Kingdom Hearts III couldn’t lead a strong fiscal year for Square Enix

Revenue up, profits down

Square Enix’s financials look a little Goofy. The Japanese publisher had a weak fiscal year despite a release slate that was headlined by the long-awaited Kingdom Hearts III. Sales aren’t the issue, though. The costs associated with getting the games to market was the problem.

Square Enix declared a 28.5 percent year-over-year decline in profits, posting a net gain of $169 million. Sales (up 7.62 percent) and revenue (up 8.2 percent) both increased. Gains were to be expected considering that Kingdom Hearts III, Shadow of the Tomb Raider, Just Cause 4, and Octopath Traveler all launched within the last fiscal year. However, Square Enix says that “higher costs associated with the release of the new titles” ultimately diminished the impact of the strong sales.

By all indications, it seems as though Square Enix over-marketed in the past year. Advertising expenditures climbed by $62.9 million from the fiscal year that ended on March 31, 2018. The gap in 2018 and 2019’s profits is approximately $67.3 million. It appears as though the marketing efforts were too ineffective to warrant the inflated budget — although Square Enix only goes so far as to infer that.

Square Enix didn’t break down sales for individual games, but their combined totals were 26.55 million. The forecast for the 2020 fiscal year is more modest; Square Enix expects 18.27 million sales despite having “multiple new titles slated for launch.” Of the games that could feasibly release within the next 10 months (sorry, Final Fantasy VII remake), Crystal Dynamics’ still-unannounced Avengers project has the potential to make the biggest splash.

Financial Results Briefing Session [Square Enix]

Brett Makedonski
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