firm, initially targeting personal computer games.[14][17] Early releases like The Death Trap (1984, pre-spin-off) and initial titles struggled commercially, prompting the company's near-collapse until Final Fantasy, released December 18, 1987, for the Famicom, which exceeded 500,000 units sold and launched Square's flagship series.[18] Square's recovery accelerated with sequels such as Final Fantasy II (1988) and Final Fantasy III (1990), alongside diversification into action RPGs like Chrono Trigger (1995, co-developed with Enix's publishing partner Chunsoft). The 1997 release of Final Fantasy VII for PlayStation marked a technological leap to 3D graphics, selling over 10 million copies globally and propelling Square to over-the-counter trading in August 1994 and Tokyo Stock Exchange listing in August 2000.[14] Subsidiaries like Square Soft, Inc. (established March 1989) supported U.S. localization efforts.[14] By the early 2000s, Square faced financial pressures from the 2001 flop of its CGI film Final Fantasy: The Spirits Within, which lost approximately 120 billion yen, leading to layoffs and a near-bankruptcy filing. Enix, buoyed by Dragon Quest stability, resumed merger discussions with Square—initially explored in 2000 but paused—culminating in an announcement on November 26, 2002, for a stock-swap merger effective April 1, 2003, with Enix as the surviving entity.[4] Square's May 2002 launch of Final Fantasy XI, its first massively multiplayer online game, represented a strategic pivot toward online services amid console market shifts.[14]

Merger and initial post-merger growth (2003–2012)

On April 1, 2003, Square Co., Ltd. merged with Enix Corporation to form Square Enix Co., Ltd., with Enix serving as the surviving legal entity and absorbing Square through an exchange ratio of 0.89 Square shares per Enix share.[14][4] The merger, announced on November 26, 2002, aimed to combine Square's expertise in action-oriented RPGs like Final Fantasy with Enix's strengths in turn-based titles such as Dragon Quest, creating a more resilient entity amid industry pressures including Square's prior financial losses from the 2001 film Final Fantasy: The Spirits Within, which exceeded $100 million in production costs and underperformed commercially.[4][19] Yasuhiro Fukushima, former Enix chairman, assumed the role of chairman for the new company, while Yoichi Wada, Square's president, became president of Square Enix.[4][20] Initial post-merger operations focused on integration and expansion, with headquarters relocated to Yoyogi in Shibuya-ku, Tokyo, in July 2003 to centralize development and publishing.[14] The company reported solid early financial performance, achieving net sales of 19.7 billion yen and net income of 1.2 billion yen for the six months ended September 30, 2003, bolstered by ongoing support for Final Fantasy XI, Square's first MMORPG launched in May 2002, and anticipation for titles leveraging the merged IP portfolio.[21] Brand unification followed in July 2004, renaming North American and European subsidiaries to Square Enix, Inc. and Square Enix Ltd., respectively, to streamline global marketing.[14] Key releases during this period, including Dragon Quest VIII: Journey of the Cursed King in November 2004 and Kingdom Hearts II in December 2005, drove revenue growth by capitalizing on established franchises, with Dragon Quest VIII selling over 4.9 million units worldwide by 2019.[22] Strategic acquisitions accelerated diversification beyond console RPGs. In September 2005, Square Enix acquired Taito Corporation as a consolidated subsidiary for approximately 81.3 billion yen, gaining arcade classics like Space Invaders and expanding into amusement operations; Taito became wholly owned by March 2006.[14][20] This move broadened revenue streams to include pachinko machines and mobile content, with Taito contributing to non-gaming segments. In January 2005, Square Enix established a wholly owned subsidiary in Beijing, China, to tap Asian markets, followed by joint ventures like SG Lab Inc. in May 2006 for digital distribution.[14] Hits such as Final Fantasy XII (March 2006), which sold over 6.7 million copies, and Crisis Core: Final Fantasy VII (September 2007) sustained momentum, emphasizing open-world mechanics and portable spin-offs.[23][22] By 2008, Square Enix restructured into a pure holding company, renaming to Square Enix Holdings Co., Ltd. in October, to oversee subsidiaries more efficiently amid growing international operations, including the establishment of Square Enix of America Holdings, Inc. in November 2006.[14] The April 2009 acquisition of Eidos Interactive plc for £84.3 million integrated Western IPs like Tomb Raider, enabling cross-studio collaborations and entry into action-adventure genres; this diversified the portfolio as Tomb Raider reboots later amplified sales.[14][20] Releases like Final Fantasy XIII (December 2009) and Dragon Quest IX: Sentinels of the Starry Skies (July 2009) propelled fiscal growth, with the latter exceeding 4.6 million units sold.[23] For the fiscal year ended March 31, 2012, the company recorded net income of 6,060 million yen and net assets of 137,297 million yen, reflecting cumulative expansion despite rising development costs for high-budget titles.[24] Further initiatives included mobile-focused entities like Hippos Lab in March 2011 and a Shanghai alliance with Shanda Games in September 2010 for Final Fantasy XIV localization, underscoring adaptation to online and emerging platforms.[14] This period marked consolidation of RPG dominance with portfolio broadening, setting the stage for global scale-up before subsequent market shifts.

