Square Enix profits sinks, forecast unchanged

Dragon Quest VIII publisher reports a 67.7 percent year-on-year earnings decline, but retains outlook for fiscal year.

by

TOKYO--Today, Square Enix reported its consolidated results for the nine-month period ended December 2005. The company's net sales were up 13.2 percent to 68.9 billion yen ($585 million) compared to the same period last year. However, its operating income fell 75.5 percent to 6.33 billion yen ($53.8 million), and its net profit declined by 67.7 percent to 4.29 billion yen ($36.5 million).

Square Enix attributed most of its financial difficulties to its primary business--games. The company had a profitable nine months, releasing a number of hits: Kingdom Hearts II, which shipped 1.1 million units in Japan since its release in December; Romancing SaGa for the PS2, which shipped 500,000 units (Japan: 450,000; USA: 50,000); and Dragon Quest VIII, which shipped 430,000 units in North America. However, the numbers couldn't match those of the previous year, when Dragon Quest VIII shipped 3 million units in its first three days of release in Japan. The segment's sales fell 43.3 percent to 21.2 billion yen ($180 million), and its operating income plunged 95.1 percent to 974 million yen ($8.28 million).

Square Enix's other operations also saw year-on-year declines. Sales in its online game division fell by 9.2 percent to 9.62 billion yen ($81.8 million), and operating income fell 15.7 percent to 3.75 billion yen ($3.19 million). Sales at its mobile content division rose by 17.5 percent to 3.66 billion yen ($31.1 million), but its operating income fell 26.4 percent to 736 million yen ($6.26 million).

Square Enix's publishing division saw a small decline due to the lack of large strategy guidebook releases, but it continued to make a profit from comic books. The segment's sales fell 9.5 percent to 6.97 billion yen ($59.3 million), and its operation income fell 23.7 percent to 1.85 billion yen ($15.7 million).

Square Enix's miscellaneous operations division was the only part of the company that saw a rise in operating income, due to the success of its DVD/UMD movie, Final Fantasy VII: Advent Children. Sales from the division rose by 209.8 percent to 6.55 billion yen ($55.7 million), and operating income rose by 250.3 percent to 2.15 billion yen ($18.3 million).

Square Enix's consolidated results for the nine months period include the fourth-quarter balance sheet from Taito, which became a subsidiary of Square Enix at the end of September. Taito's sales for the three-month period were 20.9 billion yen ($178 million), and it made an operating loss of 234 million yen ($1.99 million). Interestingly, Square Enix posts Taito's figures as its "Amusement Machine" division, which seems to be the role that Square Enix has planned for its new subsidiary.

Square Enix has not changed the outlook for its full fiscal year ending March 31, 2005. The company expects net sales of 136 billion yen ($1.16 billion), operating income of 28.5 billion yen ($242 million), and net profit of 17.5 billion yen ($149 million).

Discussion

48 comments
Esskat
Esskat

The margin for Square is horrible, but I wonder why Square even report it. Is Square-Enix not a privately held company? I would like some insight on why a private company is publicizing its own misfortune, or if it is some foreign regulation required by the Japenese government.

acesion
acesion

Yeah FFXI looks nice on 360 and plays with NO lag whatso ever so i play it on that rather then my XPS 2. I think that if SQ sold thier games on xbox they would see a major surge in profits and probably beat ps2 sells of the game because of the lack of RPG's on xbox and the large Atach rate for Xbox owners though the lack of a strong Japanese base may lower the sells if they released thier games on xbox. I think they should just go multiplatform but they wont because SONY own about 20% and in spite of mistwalker being an 360 exclusive developer.

dru26
dru26

Theres a related news story stating that ff and DQ may be coming to 360, ff xI isn't coming out on 360 for nothin. It would be nice to see SEnix put a game in progressive scan already, as well.

rusty_ghia
rusty_ghia

I can't stand FF. I wish that they'd release another Vagrant Story. Or at least another Einh

99daniel99
99daniel99

dose every one on this post love ff.

davahsa
davahsa

Releasing FFXII on PS2 this holiday against a cheeper 360, relolution and persumably the PS3 will not sell as well as it would have this past holiday season. I hope they see good profits somewhere because they set such a good example to other companies...

