Square Enix Explains Strategy in Allocating Resources to Games (Especially Japanese) & Investing in Studios

Square Enix released the official transcript of its latest financial results briefing, and it included some interesting information about the sale of some of the publisher’s western studios and the strategy for the future.

The statements were made by CEO Yosuke Matsuda during a Q&A session with investors and analysts.

This is especially relevant considering that, at the time of the presentation, we saw some rather misleading interpretations and translations of said comments, so this official transcript sets the record straight on a few points.

First of all, Matsuda-san was asked when investors will see indications of improved profitability due to the sale of the studios, and he explained that it’ll happen over the medium and long terms, as the company will be able to be more selective and focused in allocating its resources, especially related to its Japanese games.

“We do not expect to see the transaction result in better profitability in the short term. Instead, we expect to see profitability improve over the medium to long term as we are able to be more selective and focused in allocating our resources, especially in regards to our Japanese titles.”

Matsuda-san was also asked to explain the publisher’s rationale for focusing on the diversification of its investment strategy for studios.

He mentioned that, as an additional approach to owning studios outright, the company intends to adopt other solutions like forming joint ventures and taking minority stakes in developers.

“The cost of developing a single title is on the rise. As such, owning studios outright means that while you can expect major returns, your downside risk is also substantial. The result of this is greater‐than‐expected earnings volatility. Therefore, rather than insisting on full ownership, we want to additionally adopt other approaches such as forming joint ventures and taking minority stakes so that we will be able to hedge our investment risk, thereby controlling our volatility and achieving both growth and the optimal balance sheet profile.”