Expansion, acquisitions, and early challenges (2013–2021)

In early 2013, Square Enix faced significant financial setbacks from underperforming Western titles, prompting a major restructuring. Titles such as Tomb Raider, Hitman: Absolution, and Sleeping Dogs sold below internal expectations despite positive reception, with North American market weakness cited as a key factor amid a broader sales slump.[25] [26] The company forecasted an extraordinary loss of around ¥10 billion, resulting in a net loss of ¥13.7 billion for the fiscal year ended March 31, 2013, a sharp reversal from prior profitability.[27] [28] This led to the resignation of president Yoichi Wada on March 26, 2013, as leadership shifted to address misaligned sales projections and regional market dynamics.[29] To bolster development capacity, Square Enix pursued internal expansions by establishing specialized subsidiaries. In March 2018, it created Luminous Productions Co., Ltd., a Tokyo-based studio led by Hajime Tabata (former director of Final Fantasy XV), focused on AAA titles for global markets using proprietary technologies like the Luminous Engine to innovate in gameplay and entertainment.[30] In March 2020, the company founded SQUARE ENIX AI & ARTS Alchemy Co., Ltd., with ¥10 million capital, dedicated to advancing AI, augmented reality, and graphics research to enhance future projects.[31] These moves complemented ongoing efforts in mobile and PC segments, including the successful 2013 relaunch of Final Fantasy XIV: A Realm Reborn, which expanded the MMO's player base and revenue through subscriptions and expansions.[31] Challenges persisted amid these initiatives, particularly with studio relations and title performance. In May 2017, Square Enix withdrew support from IO Interactive, the developer behind Hitman, incurring an extraordinary loss of ¥4.989 billion as the studio completed a management buyout and retained IP rights, reflecting strains from inconsistent series profitability.[32] [33] Later, Marvel's Avengers (released September 2020) underperformed commercially despite adopting a games-as-a-service model, with the annual report noting development hurdles and unmet sales goals amid COVID-19 disruptions.[31] These issues highlighted ongoing tensions between ambitious Western expansions and execution risks, though core franchises like Final Fantasy provided stability.[31]

Restructuring, divestments, and strategic reboot (2022–present)

In May 2022, Square Enix announced the divestiture of select overseas studios and associated intellectual properties to Sweden-based Embracer Group AB, including Crystal Dynamics, Eidos Montréal, and rights to franchises such as Tomb Raider and Legacy of Kain, for a transaction valued at approximately $300 million.[34][35] The deal, completed in August 2022, aimed to streamline operations by refocusing resources on core Japanese development capabilities amid underperformance of Western titles.[36] A leadership transition followed in March 2023, with president Yosuke Matsuda stepping down and being succeeded by director Takashi Kiryu effective June 2023, pending shareholder approval, to accelerate decision-making and address stagnant growth.[37][38] Under Kiryu, the company initiated broader reforms, including layoffs in U.S. and European offices announced in May 2024, primarily affecting publishing, IT, and administrative roles, as part of cost-cutting measures amid heavy losses from projects like Babylon's Fall and unprofitable content pipelines.[39][40] In May 2024, Square Enix unveiled its "Square Enix Reboots and Awakens" three-year medium-term plan (fiscal years ending March 2025–2027), emphasizing a shift from quantity to quality in game development, cancellation of underperforming projects resulting in a ¥22 billion ($150 million) loss on content disposal, and a multiplatform strategy prioritizing global reach for high-definition titles while maintaining exclusivity selectively for Nintendo platforms.[41][42] The initiative includes fundamental reorganization of domestic studios into integrated teams for planning, production, and quality assurance, alongside investments in AI-assisted tools to enhance efficiency and reduce development times.[41][43] By fiscal year 2025's second quarter, net sales declined year-over-year due to fewer releases, but profits rose 1,900% from cost controls and prior-year comparisons, signaling early stabilization efforts.[44]

