- Despite releasing big titles like Final Fantasy 16 and Final Fantasy 7 Rebirth, Square Enix suffered a 70% loss in net profit this fiscal year.
- The studio’s operating income also went down by nearly 30%.
- It blames the increased development cost of AAA games for this loss.
Square Enix is among the most notable Japanese teams in the industry. With decades of experience, the studio is making key shifts to its business after suffering declining profits.
While the publisher continues to launch major AAA releases today, its latest financial report is even more concerning. According to Square Enix, its net profit was down by 70% year-on-year after losses in the digital entertainment segment.
Why it Matters: Many recent games from Square Enix have been limited to PlayStation, which seems to have been harmful to the gaming giant.
According to the official report on FY24, profit was down 69.7% compared to the previous fiscal year. The operating income also decreased by 26.6%.
Elsewhere, the Digital Entertainment segment, which includes major AAA releases, took a hit. Square Enix confirmed a nearly 40% operating income loss year-on-year in this segment, citing increased development costs.
The most surprising part of this situation is that the gaming giant launched two huge Final Fantasy games within the last fiscal year: Final Fantasy 16 and Final Fantasy 7 Rebirth.
The former sold 3 million units, and the latter received incredible reviews. However, it seems safe to conclude that both games failed to deliver the profits this team wanted.
Still, the financial report notes a 3.8% increase in the overall net sales. This could lead to Square Enix reducing its budgets for AAA games moving forward. The studio has also confirmed intentions to go multiplatform.
Square Enix basically confirmed my reporting:
-its AAA games failed to meet profit expectations
-scrapped business unit, focus on quality over quantity
-to release its top-tier games on a wider variety of games, including "Nintendo platforms, PlayStation, Xbox and PC."— Takashi Mochizuki (@6d6f636869) May 13, 2024
The gaming giant cites the termination of development efforts on various projects as another reason for the less-than-stellar results, hinting that it has canceled more than one game recently.
Moving forward, we expect Square Enix to perform better as it aims to utilize the players across all major platforms.
While sticking with exclusivity may have been beneficial in the short term, the publisher has failed to turn a profit. It has long needed a fresh start, so the new measures could help it catch up to others like Sega and Capcom.
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