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New releases can't stop sales and profits falling at Square Enix

New releases can't stop sales and profits falling at Square Enix

February 7, 2019 | By Chris Kerr

Sales and profits are down at Square Enix, which just posted its financials for the nine months ended December 31, 2018. 

Consolidated net sales dipped by 4.8 percent year-on-year to 179.1 billion yen ($1.6 billion), while profits decreased by 60.1 percent to 8.9 billion yen ($81.1 million) over the same period. 

That downturn is partly due to the restructuring of Luminous Productions, which saw Square book an extraordinary loss of to 3.7 billion yen ($33.7 million). 

Looking at the company's Digital Entertainment segment, which houses its video game operations, net sales over the past nine months dropped by 9.1 percent to 130.5 billion yen ($1.2 billion), while operating income fell by 59.3 percent to 14.8 billion yen ($134.7 million). 

That's despite a strong showing from new releases like Shadow of the Tomb Raider, Just Cause 4, and Octopath Traveler -- which actually bumped up quarterly net sales, despite not being able to offset a long-term decline.

On the smart device and PC browser front, many of Square's newer titles struggled to meet expectations, and failed to generate additional revenue on top of existing games. 

A decrease in licensing income and an increase in advertising spend also contributed to a year-on-year decline in net sales and operating income. Square claims it must now focus on selected titles, and releasing games that utilize existing properties in order to create new hits and reinvigorate its smart device and browser business. 

In the area of massively multiplayer online games, net sales and operating income also decreased on the previous year, largely due to a lack new releases and expansions. 

Moving forward, Square expects net sales and profits to hit 270 billion yen ($2.46 billion) and 175.1 billion yen ($1.6 billion) respectively by the end of the fiscal year on March 31, 2019.

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