Corporate Governance and Leadership

Key executives and decision-making

Square Enix Holdings Co., Ltd. operates as a pure holding company overseeing its subsidiaries, with key decision-making centered on the Board of Directors and delegated operational authority. The board consists of 12 members, including 9 directors (with 6 outside directors) and 3 Audit & Supervisory Committee members (all independent outside directors), ensuring a majority of independent oversight as of July 2025.[45][46] President and Representative Director Takashi Kiryu, appointed in June 2023, leads the executive board, having previously served as Chief Strategy Officer since 2021 and president of Square Enix Co., Ltd.[47][48] Other internal directors include Yoshinori Kitase, a veteran producer known for directing Final Fantasy VII and serving as director since 2018, and Yu Miyake, executive officer since 2015 with oversight of creative business development.[47] Outside directors provide diverse expertise, such as Masato Ogawa (former All Nippon Airways executive), Mitsuko Okamoto (professor at Tokyo University of the Arts), Abdullah Aldawood (chairman of Saudi Entertainment Ventures), Naoto Takano (former Mizuho executive), Mika Agatsuma (former IBM Japan executive), and Tracy Fullerton (professor at University of Southern California).[47] The Audit & Supervisory Committee, comprising Nobuyuki Iwamoto (standing member, former Daiwa Securities CFO), Tadao Toyoshima (former KPMG partner), and Hajime Shinji (attorney), meets monthly to audit duties for legality and appropriateness.[47][45] Decision-making follows Japan's Companies Act, with the board retaining authority for significant resolutions such as management plans, while delegating day-to-day operations via Delegation of Authority Rules to enhance efficiency.[46] The board convenes monthly, supported by a Remuneration and Nomination Committee (majority independent outside directors) for objective compensation and director selection.[45] Internal controls include risk management guidelines, a whistle-blowing system, and an Internal Audit Office. In February 2025, President Kiryu announced structural reforms effective April 1, 2025, establishing a new Management Committee comprising Kiryu and seven executives from game development, publishing, and corporate sectors to accelerate business reforms, decision-making, and implementation of the mid-term plan focused on AAA titles and multi-platform strategies.[49] New executive officers appointed include Toshiyuki Hirasawa and Toru Karasawa.[49] This shift addresses prior criticisms of slow adaptation in a competitive industry, prioritizing in-house development and global distribution.[49]

Organizational restructuring efforts

In June 2023, Takashi Kiryu succeeded Yosuke Matsuda as president and representative director, initiating a shift toward more selective project approvals and internal reforms to address inefficiencies in game development and profitability.[50] Kiryu emphasized reducing the number of titles in development to focus resources on higher-quality outputs, particularly in the HD game division, while upgrading select intellectual properties to AAA scale where feasible.[51] This approach aimed to counteract years of overextension, including heavy outsourcing that had diluted control over production timelines and costs.[52] By early 2024, Square Enix outlined a major overhaul of its development structure, prioritizing in-house capabilities for large-scale projects over external dependencies to enhance quality consistency and financial margins.[53] This restructuring extended to Western operations, with layoffs announced in May 2024 affecting an unspecified number of staff in U.S. and European publishing and IT divisions, effective from June 2024 onward.[54] The reductions targeted redundancies in marketing and support functions, aligning with a broader push for operational streamlining amid stagnant sales in non-core segments.[39] Domestic studios underwent further reorganization in fiscal year 2025 (April 2024–March 2025), implementing an integrated structure to accelerate decision-making and resource allocation across teams.[41] In February 2025, the company established a dedicated management committee, effective April 2025, to expedite execution of its medium-term business plan through faster reforms and oversight.[49] These efforts culminated in a 36-month "reboot" initiative launched in 2024, which by May 2025 included canceling multiple unprofitable projects—resulting in approximately $150 million in content disposal losses—and reallocating capital toward core franchises like Final Fantasy.[44] Despite initial profit gains in select quarters, the plan faced scrutiny for ongoing sales declines, underscoring persistent challenges in adapting to market shifts.[55]

Development and Creative Processes

Internal development structure

Square Enix's internal game development is structured around an integrated studio model for its domestic operations, emphasizing consolidated management of large-scale projects to optimize costs, schedules, and talent allocation across titles. This approach, implemented in fiscal year 2025, replaced the prior business unit-based design with operationally unified teams that share development know-how and centralize progress oversight under a single studio entity.[41] Specialized divisions support this framework, including an HD Game and MMO Studio handling high-definition titles and massively multiplayer online games, alongside an SD Studio focused on social and mobile games.[41] The Franchise Management Division coordinates the overall development portfolio, ensuring alignment of schedules and resources for core franchises.[41] Complementing these are dedicated units for visual and sound production, quality control, and AI/engine R&D, which aim to streamline workflows and incorporate tools like artificial intelligence for efficiency gains.[41] This structure evolved from a 2019 consolidation of 11 business divisions into four Creative Business Units (CBUs), which allocated specific franchises and project types to distinct teams for focused expertise.[56] For instance, CBU I, led by Yoshinori Kitase, handled single-player Final Fantasy titles and related series like Kingdom Hearts. CBU II oversaw Dragon Quest and titles such as NieR. CBU III managed online projects including Final Fantasy XIV, under Naoki Yoshida's direction. Subsequent restructurings, including the 2024 rebranding of CBU III to Creative Studio III, further aligned units toward integrated operations while retaining specialized leadership for ongoing MMOs.[57]

