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High launch costs see profits tumble at Square Enix

Square Enix
Kingdom Hearts III Square Enix
Kingdom Hearts III

The releases of Kingdom Hearts III and Shadow of the Tomb Raider drove big revenue for Japanese gaming giant Square Enix but also brought increased launch costs, which led to a sharp decline in the company's profits - more than 28 per cent.

According to the latest report from gamesindustry.biz, Japanese gaming giant Square Enix didn't manage to raise their profits despite launching two big games - Kingdom Hearts III and Shadow of the Tomb Raider.

In the fiscal year that ended on 31 March 2019, Square Enix reported an 8.2 per cent rise in their revenue - to $2.48 billion. While this may look like a massive revenue, Square Enix's net profits fell by a big 28.5 per cent, to $169 million.

Furthermore, gamesindustry.biz report that Square Enix's game-focused Digital Entertainments segment accounted for the majority of its annual revenue - $1.87 billion, which is up 6.9 per cent over last year. However, the profit fell 33.1 per cent year on year to $266 million.

According to Square Enix, this is due to "higher costs associated with the release of the new titles". These titles include Kingdom Hearts III, Shadow of the Tomb Raider, Just Cause 4 and Octopath Traveller. All of these titles drove revenue higher but as mentioned, higher launch costs ultimately kept the profits down.

In the previous year, Square Enix sold 25.55 million units of their games. These numbers include both retail and digital downloads and they are up from 23.74 million from the previous year. Some may expect that Square Enix increase this number even more in the current fiscal year, but the company is not that confident and they forecast a significant drop in unit sales - 18.27 million units.

The company also confirmed that their new mobile and browser related releases did not perform to their expectations. Additionally, Square Enix's MMORPG revenue and operating income also declined over the prior year.

All in all, Square Enix's profits weren't as expected in the fiscal year behind us, but the company certainly have a couple of trick up in their sleeve and it's possible that we see some of them revealed at E3 2019.

Square Enixpicture showing a fightOctopath Traveler

Fore more Square Enix news, check out the latest expansion of their Montreal-based studios.

Thanks, gamesindustry.biz