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

 

[Sakitoshi]

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??

 

[leon315]

With such a new studio, there still aren't any news about FF7R...
At this point which corrent gen is nearly at the end circle, guess we will see FF7R on ps5.

 

[whateverg1012]

yikes, hope they turn this around, really great games coming out from this company

 

[tech3475]

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??

It's not too surprising, I doubt the staff are working for free nor are the offices/equipment free and games can take months if not years to develop.

 

[HaloEliteLegend]

What, pray tell, did they spend all that money on in just 6 months? Did they spend it all on strippers and booze?

 

[Arras]

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??

Rather than that, how would they report anything BUT losses? They've presumably been working on games that aren't ready yet, so they had to have spent money with no way to get it back until they're done.

I really hope Square doesn't end up throwing too much money into the bottomless pit that FF7R might turn out to be. At least Kingdom Hearts 3 should actually be released very soon, so that's one ginormous project out the door.

 

[FAST6191]

Rather than that, how would they report anything BUT losses? They've presumably been working on games that aren't ready yet, so they had to have spent money with no way to get it back until they're done.

While I agree in principle if you wanted to get technical they could probably have hired themselves out internally to SE or their partners (I presume if they are making a full self contained company from scratch some of their specialist roles could be hired out to other divisions to help out as they are more useful at different stages of game making). That would be some revenue.

Not sure why they are calling this a loss though. I would have thought it was more an expense or asset purchase, though there is probably some tax break they can do if they have a net loss on the books.

 

[Xandrid]

Dang Square, I hope you guys can recover, you're my favorite game developer

 

[Kioku]

Yeah... This... Is... Stupid.

Seriously? They're reporting a loss on a new studio that has nothing currently released? So, what are they doing then?

 

[Sakitoshi]

It's not too surprising, I doubt the staff are working for free nor are the offices/equipment free and games can take months if not years to develop.

Rather than that, how would they report anything BUT losses? They've presumably been working on games that aren't ready yet, so they had to have spent money with no way to get it back until they're done.

I really hope Square doesn't end up throwing too much money into the bottomless pit that FF7R might turn out to be. At least Kingdom Hearts 3 should actually be released very soon, so that's one ginormous project out the door.

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.

 

[Robika]

Tabata just had to pull a Nomura, didn't he? By the Force, Square Enix get your sh*t together. Tabata seemed like the guy who could take care of things.

 

[Lazyboss]

which boasted many of the talent behind Final Fantasy XV and had a goal of creating innovative titles to bring to the market.

You are joking right?
FFXV and Talent cannot exist in the same sentence.

 

[gameboy]

GOOD, this is what they get for garbage mobile games and even more garbage console games(FF15+extras+mobile) or the good ones that they decide to bring a year too late(DQ11). Im looking forward to Dragon Quest Builders 2 though

edit: and bringing a certain games finale a DECADE TOO LATE (KH3)

 

[CathyRina]

FFXV and Talent cannot exist in the same sentence.

FFXV is proof of how you can waste talent yet still generate money.
See you can make a sentence with these two in it.

 

[grossaffe]

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??

How would they NOT report losses with zero games released?

 

[titan_tim]

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.

 

[Sakitoshi]

How would they NOT report losses with zero games released?

I don't believe you are fool enough to think they could have made a new game in only 6 months in this day and age.
anyway, I'll quote myself:

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.

 

[Jimbo_Slim]

Wonder what'll happen if they actually fix their stuff. (Please, OG graphics for FFVI).



S U P E R M A R I O R P G

 

[tech3475]

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.

That could explain why they’re considering it a loss, since they may be writing off work they had already done.

It could also be SE is using this as some kind of excuse in case investors complain about their revenue.