Game engines and technological approaches

Square Enix developed the proprietary Crystal Tools engine in the mid-2000s to support seventh-generation consoles including PlayStation 3, Xbox 360, Nintendo Wii, and Microsoft Windows, integrating libraries for graphics, audio, physics, and scripting.[58] This engine powered titles such as Final Fantasy XIII (2009) and the original Final Fantasy XIV (2010), but its complexity led to extended development times and technical issues, notably contributing to Final Fantasy XIV's problematic launch requiring a full overhaul.[59] Addressing Crystal Tools' shortcomings, Square Enix created the Luminous Engine as a successor, with early demonstrations like the 2012 tech demo Agni's Philosophy showcasing advanced real-time rendering and global illumination.[60] Luminous supported multi-platform development for eighth- and ninth-generation hardware, powering Final Fantasy XV (2016), its CGI film Kingsglaive: Final Fantasy XV (2016), and Forspoken (2023), with emphases on photorealistic environments, dynamic lighting, and scalable performance across PC, PlayStation, and Xbox.[61] Despite these capabilities, Luminous saw limited adoption beyond Square Enix's studios, partly due to protracted development cycles in associated projects. In parallel, Square Enix has shifted toward third-party middleware to accelerate production and reduce proprietary risks, particularly for remakes and new IPs. Final Fantasy VII Remake (2020) utilized Unreal Engine 4 to overhaul the 1997 original's visuals, combat, and open-world elements while maintaining core mechanics, enabling efficient iteration on high-fidelity assets.[62] Kingdom Hearts III (2019) transitioned mid-development from Luminous to Unreal Engine 4 for better tool integration and team scalability.[63] Other approaches include custom HD-2D rendering pipelines, as in Octopath Traveler (2018) and its sequels, which combine retro pixel art with modern 3D lighting effects often layered atop engines like Unity for mobile and console ports. Recent technological strategies incorporate AI-assisted workflows, with Square Enix employing Azure OpenAI Service since 2023 to process and generate game data in JSON formats compatible with in-house engines, aiming to optimize asset creation and debugging without replacing core development.[64] This hybrid model balances bespoke tools for franchise-specific features—like real-time battle systems in Final Fantasy—with external engines for broader efficiency, reflecting lessons from past proprietary overhauls.

Shift in development strategy

In 2024, following the appointment of Takashi Kiryu as president in June 2023 after Yosuke Matsuda's resignation, Square Enix initiated a strategic pivot in its game development approach, emphasizing enhanced productivity through technological integration, including aggressive application of generative AI for content creation and publishing processes.[65][66] This shift addressed prior inefficiencies, such as resource dispersion across numerous projects, by prioritizing resource optimization and talent development to produce higher-quality titles.[67] A core element of the strategy involved transitioning from a volume-driven model to one focused on "quality over quantity," explicitly aiming to reduce the number of annual releases while ensuring greater diversity and player appeal in output.[68][69] This was prompted by underwhelming commercial performance of titles like Final Fantasy XVI and the absence of blockbuster equivalents in fiscal year 2024, which contributed to a 70% drop in operating profit to ¥29.6 billion.[70] Kiryu highlighted the need for "fun" games with global market resonance, moving away from Japan-centric designs amid demographic challenges like an aging domestic audience.[71][72] By May 2025, the company formalized a three-year "reboot" under its medium-term business plan (FY2025/3–FY2027/3), which included a fundamental overhaul of domestic studio structures to integrate development pipelines and eliminate silos, alongside a multiplatform publishing strategy to broaden accessibility beyond console exclusivity.[41][73] This encompassed canceling underperforming projects and reallocating resources toward core franchises like Final Fantasy and new IP with command-based RPG elements, reaffirming turn-based mechanics as foundational despite action-oriented experiments.[74] The approach also extended to licensing expansion and geographic diversification, aiming to mitigate risks from over-reliance on high-cost AAA productions.[67]

