Having reviewed our previous medium-term business plan, we turned our attention to the future and formulated our new medium-term business plan, “Square Enix Reboots and Awakens,” with the goal of evolving into a provider of a rich variety of content offering undeniable fun. We have positioned the three years of our new medium-term as a reboot to ready us for further growth. To that end, we will execute the following four strategies.
We will rebuild our portfolio of titles, revisiting each of our projects by asking ourselves whether a given project will help us make the shift from quantity to quality that will enable us to deliver undeniable fun. To this end, we will first ensure that our development process strikes a good balance between a “productout” approach driven by content reflecting the creativity that springs from our employees’ imaginations, and a “market-in” approach driven by customers’ voices and market trends. Secondly, we will prioritize titles with strong potential to be loved for years when allocating human talent and development investments, while also enhancing the skill sets of the core teams responsible for developing our titles. Thirdly, we will strive to establish a layered title lineup that enables a schedule based on the optimal cadence and timing of launches. By pursuing these three approaches, we will achieve our transition from quantity to quality.
Furthermore, when developing titles, we will place greater priority on providing our customers with fun that only Square Enix can deliver. With our major and mid-class HD titles, we will strive to maintain and grow our fan base by focusing on consistent fun. With our SD titles, we will strive to increase our hit rate by focusing on fun that ensures customers can play for a long time with confidence. With new IPs, we will prioritize fun that is novel and creative to enable the development of new fan bases. In parallel, we will strengthen our lineup of catalog titles by leveraging our rich IP library.
We will also begin revamping our development footprint to build the capabilities that allow us to produce fun that only Square Enix can deliver. To enable us to utilize our development resources more flexibly and efficiently across the Company, we will retire our organizational design based around business units and reorganize our development footprint with the goal of achieving operational integration. In order to transition to a development footprint that harmonizes individual creativity and organizational management, we will redefine the missions of producers and associated job types and enhance our development investment efficiency by establishing better internal support capabilities and revising the entire progress management process for title development.
We will pursue a multiplatform strategy for HD titles and create an environment where more customers across the world can enjoy major franchises and AAA titles, including from our back catalog. For SD titles, we will explore PC launches and other options in addition to releases for iOS and Android, while looking to maximize new user acquisitions on launch and over the course of the game’s life.
By expanding the platforms on which we launch our titles, we not only expect to increase opportunities for customers to enjoy our games, but we also intend to work actively to establish ongoing contact points for our titles by stepping up digital sales. While we plan to deploy promotional initiatives when launching new titles that better direct customers toward digital purchases, we also aim to strengthen our base of stable earnings by expanding sales from our rich library of catalog titles.
In the pursuit of more interaction with our customers, we aim to add greater sophistication to our publishing function. To achieve this, we will consolidate the marketing functions that were previously spread across our business units, expand shared knowledge and eliminate duplicate functions to drive greater efficiency, and enhance collaboration between the sales and marketing functions. We will also work on greater sophistication in our marketing by leveraging first-party data in launch campaigns for HD and SD titles.
Alongside these initiatives, we will be striving to create further earnings opportunities by offering IP across a range of entertainment experiences. First, we will establish a new IP business development department focused on global markets and expand geographic coverage of our licensing business. In doing so, we aim to further pursue a cross-media strategy and reach new markets. In addition, we want to generate internal synergies by integrating organizations affiliated with the Merchandising segment and establishing an organization that promotes the use of our IP across a range of entertainment experiences.
In our overseas business division, we plan to revisit European and American functions and organizational structures, thereby optimizing costs. Specifically, we aim to redesign their organizational structures in line with the new development organization in Japan. Another aim of ours from a development perspective is to promote collaboration across our Group. We will work to foster closer ties and encourage greater use of human resources across intra-Group boundaries, in part by strengthening the functions of our London development location.
In Japan, we are introducing organizational and HR-related initiatives aimed at balancing creativity and productivity. We started the process of building a flat structure in April 2024 aimed at increasing opportunities to discover untapped talent from within the existing employee pool and simplifying decisionmaking mechanisms. In our development functions, we are developing and rolling out a recruitment, promotion, and management appointment system based on the operationally integrated structure referenced above.
In parallel with building organizational structures, we want to focus more on talent development. We plan to both rebuild the training and development system largely for our new hires as well as introduce internal programs to enhance the capabilities of our junior and mid-level employees, and through such efforts, we hope to develop our internal human resources over the medium to long term.
We will also be investing in infrastructure including creating office environments that maximize employee productivity and refining our management accounting system to enable greater visibility into our business activities.
In terms of our capital policy, our approach is to give consideration to the balance between growth investment and shareholder returns when allocating capital. We have earmarked up to ¥100 billion for strategic investments (growth investments/shareholder returns) for the three years of the plan. When investing in growth, we will exercise strict selectivity in identifying investment opportunities. We will leverage insights from our current businesses and explore inorganic investments that will enable us to expand into additional domains and create greater stability. With regard to shareholder returns, we will pay regular dividends in line with a basic payout ratio of 30%, and following revisions to our approach to capital allocation, we have earmarked ¥20 billion to allow for the flexible repurchase of shares between May 14, 2024 and May 13, 2025, subject to considerations including strategic investment opportunities, financial conditions, and the share price. We have also revised the split between our interim and year-end dividend per share.
We are working across the Group to further enhance corporate value and have set the following three financial targets as yardsticks to gauge our progress toward achieving the management objectives above.
- • Achieve stable profit generation from the DE segment overall, and target a consolidated operating margin of 15% in the fiscal year ending March 31, 2027
- • Allocate ¥80-¥100 billion in total over the three-year period for strategic investments (growth investments/shareholder returns)
- • Target ROE of at least 10%, shifting to a management approach mindful of capital efficiency