noxian
noxian

Optimusv2, its pretty clear in all your posts yer a pretty big MS fanboy but how does this confirm they will multiplatform?? it says nothing of the sort. it says that S-E didn't release a big title over the last 9 months. If MS wants Square they'd better make their 360 look more attractive then less than half of the original XBo's gamer base in the same period in Japan. A drop isn't considered good, but if you know why, its not going to kill you. In this case it seems like S-E knows exactly the reason for the drop, no major title like DQ8. And coming up, a major title , FFXII. I'm no XBox hater, but this article only says that if S-E wants to maintain the same high profits as a DQ-release, they need to consistantly pop out top name titles. Multiplatforming isn't even in the equation and it wouldnt have saved their profits. "Non-big title multiplatformed" just means they produced a game for multiple platforms that don't sell as well. they MIGHT get extra income off the other platform version, but its pretty unlikely a KH2 (supposedly their biggest of the 9 month period) released on 3 consoles would've topped the 4 mil units for DQ8. Especially when you consider the PS2 already has the vast majority of the JRPG playerbase to begin with, if it can only sell 1 mil on the PS2 it would sell even less on the others. all this pretty much just adds to S-E needed a big DQ-equivilent title, NOT multiplatforming. Hell when you consider how small of a base the XBox has in Japan (where the vast majority of the DQ8 sales came from; 3.5 mil Japan alone versus 500k outside); would multi-ing on to the XBox help??? pretty unlikely

FuguNabe
FuguNabe

I foresee Square-Enix being completely multiplatform to maximise profit from game development. It's something that they should consider. I also foresee a possible remake of a certain franchise in the didtant future though I don't believe they should. As for Amusement division most people here in Jpan would recognise that as the arcade scene which is very alive here. I can't see S-E making arcade games unless they allow Taito to still be in control of creativity within that Amusement division. Anyhow I must say that they are losing a fair bit of $$$. They'll likely bounce back on FFXII and if the next gen FF is a huge success. Not to mention the never been release in western country FF3 remake on the DS (a system that's been outselling PSP almost 3 to 1 especially in Japan) will do well too. I see each platform having S-E exclusives and some games coming out on all three consoles and the PC as a multiplatform. We'll see...

Game-o_O
Game-o_O

Square-enix isn't doing as bad as everyone thinks, like usual nobody posted anything about its MMORPG net-profits. Although it makes everything else decline, its gaming part is up like hell :/. -- Off course they aren't make profit, they're still waiting for Final Fantasy XII to save them again! Remember when they made Final Fantasy :Spirits Within? - I bought it, was great. But, it didn't hit off cause it was an original movie [not a spin off]. They said they would never do it again since it lost so much money, yet what happends to a movie they release about FF7? OMG awesome net profit. Final Fantasy XI keeps them alive, XII & the PS3 version (TBA) will make them sky rocket again.

forever_blank
forever_blank

Well... Maybe last year was a big year for them, if not...

Maquis_UK
Maquis_UK

who cares about ff7 ? i think maybe it belongs in the middle ages of gaming like dual thumbed controllers ( ! ) ... just give us nintendo fans ... who were the first square fans anyway ... our REVOLUTION sized FF : CC please . never mind umd.

NeoJedi
NeoJedi

Final Fantasy XII should put them back in the green in no time flat.

chibi-acer
chibi-acer

I hope FFVII:Advent Children does well for SE in the the US. The outlook seems positive, but there are a lot of warez pirates in the US.

Orasion_Seiz
Orasion_Seiz

with the release of FFXII on the way,i doubt Square-Enix will have another good year.

Nickdan
Nickdan

They should release game sale profits in the same way they release movie profits that would be something id like to see. That way you could tell how much one game made over another I think that would be a pretty cool thing someone get on that STAT.

mrkalamazoo
mrkalamazoo

How would a Capcom game help Square-Enix profits? Anyhow, I'm not supprised to see a decline in sales from this company. They only published one memorible game in the US last year (DQVIII). I was always against the Enix merger, and maybe now it's finially starting to take it's toll.

cyprus646
cyprus646

Re5 should fix that deficit problem of there dont wry ; ).

Poltergeist13
Poltergeist13

Square Enix wants to make some more cash, re-release Final Fantasy X, Final Fantasy X-2, Dragon Quest VIII, some other oddball rpgs on Xbox. Rework Dragon Quest for Xbox 360 that would be awesome. 3rd party exclusives make no sense, put a little more money into development for all platforms = more money made off the game. Oh I forgot their a japanese company. They can't p*** off Sony.

mikekare79
mikekare79

Am I the only one who is tired of games where you tell your character what to do instead of doing it yourself? (walking around fighting for hours to build experience is boring too)

Imavnas
Imavnas

I dont think it has anything to do with them releasing primarily only on a Sony system people. It has to do with the fact that they havent had a major worldwide seller since FFX, lol. DQVIII is doing pretty good considering DQ isnt very popula rin the US, but its not enough. From the looks of it you can attribute the decline in sales too the RIDICULOUS and CONSTANT delays of FFXII.

poohhead1
poohhead1

serves them right for being sony lovers.

cusoker
cusoker

Looking at the headline you would think that they are in a dire financial situation. The numbers are down over a 9 mo. period. It really only has to do with the fact they havent released a huge title in a while. Jap style RPG's dont sell well over here. 3 million copies of DQ VIII in the states isnt going to happen.