Business Operations

Core video game franchises and publishing

Square Enix's core video game franchises center on established role-playing game series that originated with its predecessor companies, Square Co., Ltd. and Enix Corporation, prior to their 2003 merger. The Final Fantasy series, debuting in 1987 for the Nintendo Entertainment System, encompasses mainline numbered entries, spin-offs, and remakes, with cumulative worldwide sales surpassing 195 million units as of October 2024.[75] This franchise drives significant revenue through episodic releases, such as the ongoing Final Fantasy VII Remake project, which began in 2020 and includes sequels like Rebirth in 2024.[75] The Dragon Quest series, launched in 1986 and primarily developed by Chunsoft (later acquired influences), has sold over 91 million units worldwide by October 2024, emphasizing turn-based combat and narrative-driven fantasy adventures.[75] Key milestones include Dragon Quest XI: Echoes of an Elusive Age, released in 2017, which exceeded 6 million units sold.[76] These series form the backbone of Square Enix's digital entertainment segment, contributing to consistent profitability despite fluctuating new title performance.[77] Kingdom Hearts, a action role-playing crossover with Disney properties initiated in 2002, has achieved over 37 million units in sales as of early 2025, blending original characters with licensed Disney and Pixar elements.[78] Developed in collaboration with Disney Interactive Studios, the series relies on complex narrative continuity across platforms, with recent compilations like Kingdom Hearts HD remasters sustaining sales amid delays in new entries.[79] Beyond internal development, Square Enix's publishing operations involve global distribution of its franchises and selective third-party titles through subsidiaries like Square Enix External Studios, formalized in 2018 to handle external partnerships.[80] This division has published narrative-driven games such as the Life is Strange series, developed by Dontnod Entertainment, and action titles like Just Cause, prior to related studio divestments.[81] Following the May 2022 sale of Western studios including Eidos-Montréal and Crystal Dynamics to Embracer Group, which transferred IPs like Tomb Raider and Deus Ex, publishing emphasis has realigned toward multiplatform releases of core Japanese franchises and vetted indie or mid-tier third-party projects to diversify revenue streams.[82]

Digital and online services

Square Enix maintains the Square Enix Account system as its primary gateway for user authentication across online services, enabling linkage of multiple game IDs for seamless access to digital content, purchases, and exclusive features without additional cost to users.[83] This unified account framework supports authentication for titles spanning PC, console, and mobile platforms, facilitating secure logins and data portability since its implementation for modern services.[84] Central to these offerings are massively multiplayer online role-playing games (MMORPGs), with Final Fantasy XIV serving as the flagship service, boasting over 30 million registered accounts as of 2024 and generating steady subscription revenue through monthly fees starting at $12.99 for standard access.[85] Dedicated platforms like the Mog Station handle expansions, optional subscriptions for additional service accounts (up to eight per primary account at $2.99 monthly each), cosmetic items, and game time extensions, with digital codes redeemable for immediate in-game application.[86] Similarly, the long-running Final Fantasy XI, operational since 2002, continues to support online play with recent server expansions in July 2025 to accommodate surging populations amid promotions and crossovers with Final Fantasy XIV.[87] Digital distribution occurs via the Square Enix online store, offering direct downloads of PC titles, DLC, and bundles, often integrated with third-party platforms like Steam for automated updates and cross-save functionality where applicable.[88] The company also develops and operates browser-based and mobile games under its digital entertainment umbrella, emphasizing online connectivity for casual and social play without requiring full installations.[89] Customer support for these services has shifted toward digital self-service portals and forums, with North American phone support discontinued as of September 2025 in favor of in-app ticketing and knowledge bases to streamline resolutions.[90]

Diversified ventures (mobile, film, merchandise)

Square Enix has ventured into mobile gaming primarily through free-to-play titles adapted from its core franchises, such as Final Fantasy Brave Exvius (launched October 2015 in Japan) and Dissidia Final Fantasy Opera Omnia (November 2017), which employ gacha mechanics to generate revenue via in-app purchases.[91] The smart devices and PC browser sub-segment reached peak contributions in the mid-2010s, with mobile alone accounting for approximately $858 million in the fiscal year ending March 2018, surpassing console and PC earnings at that time.[92] However, revenues have declined since, attributed to the natural lifecycle of titles like Brave Exvius, with net sales and profits in the segment dropping year-over-year after the fiscal year ending March 2024 due to reduced player engagement post-major updates.[91] In the fiscal year ending March 2025, the segment continued to underperform amid broader digital entertainment challenges, though it remains a diversification avenue alongside MMOs.[93] In film and media adaptations, Square Enix has pursued computer-generated animated features tied to its properties, beginning with Final Fantasy: The Spirits Within (released July 2001), produced by subsidiary Square Pictures at a cost exceeding $137 million but grossing only $85 million worldwide, resulting in substantial losses that contributed to the studio's closure shortly thereafter. Subsequent efforts included Final Fantasy VII: Advent Children (September 2005), a direct-to-video sequel emphasizing narrative continuity with the original game, which achieved stronger home media sales and critical reception for its visuals. More recently, Kingsglaive: Final Fantasy XV (July 2016) served as a promotional tie-in for Final Fantasy XV, featuring theatrical release and CG animation by Visual Works, Square Enix's in-house studio for such productions. The company has also licensed intellectual properties for external anime adaptations, such as those of Fullmetal Alchemist manga (published by Square Enix's Monthly Shōnen Gangan), yielding multiple series and films since 2003, though direct production involvement remains limited to enhance franchise longevity rather than core revenue.[94] Merchandise operations encompass licensing of characters and brands for third-party products like figures, apparel, and collectibles, alongside direct sales via official e-stores and collaborations. The merchandising segment generated approximately ¥20 billion in revenue for the fiscal year ending March 2023, reflecting steady demand for items tied to franchises such as Final Fantasy and Dragon Quest.[10] In the three months ended June 30, 2025, net sales totaled ¥3,771 million, a 15.2% decline year-over-year, impacted by reduced royalties and variable licensing deals, though operating income held amid cost controls.[95] Notable recent initiatives include a Magic: The Gathering Final Fantasy set launched in 2025, which produced $200 million in partner sales on its first day, yielding royalties for Square Enix and bolstering non-game profits despite overall segment pressures.[96] Physical outlets, such as the Shibuya Square Enix Cafe, offer exclusive items like plush toys and apparel, supporting fan engagement and supplemental income streams.[97]

