The Rice Digital Friday Letters Page, May 20, 2022 – the state of Square Enix

The Rice Digital Friday Letters Page

A bloody good afternoon to one and all! It’s been a little while since we had a Letters Page, but we had a substantial bit of correspondence drop into our mailbox this week, so I thought it was worth discussing. As a longstanding and well-established company with a complex history, Square Enix remains a hot topic for many gaming enthusiasts, particularly those who have been enjoying video games for many years. So let’s talk about that!

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Original art by Masami. Original source

The state of Square Enix

Salutations!

This is my first letter and it will be quite the lengthy one, but I pray you’ll indulge me.

About two weeks ago, Square Enix announced they will be selling their Western studios – namely, Square Enix Montréal, Eidos and Crystal Dynamics, as well as various attached properties, prominently Deus Ex, Tomb Raider and Legacy of Kain – to Swedish conglomerate Embracer Group.

While the sale hasn’t been without criticism aimed at Square Enix for their intentions to use the income from the sale to further their ventures into the world of tech buzzwords such as “blockchain”, “crypto”, the “metaverse” and so forth (a mighty daft idea considering the state of the cryptocurrency market over the past few days), I think it might be a fine idea, even if Embracer’s public image isn’t without blemishes either.

Let’s face it, Square Enix never quite understood what to do with the properties they acquired upon purchasing Eidos in 2009, having stated that sales had not lived up to their expectations on various occasions and even cancelling some games – like a new title in the Legacy of Kain series – outright.

But that’s not what I want to talk about, but I feel it is required as context for the rumour that reared its head in the aftermath, which is that Square Enix would be readying itself for a purchase by a console maker, and the name being conjured up the most was Sony’s.

Square Enix's Final Fantasy VII Remake

Which isn’t really that surprising as both companies have been fairly close since the late 1990s, and their closeness grew as Sony helped Square during their merger with Enix, but the idea that Sony would buy SQEX outright is something I’d consider a ludicrous fantasy in the heads of console warriors who don’t understand Square Enix – which is not just a game studio and publisher, but also dabbles in music, merchandising and book publishing (ever heard of Fullmetal Alchemist? The magazine it ran in is owned by Square Enix!) – but also potentially dangerous, considering the way Sony’s PlayStation division is currently operated and by whom.

I am fairly certain that a Sony Interactive Entertainment ran by Jim Ryan would be very likely to turn Square Enix into a Final Fantasy and Kingdom Hearts factory and the massive, massive legacy of Square and Enix would left to wither and die. It would mean no potential remasters of games like Vagrant Story and Xenogears, no more Mana games, no HD-2D titles like Triangle Strategy and Octopath Traveler and even though the series is still a hit… probably no more Dragon Quest. How in the world could this be desirable to anyone but those who only care about two IPs and for whatever asinine reason believe these games should not be on other platforms?

Square Enix has problems, I concede that. Their release strategy has been odd – the Final Fantasy Pixel Remasters still haven’t hit consoles, their general PC releases are often delayed, of poor quality and for some reason prefer the Epic Games Store which many don’t understand – and the foray into techbro buzzwordism is worrying, but such is probably the state of a company that can give off the feeling of being run by old Japanese men who are in their position simply for being old men and thus are prone to being out of touch with what their audience want.

Yes, Babylon’s Fall is a “flop”. And according to Square Enix, Guardians of the Galaxy also underperformed. But Square Enix seems to be doing fine and I don’t think they’re in a state where their empire needs to be broken up and given to the one console maker that would care the least about their legacy.

Greetings from Germany

AnGer


Square Enix's Final Fantasy XIV

Guten Tag AnGer, und vielen Dank for your substantial letter. Plenty to ponder here, although broadly speaking I agree with pretty much everything you’re saying. There were all sorts of hot takes all over social media when Square Enix sold off those western studios — particularly given that no-one had really heard of Embracer prior to that news — but the reality is that Square Enix is almost certainly doing absolutely fine, and simply wanted to shed a bit of baggage so it can better focus on the things that it knows it does well.

Part of the problem with 21st century Square Enix is that they have been caught between being a western publisher and a Japanese publisher, and the two things have, over time, appeared to be fundamentally incompatible with one another.

Big western publishers — on a triple-A scale, I mean, which is where we’d count Square Enix for sure — tend to prefer focusing on multi-million sellers with a long tail, games as a service and all that nonsense hated by everyone except men in suits who spend all day around conference tables. They want DLC, they want microtransactions, they want games that are never “finished” that people will continue playing into perpetuity, they want continuous monetisation rather than “buy it and be done” — and many of them desperately seem to want blockchain crap.

Trouble is, most of Square Enix’s western developers weren’t actually creating that sort of experience. Both Avengers and Guardians of the Galaxy were attempts at adopting a “games as a service” model with continuous updates, but while they both had their audiences, a lot of gamers saw right through their cynical intentions from the outset and had no interest in getting involved. Meanwhile, long-running series like Tomb Raider and Deus Ex have always been designed as story-centric single-player experiences first and foremost — and those are difficult to turn into “lifestyle games” with continuous monetisation.

As such, we get ridiculous situations where Square Enix considered games that had sold millions of copies — figures that even some other triple-A publishers would have likely been very happy with — to be “failures”, likely simply because they weren’t continuing to bring home the bacon after launch week. But if a game hasn’t been designed like that, people aren’t going to keep ploughing money into it just for the sake of it — and if you do expect people to keep paying up after spending £50+ on a new title, you better damn well have something worthwhile to show for that additional expense.

Square Enix's Powerwash Simulator

The daft thing is that Square Enix has absolutely nailed this formula with Final Fantasy XIV, which is a runaway success to a degree that I don’t think anyone ever expected. This is an always-online, subscription-based MMO that you have to buy each expansion up front for as well as paying monthly — and yet very few people are complaining about that side of things, because the stuff they’re getting for that monthly subscription is worthwhile and has clear value. New story, new stuff to do, new items, new music — plus a feeling that you’re continuing to support one of the hardest working teams in game development. Nothing about FFXIV feels cynical.

I think the Sony stuff is mostly fearmongering after the various acquisitions we saw a while back — Microsoft buying Activision, Sony nabbing Bungie, and the news that Jim Ryan is working on further acquisitions going forward. Sony already has a stake in Square Enix (along with a bunch of other companies like Kadokawa, Epic Games, Discord and even Devolver Digital) so an outright acquisition might not be completely out of the question — but as you say, I think it would be a foolish move.

Despite shedding those studios, Square Enix seems to be handling itself absolutely fine, and while it’s complained about the underperformance of titles like Babylon’s Fall — which it did a terrible job of both marketing and generally positioning as a desirable game to anyone — it also has plenty of smaller successes on its hands worth celebrating. FuturLab’s Powerwash Simulator (published by Square Enix) is a great example, for one — that’s an immensely popular title among streamers and VTubers, and I suspect it’s sold like crazy as a result. Probably won’t hear about that one in a shareholders’ meeting though, hmm? It’s probably worth asking why.

As you say, Square Enix definitely has work to do — get those damn Pixel Remasters on Switch with a nice collector’s physical release for starters, you’ll sell a buttload! — but rumours of their being in trouble are, as the saying goes, greatly exaggerated.

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