ShockerD19
ShockerD19

with gradia 3 releasing in february, and kingdom hearts 2 coming in march, and valkyrie profile coming to psp in march, im sure their numbers will come out fine.

Octagon
Octagon

they PROFITED 36million dollars. PROFIT! With a lot of operating costs tied into 2006 launch titles, their Profits for this year will be more. Why do a lot of you posters say "SEEEE, they need to publish on xyz or they'll go under!" (exaggeration)? They're making more money than a lot of companies even do from net sales. % is another matter though.

Konfusion
Konfusion

I think they could profit from Nintendo's philosphy of greatest idea versus biggest budget. RPGs could use a twist, and if anyone can do it, it's SquareEnix.

thelamborn60
thelamborn60

While this may be down, next year will most likely beat last year for square enix, so there are no worries for the company.

_sean_05
_sean_05

lay off the online games. online games suck.

GOLIATHtheGREAT
GOLIATHtheGREAT

this is what happens when you dont give the people what they want! and they want more...............................................Final Fantasy!

zhuojloh
zhuojloh

I know why, because Dragon Quest VIII has no progressive scan. That's why.. LOL

mikesea
mikesea

Best hurry up and get FFXII, FFVII:AC & KH2 released worldwide quick smart. Please.

mdlight
mdlight

I don't think not putting games on multiplatforms is the issue. Lets think: FF X-2 wasn't a huge success (it was moderately good though) I don't think Star Ocean caught many peoples attention Most people were looking forward to a FF12 release in 05....but that never came Then there was the possibility of a KH2 05 release...but that never came yet. Squares most anticipated releases have yet to show up . Thats probably the reason for the decline in sales.

Optimusv2
Optimusv2

When a company can release so many hits and still see their profits take a dive is a sign that they must start showing some damn love to xbox 360 owners. The original xbox had like 24+ million users world wide and thats money they passed up. Hideo Kojima would've made mgs4 for the 360 if the damn rumble roses team didn't get 360 dev kits first... :(

Optimusv2
Optimusv2

When you run such a big company no decline is a good thing. You either match your previous sales or surpass them declining is a bad thing because every decline is treated as if we were down to our last dollar and lost this much we'd be done. So they take it very seriously.

HuhJustaBox
HuhJustaBox

I am sick of these conglomerate companies acting like they are losing tons of money. Hello!!!! They still made profits in the tens of millions!!! Just because this year does not earn more money than last year does not mean it was not successful. If company A makes 10 million this year, they act like they are losing money if they don't make at least 15 million the following year. Remember the article a few months ago that was pedaling trash of the video game industry losing money for the year of 2005. They in fact were not losing money, they just were not making as much as 2004. Due to no new GTA, MGS, and few other blockbuster titles made their profits not as much, but the articles were making it out like they were losing money. Then at the end of the year they ending up posting profits that exceeded 2004 anyways. Never believe statistics, they can be manipulated in more ways than console specs are with fanboys. Bottom line is that they still made a huge profit!!!!!

damienxxx
damienxxx

Maybe if they stopped delaying FFXII in favor of releasing crap based on a game released nearly a decade ago. GIVE US OUR FFXII!!

Nintendo_Boy1
Nintendo_Boy1

Maybe if they would pultiplatform there games they would make more money COMEbackto nintendo square thats where the money is

jmford_1
jmford_1

That sucks, but if they weren't so single platform minded, I'd have a copy of DQ VIII and FFXII on my Xbox 360, Xbox or Gamecube.

death919
death919

Meh, this year marks the relese of Final Fantasy XII. It will sell 5 million easily.

Optimusv2
Optimusv2

This just solidifies the fact that at E3 square enix will announce that its next gen installments for final fantasy and dragon quest will also be coming to the 360 as well as the ps3.

samuelroberts
samuelroberts

This is what happens when you don't release AC in America, fools! Next year should be good, though. KH goes international, FFXII is released and AC also goes international. Still love their games...

rcrofton
rcrofton

Their outlook is pretty correct, considering that Final Fantasy XII will almost be guaranteed to be a hit.

Viquist
Viquist

What exactly is this "Amusement Machine"??? Either way things aren't sounding too well for SQUARE-ENIX but then again they never are. I don't see how they could always come up short but they always tend to do so. Things will get better for them (or Nintendo will buy them out so they can have FF games again.) Is this "Amusement Machine" a console? could they be planning to release a console under the Taito name and have FF only on their console? Nah, but it would sure be a thorn in Sony's side if they ever did

frankeyser
frankeyser

you know all these finacial reports really mean nothing to me... so they make money... or they make more money... i really dont care as long as they keep putting out good games... and mario rpg 2... hahahaha

Donkeljohn
Donkeljohn

Ouch! 67% decline in Net Profit. That could be addressed by trimming fixed costs. . . or overhead.