In the fiscal year ended March 2023, we overhauled our studio portfolio in our existing businesses, and in the realm of new businesses, we stepped up our efforts in our focus investment fields. In May 2022, we announced the sale of three of our overseas studios and some of our IPs to the Sweden-based Embracer Group AB. The move was part of our efforts to right-size the Digital Entertainment segment’s title portfolio for the medium to long term and to optimize our resource allocation based on that. The divestiture’s objective was to consolidate the portion of our development footprint that lies outside of Japan.
We view this as only the beginning of our efforts to transform the structure of the entire Digital Entertainment segment, which is home primarily to our HD games. Going forward we will revisit our title portfolio from a medium- to long-term perspective and make our development organization stronger so that it is capable of producing the portfolio we envision. Specifically, I mean that we will further strengthen our internal development resources while also beginning to take our domestic and overseas publishing functions to greater levels of sophistication and optimization. Incredible performance gains by all types of consoles and devices have increased the difficulty and prolonged the timelines for developing game titles. Recruiting and training the teams and resources capable of producing high-quality content that our customers will find satisfying requires an amount of time reflective of these changes. In addition, recent years have seen the competition to attract talent intensify, and the number of external partner companies capable of handling large-scale development projects has diminished. For these reasons and others, it is currently extremely difficult to build a development organization that can ensure both quality and quantity with short turnaround times. Furthermore, as I stated at the outset, I believe that the most important elements in the creation of our Group’s content is the individuality and creativity of each and every one of our employees. Therefore, we need to pursue our structural transformation while giving due consideration to the various projects we currently have under way and the productivity of the employees involved in them. As such, it is my view that the development and construction of our internal development organization is a challenge that we need to roll up our sleeves and take ample time to tackle. It involves a diversity of issues including strengthening our ability to structure our development process, recruiting talent, and establishing training capabilities. We will devise an agenda based on these and work our way steadily through it step by step. In addition, customers are increasingly accessing our Digital Entertainment offerings—especially our HD games—via the digital world rather than the physical world. I believe that this gives critical importance not only to the distribution channels that we use to deliver our products to our customers, but also to the creation of appropriate contact points and communication initiatives within the context of our marketing and sales activities because it is these that enable our customers to learn about our content before they decide to purchase it. By increasing the sophistication of our publishing functions both in Japan and overseas, we will strive to maximize our sales of both new and catalog titles. We will work from a medium- to long-term perspective to optimize the allocation of our resources for both development and publishing and to build the optimal organizations to utilize those resources. In so doing, we will bolster the profitability of our Digital Entertainment segment and our HD games in particular.
I will next discuss new business domains. To date, we have named three focus domains: blockchain entertainment/Web3, AI, and the cloud. Among those, we have devoted special effort to the blockchain entertainment/Web3 domain. We launched a new internal organization dedicated to this domain in February 2022 and have also been investing in start-ups globally with the help of the business development organizations at our overseas offices. We will continue such efforts going forward. However, my intention not only in the case of the blockchain entertainment/Web3 domain but also the AI and cloud domains is to pursue our efforts by striking a good balance between our use of internal and external resources. In the case of AI in particular, we will revisit the missions of our internal AI-dedicated R&D organization and our AI-specialized Group operating company SQUARE ENIX AI & ARTS Alchemy Co., Ltd. In addition, we will strive to establish a structure within our Group that takes a broader view of the possibilities AI presents for our businesses, including in terms of investments and tie-ups with external partners. Furthermore, we will apply a broader definition to “digital entertainment content” and be more aggressive in trying our hand at new businesses, thereby enabling the expansion and development of the AI domain.