Square Enix Plans to “Aggressively Invest in New IP” As NieR Automata Passes 4 Million Units

Today Square Enix announced its financial results for the fiscal year ended on March 31, 2019.

As you can see in the tables at the bottom of the post, net sales increased year-on-year, while operating income decreased.

The same can be said for the Digital Entertainment segment of the business, which includes video games. Games like Kingdom Hearts III, Shadow of the Tomb Raider, and Just Cause 4 drove higher sales compared to the previous fiscal year, but operating income declined due to the costs associated with launching the games.

On the other hand, digital sales of console and PC games have grown to an average of 40%, contributing to improving margins.

For MMORPG (Final Fantasy XIV and Dragon Quest X), net sales and operating income decreased year-on-year due to the lack of expansion launches, but revenue from recurring subscriptions remained “brisk.”

Square Enix shipped 26.55 million units of games, of which 15.94 in physical form, and 10.61 in digital download.

Speaking of mobile and browser games, most of those launched in the fiscal year ended in March 2018 and in the first half of the fiscal year ended in March 2019 underperformed.

In order to achieve its medium-term targets, Square Enix aims to enrich its title portfolio via regular launches of AAA games. Help its games have a long sales tail by encouraging repeat sales, especially in digital form. Maximize earnings by deepening user engagement by offering various content related to major existing IP.

Square Enix also plans to aggressively invest in new IP on an ongoing basis to enrich its portfolio.

On top of that, they intend to invest in new business models and tech including 3D modeling, artificial intelligence, blockchain, and XR (virtual, mixed, and augmented reality).

The corporate philosophy they’re going to follow is as follows:

“To spread happiness across the globe by providing an unforgettable experience.”

Below you can read the official explanation of the result for the Entertainment Business segment directly from the press release:

“The release of such new consumer console titles as “KINGDOM HEARTS III,” “SHADOW OF THE TOMB RAIDER,” and “JUST CAUSE 4” drove a rise in net sales compared to the prior fiscal year. Operating income meanwhile fell versus the prior fiscal year due to higher costs associated with the release of the new titles.

In the smart devices and PC browser area, many of the titles newly launched in the prior fiscal year and first half of this fiscal year performed below expectations and failed to generate additional revenue on top of that from existing games. A decrease in licensing income also resulted in a year-on-year decline in net sales and operating income.

In the area of massively multiplayer online role-playing games, net sales and operating income decreased
compared to the prior fiscal year, which had seen the launch of expansion packages for “FINAL FANTASY
XIV” and “DRAGON QUEST X,” but recurring subscription revenue remained brisk.”

On top of that, we get additional information from the results conference hosted by Square Enix via Wall Street Journal’s reported Takashi Mochizuki.

We learn that NieR: Automata passed 4 million shipments. Kingdom Hearts 3’s launch is considered a success, while Left Alive was very much a disappointment.

Most games planned this fiscal year will launch in the second half, which means between October 2019 and March 2020.

Last, but not least, there will be game announcements at E3, but information about unannounced games will already be disclosed this month.

Square Enix (sorry for delay!):

-NieR topped 4 million; GOTY edition helping
-KH3 launch successful; aim to expand sales with DLC etc
-Octopath remains stable
-Left Alive very disappointing
-Subscription for online games, especially FF14, remains solid

— Takashi Mochizuki (@mochi_wsj) May 13, 2019

-Most of games planned this FY to be released last half of term
-Thus not expecting huge profit contribution from them this FY
-Game announcements at E3, but not just that. Will start disclosing info about unannounced titles from this month

— Takashi Mochizuki (@mochi_wsj) May 13, 2019

You can find all the relevant tables and data below. If you’d like to compare, you can check out the results of the previous quarter released in February.