A significant investor in Square Enix, the renowned creator of the Final Fantasy series, is pushing for a critical reassessment of the company’s business strategy due to underwhelming financial performance. 3D Investment Partners, which holds a 14% stake in Square Enix, released a 100-page critique detailing a decline in revenue and profit margins, attributing these issues to an excessive fragmentation of the development portfolio and rising costs. They argue that Square Enix must re-evaluate its management practices to unlock the potential of its beloved intellectual properties and enhance corporate value.

The investor's letter highlights the contrast between Square Enix and other Japanese gaming giants like Capcom and Nintendo, suggesting that current management is failing to meet the expectations of shareholders and gamers alike. This call for change comes in the wake of recent layoffs and structural shifts within the company, alongside plans to integrate AI technologies into their development processes.

What challenges is Square Enix currently facing in the gaming industry?

Square Enix is grappling with declining revenue and profitability, excessive development costs, and management fragmentation. Recent critique from a major investor has emphasized the need for a strategic overhaul to revive its operations and meet the expectations of both shareholders and fans.

Square Enix, founded in 1986, is known for its iconic franchises, particularly Final Fantasy and Dragon Quest. The company has historically been a leader in the gaming industry, pioneering many game design elements that have become standard today. However, recent issues have raised concerns about its ability to innovate and maintain its stature in a competitive market full of dynamic changes.