Square Enix, the creators of the highly popular Final Fantasy franchise, has recorded a massive $140 billion loss due to canceled games after a development pipeline review.
The company told its investors to expect "content abandonment losses" amid efforts to streamline its development pipeline. The Japanese company had issued a notice where it explained those losses would be recognized on its books for the fiscal year that ended in March 2024.
Square Enix Records $140 Billion Loss
(Photo : Yuichi YAMAZAKI, AFP, Getty Images / Screenshot taken from official website)
Square Enix also said that the financial loss comes after the board of directors voted to revise the company's approach to the development of "high-definition games with the intention of being more selective and focused in the allocation of development resources."
It also said that the massive loss was found after a close examination of the Group's development pipeline. Square Enix is responsible for developing console and PC titles within its HD Games segment.
These feature various entries in major franchises such as the Final Fantasy series, Dragon Quest, and Star Ocean. The company said earlier this year that it wanted to revitalize its production process by focusing more on internal development and large-scale titles, according to GameDeveloper.
At the start of the year, the Japanese company held a financial briefing where the president and representative director, Takashi Kiryu, indicated the company wanted to become less reliant on external studios and improve the quality of its biggest releases.
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His remarks tallied with another report in January that indicated Square Enix would be assessing its development pipeline with the of making better but fewer games.
The company noted in its latest fiscal report for the nine months that ended on Dec. 31, 2023, that net sales fell by 2.6% year-on-year to around $1.2 billion.
The situation comes as Square Enix, in February, had forecast full-year sales of roughly $2.3 billion. This figure is an increase of 16.8% over the company's previous financial year estimates. However, it predicted that profit would be flat at roughly $350 million.
Streamlining Its Development Pipeline
The company released Final Fantasy 7 Rebirth in February but it has yet to announce a sales figure for the major title. Some analysts have suggested that the game has struggled to meet expectations, said IGN.
There were also other games that were released in the current financial year, including Final Fantasy 16, Final Fantasy Pixel Remaster, and Foamstars. On the other hand, Dawntrail, the expansion for the ongoing MMO, Final Fantasy 14, will launch in the next financial year, in late June.
The Japanese company also has Kingdom Hearts 4, the third game in the Final Fantasy remake trilogy, and Dragon Quest 12, in development. An analyst, Daniel Ahmad, said that the situation may not have a significant impact on the scope of the third game in the Final Fantasy trilogy remake.
However, he argued that it could lead to Square Enix reconsidering its approach to how it handles direct sequels that heavily rely on a prior player base buying the new title. This comes as Final Fantasy VII Rebirth has experienced slow sales, according to Inverse.
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