Square Enix's Financial Blow: $140M Loss From Game Cancellations

Square Enix Holdings Co Ltd (OTC:SQNXF) recently announced a significant change in its game development strategy, resulting in absorbing 22.1 billion yen (approximately $140.9 million) in what it termed “content abandonment losses.”

The company made this announcement as a caution to investors, stating that it would recognize this extraordinary loss for the fiscal year ending in March 2024, IGN reported.

See Also: Square Enix President Proclaims Quality Over Quantity As Lineup Gets Trimmed

This shift in approach primarily concerns the development of high-definition (HD) video games for PC and consoles.

According to Square Enix, the intention behind this change is to become “more selective and focused in the allocation of development resources.”

This decision follows a thorough evaluation of the company’s development pipeline. Unfortunately, Square Enix did not disclose the specific titles affected by these cancellations or revisions.

Square Enix’s decision comes amidst ambitious forecasts: in February, it projected a 16.8% increase in full-year sales, reaching 360 billion yen (about $2.3 billion), while anticipating flat profits at 55 yen billion (approximately $350 million). However, the company is now re-evaluating these projections to account for the impact of the recent writedown.

Despite these challenges, Square Enix has released notable titles in the past year, including Final Fantasy 7 Rebirth and Final Fantasy 16, with plans for upcoming releases such as Dawntrail for Final Fantasy 14 and games like Kingdom Hearts 4 and Dragon Quest 12 in development.

This strategic shift aligns with previous statements from Square Enix executives. In January, producer Naoki Yoshida hinted at the possibility of a new generation leading the Final Fantasy franchise, potentially with Final Fantasy 17.

Additionally, reports suggest the company is restructuring its organization in response to declining sales in its digital entertainment division, despite the success of titles like Final Fantasy 16, which reportedly sold three million copies during its PlayStation 5 exclusive launch week.

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Photo: Hannari_eli on Shutterstock.