Square Enix announces a new medium-term business plan: “Square Enix reboots and wakes up: 3 years laying the foundation for long-term growth”

Square Enix has Announced the establishment of a new medium-term business plan covering the fiscal year ending March 31, 2025 until the fiscal year ending March 31, 2027, which is called “Square Enix reboots and wakes up: 3 years to lay the foundation for long-term growth. .”

The objective of this business plan is to overcome the challenges faced in its previous medium-term business plan, including low profitability of its high-definition gaming sub-segment, a slowdown in the gaming sub-segment for smart devices and PC browsers, insufficient franchise-by-franchise portfolio management and some gaps in Square Enix’s management infrastructure.

The four pillars of your new business plan are the following:

Pillar Initiative
(1) Improve productivity by optimizing the development footprint in the digital entertainment (DE) segment. Focus on developing titles that offer “Fun” that only the Group can create and build the development structure.
(2) Diversify profit opportunities by strengthening customer touchpoints. Switch to a cross-platform strategy. Build continuous points of contact with the customers of our titles by intensifying digital sales. Create customer engagement by increasing the sophistication of the editorial function. Generate the opportunity for new revenue by offering IP in a variety of entertainment experiences.
(3) Implement initiatives to create additional fundamental stability. Rebuild overseas business divisions from scratch. Introduce policies on organization and allocation of human resources in Japan. Improve business infrastructure by implementing the PDCA cycle in a timely and appropriate manner.
(4) Striking a balance between shareholder returns and investment in growth when allocating capital. It allocates a maximum of 100 billion yen for total strategic investments over a three-year period (20 billion yen is earmarked for share buybacks over the next year).
By driving a new medium-term business plan, we will move from quantity to quality and evolve to offer a variety of content that guarantees “fun” around the world.

The complete breakdown of each pillar is as follows:

(1) Improve productivity by optimizing the development footprint in the digital entertainment (DE) segment

(2) Diversify profit opportunities by strengthening customer touchpoints.

(3) Implement initiatives to create additional fundamental stability

(4) Allocate capital taking into account the balance between growth investments and shareholder returns.

(1) Improve productivity by optimizing the development footprint in the digital entertainment (DE) segment

    • Go from quantity to quality
      • The Group (Square Enix) will pursue a shift from quantity to quality as its medium and long-term philosophy with respect to the DE segment portfolio. To do this, you will first work to establish the optimal portfolio, striking a balance between a “product outward” approach that maximally reflects the imagination of your employees and a “market inward” approach that leverages customer voices and data. to inform development efforts. It will strive for a regular release cadence, focusing its development efforts and investments on titles with substantial potential to be loved by customers for years.
    • Focus on developing titles that offer “fun” that only the Group can create.
      • With the aim of developing titles that provide unforgettable experiences to customers and guarantee enthusiasm, the Group intends to focus on the following points. First, aware of the need to release HD titles that help attract additional fans to the Group, the Group will periodically release AAA titles in its major franchises to maintain and develop its fan base. Additionally, the Group will strive to increase its success rate in SD games by launching a carefully curated selection of titles. Additionally, you will explore ways to leverage its rich library of intellectual property.
    • Establish an internal development footprint that provides “fun” that only the Group can create.
      • The Group will withdraw its business unit-based organizational design and strive to establish an operationally integrated organization with the aim of revamping its internal title development footprint and bringing more capabilities in-house. Furthermore, maintaining a balance between the creativity of its individual employees and organization-focused management, the Group will move to a project management structure. To this end, the Group will redefine the mission of producers and other related employees and organize its internal support structure. In addition, the Group will improve the efficiency of its development investment by reviewing the overall title development management process.

(2) Diversify profit opportunities by strengthening customer touchpoints.

