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.

Source

 

[alainvey]

Extraordinary loss = loss that is out of pattern and not a meaningful index of the company’s overall performance.

 

[Bladexdsl]

and they wonder why it's losing money? take a look at Final Fantasy XV there's your answer!

 

[Arras]

while you both are not wrong. they see those expenses as investments, never loses.
if they are explicitly calling it a loss then something went very wrong in the process.

They may have had some game prototypes that they decided to cancel or something? It's the only thing I can really think of.

 

[eyeliner]

Money laundering, boys. Also, ideal scenario for massive layoffs.

 

[Kilik410]

For those wondering, Luminous studios was originally made to create a next gen engine, not to make specific games (Check youtube for Agni's philosophy). But they also had another engine which they used on a previous game that they upgraded to be next-gen. So they were kind of competing against each other. Now they can use the engine for whatever they want to.

So, wait, are you saying they didn't learn their lesson from Crystal Tools and tried to go even bigger? If so, then does this mean they had to scrap their new engine?

 

[abilaunken]

If it was a new engine than lets go again into 10 years building the wheel.

 

[titan_tim]

So, wait, are you saying they didn't learn their lesson from Crystal Tools and tried to go even bigger? If so, then does this mean they had to scrap their new engine?

The crystal tools is the engine that they upgraded that became competition for the luminous engine. BUT, since both were not progressing quickly enough, and were quite buggy, they decided to merge both the engines into one to finish FF15.

 

[the_randomizer]

Remember when SE actually made quality games? That's okay, neither do I.

 

[grossaffe]

Remember when SE actually made quality games? That's okay, neither do I.

I remember when Squaresoft made quality games.

 

[Bellebite2000]

That is right, the same clowns how took over the FFVII remake (which was finished by CC2) because they know how to manage schedule and money, now report money and schedule issues, LOL. And of course, whoever put Tabata in charge of the Titanic, the real criminal here, still has his job. Great.

 

[raxadian]

how is that? the studio is new, how can they report losses with 0 games released. were they just twiddling their thumbs for six months instead of working in a new game??

Coding games takes time, more so on 3D.

Yeah that money wasted in six months is not a lost but investment capital. If the studio was at least a year old with not even a demo to show it would be a different deal.