Digital sales boost profits at Square Enix

Packaged games declined in Q1, but console downloads, MMOs and smartphone games were all on the rise

Square Enix reported a 45% increase in operating profit for its games business in the first quarter, almost entirely down to digital games of various kinds.

In the three-month period ended June 30 2017, sales of first- and third-party packaged games declined year-on-year, dragging HD Games revenue down from 12.2 billion to 11 billion ($99.3 million). However, download sales of catalogue titles like Nier: Automata actually drove an increase in operating income.

The last expansion for Final Fantasy XIV led to an increase in both monthly subscribers and MMO revenue, which rose from 5.6 billion to 9.3 billion ($84 million) year-on-year. Smartphone and browser game revenue also increased versus Q1 last year, from 19.7 billion to 23.7 billion ($213.9 million).

The Digital Entertainment segment earned 44.2 billion ($399 million) in revenue, up 17.7% over the same quarter last year. Operating income for the segment was 13.7 billion ($124 million), a 45% increase year-on-year.

As an entire company, Square Enix earned 57 billion ($514 million) in revenue, up 11%, and 8.4 billion ($76 million) in profit, up 57%.

Next quarter is likely to be even stronger for Square Enix, with Dragon Quest XI already generating huge interest in Japan. Despite only being released on July 29, it has already racked up a combined 3 million units of downloads and shipments across PlayStation 4 and 3DS.

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