    • Switch to a cross-platform strategy
      • For HD titles, the Group will aggressively pursue a cross-platform strategy that includes Nintendo, PlayStation, Xbox and PC platforms. Especially for major franchises and AAA titles, including catalog titles, it will create an environment where more customers can enjoy our titles. Additionally, it will also devise a platform strategy for SD titles that includes not only iOS and Android, but also the possibility of PC releases. In addition, the Group will strive to maximize the acquisition of new users when launching a title and that of returning users after initiating management of the game’s operation.
    • Build continuous points of contact with the customers of our titles by intensifying digital sales.
      • The Group will strengthen the user flow of digital sales of new titles at the time of launch in connection with promotional initiatives. Additionally, you will create the opportunity to generate revenue across the broad range of titles in our catalog, strengthening your revenue base by expanding sales of catalog titles. In addition, the Group will participate in initiatives focused on the acquisition of PC users.
    • Create interaction with clients by increasing the sophistication of the editorial function.
      • The Group will pursue integrated sales and marketing operations in Japan and streamline publishing by consolidating marketing functions that were previously spread across creative business units, expanding shared knowledge and eliminating duplicate functions. Additionally, create a new reporting line to improve collaboration between sales and marketing functions. You will also address the increasing sophistication of marketing by leveraging first-party data, including through the use of CRM solutions and data analytics, by developing an advertising campaign for HD and SD titles.
    • Generate the opportunity for new revenue by offering IP in a variety of entertainment experiences.
      • The Group will follow a cross-media strategy capable of approaching new markets. Specifically, it will expand the licensing business area by establishing a new department focused on developing intellectual property businesses in global markets. Additionally, you will create an organization that makes more active use of its intellectual property by offering it in all media formats. The Group also hopes to generate synergies through the integration of organizations affiliated with its Merchandising segment.

(3) Implement initiatives that create greater foundational stability.

    • Rebuild overseas business divisions from scratch
      • The Group has begun to optimize costs in its European and American offices through structural reforms. It will also promote collaboration within the Group in Japan and abroad and strengthen the functions of its development site in London. For example, the Group intends to work to strengthen close collaboration between its divisions in Japan (creative studios and publishing) and enable greater mobility of talent between them and the Group’s editorial functions abroad.
    • Renew policies on human resource allocation and investment to balance both “creativity and productivity” in Japan
      • The Group will build its flat organization by increasing selection promotion opportunities to seek new talent in our company and streamline the decision-making process. Specifically, it will launch a new human resources system in line with the integrated management of development functions, building a new system for hiring, promoting and appointing managers. In addition, the Group will rebuild the training system for new graduates and introduce internal educational programs to enhance the capabilities of mid-level and junior employees.
    • Improve business infrastructure by implementing the PDCA cycle in a timely and appropriate manner.
      • The Group will seek to improve its management accounting system that allows greater visibility of commercial activities. Furthermore, the Group will not only make infrastructure improvements that maximize the productivity of its employees under the hybrid work system, but will also build an attractive office environment that helps unleash the creativity of its development teams.

(4) Allocate capital taking into account the balance between growth investments and shareholder returns.

The Group has formulated a capital allocation policy that takes into account the balance between growth investment and shareholder returns, allocating a maximum of ¥100 billion for total strategic investments (growth investments or shareholder returns) for a period of three years.

Regarding growth investments, the Group will carefully select investment opportunities that contribute to the improvement of corporate value and will use insights from its own businesses. You will explore the possibility of making inorganic investments designed to expand your business domains and create greater stability.

Meanwhile, to reward its shareholders, the Group will issue periodic dividends based on a basic policy of achieving a dividend payout ratio of 30%. Additionally, in a change from its previous capital allocation approach, the Group has set aside ¥20 billion for funding potential buybacks of its own shares to be executed flexibly between May 14, 2024 and May 13. May 2025 based on consideration of factors including strategic investment opportunities, the Group’s financial position and its share price. The firm has also revised the breakdown of its dividends per share (interim dividend and year-end dividend).

Through these initiatives, the Group will strive to further enhance its corporate value.

More information is available through Presentation of Square Enix’s medium-term business plan.

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