Square Enix’s Shift Toward Blockbusters Is Costing It $140 Million

Square Enix is chalking up a roughly $140 million loss to “content abandonment,” as the company is scaling back its approach to game releases. We don’t know which projects are specifically being cut. The move is in line with a shift in publishing strategy Square Enix announced last year and follows the reported underperformance of Final Fantasy VII Rebirth, which launched in February.

In a financial report released April 30, Square Enix said that it’s altering the way it approaches “high-definition (HD) games with the intention of being more selective and focused in the allocation of development resources.” The $140 million loss appears to represent money already spent on games in the developer’s pipeline that don’t fit with its revised business model.

Square Enix did not immediately respond to Inverse’s request for comment.

While Square Enix doesn’t lay out specific reasons for the change, the announcement does come shortly after Final Fantasy VII Rebirth sold only half the units that Final Fantasy VII Remake did after launch, according to Niko Partners analyst Daniel Ahmad.

“I wouldn’t expect this to have a significant impact on the scope of the third game at this point, but it could lead to Square Enix reconsidering its approach to how it handles direct sequels that are reliant on a prior prior base buying the new title,” Ahmad told Inverse in response to Rebirth’s lower sales.

While Rebirth’s slow sales may not be behind Square Enix’s decision to pull the plug on these unannounced games, it does pose potential problems for the company’s shift in direction. Late last year, Square Enix announced that it would begin cutting back on the number of games it releases.

“We want to concentrate our development resources on carefully selected new titles that we will develop to a high level of quality,” Square Enix president Takashi Kiryu said in a November 2023 financial report. Kiryu said that Square Enix is putting more focus on big-budget blockbusters like Rebirth and smaller titles like PowerWash Simulator, while moving away from releases that fall in the mid-budget range. It’s likely that cuts to projects at that scope accounted for the $140 million loss.

Without mid-budget titles to fall back on, performance of its highest-budget games will be more important than ever. At least part of Rebirth’s slow sales are due to the PlayStation 5 having a much smaller install base than the PlayStation 4 when Remake launched. That could spell trouble for the publisher, since focusing more on big-budget titles means relying on games that are more likely to be PS5-exclusive. With even a game as anticipated as Rebirth reportedly falling behind, Square Enix may be pursuing new ways to monetize its biggest projects.

“Game publishers are increasingly turning to different monetization strategies to generate higher revenue over the long term,” Ahmad said. “This could be through paid DLC, offering it via a subscription service or taking a live service approach.”

It took 10 months after launch for Remake to come to PS Plus. Rebirth could follow to bring it to more players and help cover the losses from low sales, according to Ahmad.

“This typically allows a publisher, Square Enix in this case, to earn a lump sum from Sony in return for the game going into the subscription service,” the analyst said. “Sony is already offsetting some of the development and marketing cost for the game through the initial agreement for console exclusivity on PlayStation for a set period of time.”

The past few years have been an extremely turbulent time in game development, with canceled projects and job cuts across the industry. As Square Enix’s financial report shows, even the biggest publishers in gaming are scaling back to weather the storm, and while it’s impossible to say how that will work out in the long term, for now we can expect fewer mid-size games and likely a more aggressive push to make money on its biggest titles.