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Square Enix reports decreased sales, increased profits

Dragon Quest XI publisher only takes a 2.5% hit to revenues despite 32% dip in software unit sales

Today, Square Enix posted its financial report for the year ending March 31, 2018. The report reveals that, despite a 32% decrease in software sales, Square Enix held fairly steady with only a slight decrease in net sales and a 22% increase in operating income. Not bad for a quiet year.

In the report, Square Enix shows net sales of ¥250.3 billion ($2.3 billion), a 2.5% decrease from the previous year. Its operating income, however, was up 22% from last year at a total of ¥38.1 billion ($349 million). Digital entertainment continues to drive Square Enix's profits, bringing in ¥191.4 billion ($1.8 billion) in net sales and ¥43.4 billion ($397 million) in operating income.

Square Enix cites the increase in operating income and decrease in net sales as stemming from strong digital sales and few new releases, respectively. The continued popularity of 2017 release NieR: Automata also contributed to the increase in operating income.

In terms of new releases, Square Enix largely clung to the familiar in the last year, releasing only two new major titles in Dragon Quest XI and Dissidia Final Fantasy NT. Overall, Square Enix sold 23.74 million units of software worldwide, down 32% year over year.

Net sales from smart device and browser games continued to climb and made up the bulk of digital entertainment sales, reaching ¥93.8 billion ($858 million) in net sales by the third quarter of the 2018 fiscal year. This was driven by new games such as Dissidia Final Fantasy Opera Omnia as well as older titles like Final Fantasy Brave Exvius and Kingdom Hearts Union X.

Square Enix aims for further growth in smart device sales with both new releases and international releases of domestic titles. However, Square Enix projects that, at least for the third quarter of this year, disc sales for ongoing MMO properties such as Final Fantasy XIV and Dragon Quest X will decrease due to a lack of new expansion content. Square Enix plans to mitigate this with "large updates" instead.

As for HD games (non-MMO, non-browser PC and console games), Square Enix looks to expand its IP portfolio and return to net sales growth in the coming year, specifically in the third quarter. Currently, Octopath Traveler is the only announced new IP, but there's a reasonable expectation of high sales for Shadow of the Tomb Raider and Kingdom Hearts III. Square Enix's report additionally mentions multiple new releases both major and mid-sized to bring in an increase in revenue, and with Square Enix's coming E3 livestream, announcements of what that entails may be imminent.

For the coming fiscal year, Square Enix projects an increase in net sales to ¥270 billion ($2.47 billion) and a decreased operating income to ¥30 billion ($274 million). ¥207.5 billion ($1.898 billion) of the anticipated net sales is expected to come from digital entertainment.

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