Square Enix Announces Record Financial Results; Talks Blockchain/NFT, Potential New Studios & Acquisitions, & More

Today Square Enix announced its financial results for the fiscal year that ended on March 31, 2022.

Looking at the whole company, both net sales and operating income grew year-on-year. Both revenue and profits established new full-year records.

Looking at the Digital Entertainment segment, which includes games, revenue for HD games dropped slightly year-on-year despite launching multiple new titles. On the other hand, the performance of the MMO business grew sharply thanks to the launch of expansions for Final Fantasy XIV and Dragon Quest X, on top of a “sharp rise in monthly subscribers” for FFXIV.

The performance of existing smartphone games is defined as “somewhat weak” but sales still increased year-on-year due to the application of new revenue recognition standards.

We also get some interesting insight into Square Enix’s medium-term strategy, which is predicated over three points.

1. Strengthening the IP ecosystem
2. Take on new domains
3. Optimize business structure for COVID world

The sale of most of Square Enix’s western assets (Crystal Dynamics, Eidos-Montréal, Square Enix Montréal), and their IP (Tomb Raider, Deus Ex, Thief, Legacy of Kain, and more) to Embracer Group falls within points 1 and 3, and in the slides below you can find an explanation that we pretty much have already heard when the deal was announced.

In order to strengthen the IP ecosystem, Square Enix intends to cultivate robust IP (including the creation of new ones) and boost its game development capabilities by establishing new studios and possible acquisitions. It’s certainly interesting to see them mention this after selling three studios.

The point about taking on new domains is exactly what you may expect it to be, the plan to expand into the blockchain field.

The company has created a Blockchain Entertainment Business Division in February, and “encouraged by the results and feedback from the NFT business” with the first season of the NFT game Shi‐San‐Sei Million Arthur, they are producing a second season.

In the slides below you can read about the strategy in more detail.

The last slides mention investments made in Blockchain with Animoca Brands and The Sandbox, and in cloud gaming with Ubitus. “multiple potential global investment” in addition to those are being considered.

If you want to compare today’s results with historical data, you can check out the results published in February, related to the previous quarter.