Square Enix‘s financial report for the quarter just ended reveals that the firm saw some noticeable declines through April, May and June. Even with the release of new titles, Square Enix’s digital entertainment segment, consisting of consumer game consoles (including handheld game machines) and personal computers, still declined compared to the same period of the previous fiscal year.
Net sales and operating income in Square Enix’s digital entertainment segment totalled ¥53 billion JPY ($392 billion USD), a decrease of 23.3 per cent from the same period of the prior fiscal year, and ¥14,140 million ($103 billion USD), a 17.5 per cent decrease from the same period of the previous fiscal year, respectively.
In the Massively Multiplayer Online (MMO) game sub-segment, net sales rose compared to the same period of the previous fiscal year due to growth in the number of monthly paying subscribers for Final Fantasy XIV.
Meanwhile, Echoes of Mana got off to a solid start following its April launch. Although, net sales in the games for smart devices and PC Browser sub-segment declined compared to the same period of the previous fiscal year, partially because of weak performances from existing titles.
Net sales for Square Enix weren’t looking too promising either, totaling ¥74 billion ($548 million), a 15.5 per cent decrease from the same period of the prior fiscal year. The firm’s operating income amounted to over ¥14 billion ($103 billion), a 16.7 per cent decrease compared to the same period of the prior fiscal year.
The future of Square Enix
However, Square Enix is still determined to strengthen the competitiveness and profitability of its digital entertainment, amusement, publication and merchandising business segments.
The report stated the result of digitisation and other technological advances increased the consumer game content sold via downloads rather than physical packages. Monetisation methods such as free-to-play, microtransactions and subscriptions have also given rise to a greater diversity of business models outside the confines of traditional one-off sales. As such, the consumer game market continues to grow.
Customers demand even richer gaming experiences on the market for games on smart devices, enabling advanced smartphones to provide a greater variety in game design and business models. Globally, the market’s size is also growing, with the Western and Asian regions leading the way. Square Enix’s report stated the firm is developing content and diversifying earnings opportunities in line with this changing environment, working to establish an earnings platform with the goal of enabling sustained growth in sales and profits.
The firm is also looking to sell stakes in its studio to improve capital efficiency, expecting companies like Sony, Tencent and Nexon to be possible buyers, according to MST Financial senior analyst David Gibson. In May, Embracer Group announced the agreement to acquire Square Enix studios Crystal Dynamics, Square Enix Montréal, and Eidos Montréal, and studio-related IP including Tomb Raider, Legacy of Kain and Deus Ex. Square Enix has made some investments of its own, investing in the cloud gaming company Blacknut.
Regardless of the acquisition, Square Enix will look to meet the demands of its consumers with its upcoming projects. A DMCA from Square Enix suggested one of the firm’s upcoming Tomb Raider projects, codenamed Project Jawbreaker, might be real. Last Stand Media, who leaked the script on a podcast, received a notice from Square Enix demanding the removal of the episode.