Multiplatform and global distribution

In May 2024, Square Enix announced a strategic shift to aggressively pursue multiplatform releases for its high-definition (HD) and AAA titles, encompassing Nintendo platforms, PlayStation, Xbox, and PCs, following underwhelming sales from PlayStation exclusives such as Final Fantasy VII Rebirth.[98] This approach aims to expand market reach and boost profitability by avoiding platform exclusivity, with plans for simultaneous launches across supported systems to minimize delays in accessibility.[99] Producer Naoki Yoshida emphasized this direction in November 2024, noting it as a response to prior limitations that hindered global player engagement.[99] Square Enix facilitates global distribution through a network of regional subsidiaries responsible for publishing, localization, marketing, and sales of its titles. In North America, Square Enix, Inc., based in El Segundo, California, handles planning, development support, publishing, and derivative product sales tailored to the region.[1] Similarly, Square Enix Ltd., headquartered in London, United Kingdom, manages these functions for Europe and PAL territories, including distribution under brands like Square Enix, Eidos, and Taito, while overseeing studios such as Crystal Dynamics and Eidos Montréal for Western-market adaptations.[100] In Asia, entities like Square Enix (China) Co., Ltd. in Beijing oversee interactive entertainment sales, and Square Enix Pvt. Ltd. in Bangalore promotes and publishes content, ensuring localized releases across diverse markets.[1] This structure enables coordinated worldwide rollout, with occasional partnerships—such as expanded distribution deals with Bandai Namco Entertainment Europe in January 2025—for physical and select digital channels.[101]

Financial Performance

Revenue sources and profitability trends

Square Enix's primary revenue source is the Digital Entertainment segment, which encompasses video game development, publishing, and distribution across consoles, PCs, and mobile platforms, accounting for approximately 75-80% of total net sales in recent fiscal years.[91] Within this segment, subcategories include high-definition (HD) games for consoles and PCs, massively multiplayer online (MMO) titles such as Final Fantasy XIV, and mobile/PC browser games. For the fiscal year ended March 31, 2024 (FY2024), Digital Entertainment generated ¥248.1 billion in net sales, with HD games contributing around ¥99.2 billion, MMO titles ¥47.3 billion, and mobile/PC games ¥101.5 billion, though these figures reflect episodic and distributed titles.[93][102] Digital downloads have increasingly offset declining physical sales, with downloaded units reaching 15.85 million in FY2023 compared to physical shipments, driven by platforms like PlayStation Store and Steam.[103] Secondary revenue streams include the Publication segment, focused on manga, books, and magazines, which reported ¥31.1 billion in net sales for FY2024, up 6.6% year-over-year due to strong comic adaptations of game IPs.[102] The Merchandising segment, covering merchandise, licensing, and music, contributed ¥18.9 billion in net sales for the same period, bolstered by character goods from franchises like Dragon Quest.[91] Overall company net sales for FY2024 totaled around ¥356 billion (converted from USD figures at prevailing rates), with Digital Entertainment dominating profitability at ¥25.4 billion in operating income.[104] Profitability trends show revenue peaking at ¥279.6 billion for Digital Entertainment in FY2022, followed by a decline to ¥245.5 billion in FY2023 and stabilization at ¥248.1 billion in FY2024, reflecting variable HD game performance amid high development costs and fewer blockbuster releases.[105] Operating income margins in Digital Entertainment hovered around 10%, with MMO subsegment yielding higher margins due to recurring subscriptions and lower marginal costs compared to one-time HD title sales.[106] For FY2025 (ended March 31, 2025), overall net sales fell 8.9% to ¥324.5 billion, yet net income rose 64% to ¥24.4 billion, attributed to cost controls and MMO stability offsetting mobile declines.[107] However, the first quarter of FY2026 (April-June 2025) saw net sales drop 15.2% to ¥59.2 billion and profit decline 54.8%, linked to underperforming new titles and reduced marketing spend.[77]
Fiscal YearDigital Entertainment Net Sales (¥ billion)Operating Income (¥ billion)Key Factors
FY2022279.6Not specifiedPeak from major releases
FY2023245.5~49.3 (overall profit dip)Physical sales decline
FY2024248.125.4MMO strength, HD variability
FY2025~206.5 (estimated core)Improved margin to 12.5%Mobile weakness, cost cuts

