Square Enix faces losses of $33 mil as subsidiary Luminous Productions pivots to create AAA titles
Last March saw the formation of a new development studio by Square Enix called Luminous Productions, which boasted many of the talent behind Final Fantasy XV and had a goal of creating innovative titles to bring to the market. In the six months since Luminous Production started work, Square Enix has reported a loss of 3,733 million yen from the studio, which is equivalent to $33 million dollars. To compensate for these losses, the subsidiary company will shift its focus towards creating AAA games of "large scale and high quality", better utilizing the talent and strengths of the development team. Square Enix itself also faces half the profit gain (compared to last year) as from the last six month financial period, despite major and critically acclaimed releases such as Octopath Traveler and Shadow of the Tomb Raider.
Merchandise sales and arcade related machine revenue also were on a decline, as year-on-year sales fell by 15% compared to 2017. Square Enix plans for total sales throughout the financial year to still bring in a profit of $2.39 billion, an increase from last year, while they project a decrease of operating income by about 19% due to the aforementioned losses.
The cause and nature of the extraordinary loss Having conducted an in-depth review of the business strategy for Luminous Productions Co., Ltd., a wholly-owned subsidiary (the “Subsidiary”), the Company had decided to focus the Subsidiary’s development efforts on large-scale, high-quality AAA game titles, which best leverages the Subsidiary’s strengths. This decision has resulted in the booking of an extraordinary loss amounting to 3,733 million yen, including the disposition of the portion of the content production account related to the game titles under development at the Subsidiary and impairment losses on intangible assets, in the Company’s financial results for the six-month period ended September 30, 2018.
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