One of the biggest investors in Square Enix, the legendary creator of Final Fantasy, has unleashed a scathing 100-page critique of the company's recent performance, urging fellow shareholders to speak up and demand change. But here's where it gets controversial: despite owning some of the most iconic franchises in gaming history, the investor claims Square Enix has lost its way, with stagnant revenue, skyrocketing development costs, and a management team seemingly out of touch with the market. Could this be the wake-up call the company desperately needs, or is this investor overstepping their bounds? Let’s dive in.
In a detailed press statement (https://www.businesswire.com/news/home/20251207089743/en/3D-Investment-Releases-a-Presentation-Highlighting-Management-Issues-at-SQEX-Holdings-and-Seeks-Shareholder-Views), 3D Investment Partners—Square Enix’s third-largest investor with a 14% stake—pulls no punches. They argue that the company’s 'earning power has significantly deteriorated,' despite its status as a 'preeminent Japanese game developer.' The investor nostalgically reflects on Square Enix’s golden era, asking: 'Is Square Enix still pushing boundaries and creating something truly innovative, or has it abandoned its pioneering spirit and lost its footing?' They challenge the company to reignite the passion it once inspired in gamers worldwide, who are 'endlessly waiting for that irreplaceable experience.'
And this is the part most people miss: the critique isn’t just about numbers—it’s about culture, creativity, and the soul of a company that once defined an industry. However, the investor highlights that under the current leadership, the past three years have seen a 'pronounced stagnation' in revenue growth and profitability. Key metrics like operating income and return on equity have declined, painting a picture of a company struggling to adapt.
Labeling this as Square Enix’s 'most critical management challenge,' 3D Investment Partners calls for urgent action. They point to issues like an overly fragmented development portfolio, flawed product design, and bloated expenditures—all of which have contributed to declining performance. The investor urges a 'fundamental reassessment' of the company’s medium-term management plan to fully leverage its world-class intellectual property and maximize shareholder value.
To drive home their point, the investor compares Square Enix to competitors like Capcom, Sega, Konami, Bandai Namco, and Nintendo, highlighting stark differences in performance. They also cite harsh reviews from Metacritic for both new and established IPs, underscoring the company’s struggles. Interestingly, 3D Investment Partners reveals they’ve been in talks with Square Enix since July 2024, presenting their concerns and proposals to President Kiryu and Outside Director Abdullah. However, the response from leadership has been underwhelming, with President Kiryu offering only a brief, non-committal email.
Frustrated by the lack of engagement, 3D Investment Partners is now taking their case directly to shareholders, seeking 'frank views' to build a collective push for change. They aim to use this feedback to engage in constructive dialogue with Square Enix’s leadership and restore the company’s former glory.
Here’s where it gets even more intriguing: former Square Enix executive and Genvid CEO Jacob Navok weighed in on the controversy, summarizing the investor’s critique into two key points: 'sales are bad' and 'dev costs are high.' Navok, who previously criticized Square Enix’s sales strategy for Final Fantasy XVI, noted that the game’s underperformance wasn’t due to unrealistic expectations but rather poor sales execution and excessive development costs.
This public backlash comes at a particularly sensitive time for Square Enix. Just weeks ago, the company announced mass layoffs affecting over 100 employees, as part of a broader effort to consolidate its publishing operations and focus development in Japan. The company has also sold several Western studios, including Crystal Dynamics and Eidos-Montreal, to Embracer Group, and laid off staff across its Western operations in 2024 (https://www.videogameschronicle.com/news/square-enix-confirms-us-eu-layoffs-as-part-of-restructuring/).
Adding to the complexity, Square Enix is betting big on AI, aiming for 70% of its quality assurance (QA) work to be handled by generative AI by 2027. The company has openly stated its intention to 'aggressively apply AI' across development and publishing (https://sea.ign.com/final-fantasy-vii-remake-part-2/210509/news/square-enix-president-states-the-company-will-be-aggressive-in-applying-ai). But is this innovation or desperation? And will it be enough to turn the tide?
Now, here’s the question for you: Is Square Enix’s current struggle a temporary setback or a sign of deeper systemic issues? Do you think the investor’s critique is fair, or are they overreacting? And what role should AI play in the future of game development? Share your thoughts in the comments—let’s spark a conversation!