Major financial events and responses

In fiscal year 2023, following the June 2023 launch of Final Fantasy XVI, Square Enix experienced a sharp decline in market capitalization, losing approximately $2 billion as share prices fell due to underwhelming sales performance relative to expectations and broader concerns over profitability.[108] This contributed to a 15% intraday stock drop in August 2023, erasing over a year's worth of gains, amid setbacks in Final Fantasy titles and mobile segments.[109] By April 2024, the company recorded ¥22.1 billion ($140.8 million) in content abandonment losses after reviewing its development pipeline, leading to the cancellation of multiple unannounced projects to streamline operations and reduce risk exposure.[110] For the fiscal year ended March 31, 2024, net sales totaled ¥356.3 billion with operating income of ¥32.5 billion, falling short of internal targets due to persistent underperformance in high-definition games and mobile sectors.[91] Share prices dropped nearly 16% in May 2024 following these underwhelming results.[111] Financial pressures continued into 2025, with operating income for the July-September 2024 quarter declining 27% year-over-year to ¥10.3 billion, prompting a stock sell-off attributed to weakness in existing titles.[112] Square Enix Europe's operations reported worsening losses for the fiscal year ended March 31, 2025, including an operating loss of ¥12.57 billion (over $87 million).[113] First-quarter fiscal 2025 net sales fell 15.2% to ¥59.275 billion, though operating income rose due to reduced content amortization.[95] In response, Square Enix initiated a business "reboot" announced in May 2025, focusing on revamping operations after year-over-year sales slumps, including enhanced pipeline management and a pivot toward core franchises.[55] Restructuring efforts improved operating margins, with game profits surging in select quarters despite overall sales declines, by cutting development costs and abandoning low-potential projects.[114][44] These measures aimed to address causal factors such as over-reliance on underperforming HD titles and mobile declines, though analysts noted ongoing risks from weak cash flows and high valuations.[114]

Reception and Impact

Commercial successes and industry influence

Square Enix's primary commercial successes stem from its core franchises, particularly the Final Fantasy and Dragon Quest series, which have collectively generated hundreds of millions in unit sales. The Final Fantasy series, launched in 1987, has sold over 203 million units worldwide as of August 2025, driven by narrative depth, innovative gameplay mechanics, and recurring releases across platforms.[115] Similarly, the Dragon Quest series, originating in 1986, has achieved approximately 95 million units sold, establishing a benchmark for turn-based combat and epic storytelling in Japanese role-playing games (JRPGs).[22] These franchises have provided stable revenue streams, with Final Fantasy XIV, an online multiplayer title, contributing significantly through subscriptions and expansions; its Dawntrail update in 2024 bolstered MMO segment profits despite broader sales dips.[116] Individual titles have marked milestones, such as Final Fantasy VII (1997), which sold over 10 million copies and transitioned the series to full 3D graphics, influencing console RPG production standards.[117] More recent entries like Final Fantasy XV (2016) reached 10 million units, while Dragon Quest XI (2017) exceeded 6 million, demonstrating sustained demand amid evolving market preferences for open-world elements.[118] Publishing Western franchises like Tomb Raider has added to successes, with the series surpassing 100 million units under Square Enix's oversight since acquiring Eidos in 2009, though core profits remain anchored in proprietary IP.[22] In terms of industry influence, Square Enix, formed by the 2003 merger of Square and Enix, solidified the JRPG genre's global viability by popularizing structured narratives, character-driven quests, and strategic combat systems that prioritized accessibility over Western RPG complexity.[119] Dragon Quest titles established console RPGs in Japan by adapting PC influences for mass-market hardware like the NES, fostering a cultural phenomenon that shaped developer pipelines and fan expectations for serialized adventures.[120] Final Fantasy VII revolutionized the genre in 1997 by introducing cinematic full-motion video, pre-rendered backgrounds, and a post-apocalyptic theme that bridged Eastern and Western audiences, prompting competitors to invest in high-production values and 3D transitions.[121] The company's pivot to MMOs with Final Fantasy XI (2002) and the revived Final Fantasy XIV (2013) demonstrated scalable online models, influencing live-service RPGs by integrating persistent worlds with traditional single-player elements, though this shift reflected pragmatic adaptation to digital distribution trends rather than pure innovation.[122] Overall, Square Enix's emphasis on IP longevity has set precedents for franchise stewardship, enabling cross-media expansions while highlighting risks of over-reliance on established formulas amid rising development costs.[123]

Criticisms of creative and business decisions

Square Enix has faced criticism for its creative direction in flagship franchises, particularly the shift toward action-oriented gameplay in titles like Final Fantasy XVI (released June 2023), which prioritized real-time combat over traditional turn-based systems, alienating some long-time fans who preferred the series' strategic roots.[124] Company executives admitted in a September 2024 briefing that Final Fantasy XVI and Final Fantasy VII Rebirth (released February 2024) generated profits below expectations, with Rebirth's PlayStation 5 exclusivity limiting sales to under 3 million units despite high development costs exceeding hundreds of millions.[125] Critics and analysts attributed this to over-reliance on console-specific launches and deviation from proven mechanics, contributing to operating losses as HD game sales failed to offset budgets.[126] New intellectual properties have also underperformed, with ventures like Forspoken (2023) and Babylon's Fall (2022) cited as examples of misguided Western-style development partnerships that prioritized graphical ambition over engaging narratives or mechanics, leading to quick shutdowns and financial write-offs.[127] Square Enix's strategy of outsourcing to studios like Luminous Productions resulted in Forspoken's commercial failure, selling fewer than 1 million copies amid poor reviews for repetitive gameplay, prompting internal reflections on mismatched creative visions.[128] On the business side, former president Yosuke Matsuda's advocacy for blockchain, NFTs, and Web3 integration drew significant backlash starting with his 2022 New Year's letter, where he endorsed "play-to-contribute" models that fans viewed as antithetical to immersive gaming, potentially diverting resources from core titles.[129] Despite continued investments, including a 2023 partnership with Elixir for blockchain games, these initiatives yielded minimal returns and faced market rejection, with Square Enix quietly scaling back NFT projects by March 2025 amid broader industry skepticism.[130] [131] In response to these setbacks, Square Enix initiated structural reforms in May 2024, including layoffs across U.S. and European operations affecting publishing, IT, and administrative roles, as well as project cancellations with partners like People Can Fly, which led to over 30 redundancies in June 2025 due to budget cuts.[132] [133] These moves followed a 10% stock drop in November 2024 after disappointing quarterly results, highlighting criticisms of delayed adaptation to multiplatform distribution and overemphasis on high-risk HD investments over diversified, lower-cost mobile or PC strategies.[134] The company's pivot to broader platform availability post-2024 was seen by observers as an admission of exclusivity's role in revenue shortfalls.[40]

Controversies involving policies and fan relations

In January 2025, Square Enix announced its Group Customer Harassment Policy, aimed at protecting employees and partners from abusive behavior by customers, including threats of legal action and denial of services or products to repeat offenders.[135][136] The policy defines harassment broadly, encompassing not only violence or defamation but also "unreasonable demands" for compensation or repeated contacts deemed excessive, prompting criticism from fans who argued it could stifle legitimate feedback on game quality or business decisions.[137][138] Square Enix stated the measure responded to rising toxicity amid high-profile incidents in the gaming industry, though some observers linked it to deflecting backlash over recent creative choices.[139][140] Fan relations have strained over Square Enix's content localization policies, particularly alterations in remakes and Western releases perceived as censorship to align with international sensitivities. In the Dragon Quest III HD-2D Remake, released in November 2024, female character designs were modified to reduce sexualization, such as adding clothing or adjusting proportions, sparking accusations of bowdlerization that alienated core JRPG enthusiasts who viewed the changes as unnecessary deviations from the 1988 original. Similar backlash occurred with the Dragon Quest VII reimagining, where plot elements and monster designs were reportedly toned down, fueling debates on whether Square Enix prioritized "global standards" over fidelity to source material.[141] These decisions, often justified by the company as enhancements for broader appeal, have led to organized fan campaigns and review-bombing on platforms like Steam. Square Enix's commitments to diversity, equity, and inclusion (DEI) initiatives have also drawn ire from segments of its fanbase, who contend they influence hiring and content in ways that prioritize ideological conformity over merit or artistic intent. The company's 2021 sustainability report emphasized fostering diverse workplaces, a stance reiterated in responses to criticism, yet fans have highlighted instances like altered character portrayals in Final Fantasy titles as evidence of external pressures eroding traditional Japanese design aesthetics.[142][143] In July 2025, Square Enix reversed a controversial event name in Final Fantasy VII Ever Crisis—"Water Burial"—following widespread fan complaints over cultural insensitivity, issuing an apology and substitution, which underscored reactive rather than proactive engagement with community concerns.[144] Additional tensions arose in November 2024 when fans of Life is Strange: Double Exposure, published by Square Enix, accused the company of misusing copyright claims to remove critical videos and discussions from platforms like YouTube, interpreting it as an attempt to suppress discourse on narrative choices and development issues.[145] Square Enix's West Material Usage Policy, updated in July 2024, further prohibits fan content deemed offensive, racist, or discriminatory, leading to debates on whether it curtails creative expression in fan art and mods.[146] These policies, while intended to safeguard brand integrity, have exacerbated perceptions of a widening gulf between the company and its dedicated player base, particularly in online communities vocal about preserving franchise heritage.[147]

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