Square Enix's financial results detail blockchain plans, income decline, and FF14 success

by Alex Donaldson and Adam Vitale on 08 November, 2022

Japanese and RPG gaming monolith Square Enix has released its latest financial report covering the first half of the fiscal year that'll end in March 2023 - and as ever, the results provide an interesting look at where the company is at right now and where it's going in the future.

In general, the financials paint a picture of a difficult year for Square Enix, where sales decreased by 3.3% while costs soared by 10.6% year-on-year. However, the drop in sales has been offset to a significant degree thanks to foreign exchange gains due to the weak Japanese yen, the divestiture of studios like Eidos and Crystal Dynamics, and the success of MMO Final Fantasy XIV, with an uptick in subscribers resulting in increased revenue from that game alone.

Looking to the future, the financial report makes clear that despite public criticism of the company's intention to support and use it, Blockchain technology remains key to Square Enix's growth plans - which is specifically listed as a key component of the company's 'medium‐term business strategy'. Along with strengthening the IP portfolio and optimizing the business to reduce costs, one of Square Enix's primary areas of focus for growth is in blockchain games and entertainment.

The financial results, primarily intended to inform investors in the company, promise that the group plans to "explore [the] business structure & earnings potential of NFT business," and "explore businesses in leveraging public blockchains." Also outlined are plans to set up a new overseas entity with a focus on exploring games and publishing aimed at countries and markets with a widespread cryptocurrency adoption, including exploring "token economy operations".

Fans thought Symbiogenesis was going to be more Parasite Eve, but instead it was a new NFT project.

All of Square Enix's recent financial communications, including its 2022 New Year's Letter and more recently released Annual Report for 2022, have touched on Blockchain with a lot of hyped-up investor babble, with quotes like the following - which sums up the company's excitement quite well:

"We have identified AI, the cloud, and blockchain as focus investment areas under our Medium-Term Earnings Targets and Business Strategy. At present, we are positioning the blockchain domain as our most important focus and approaching our investment and business development initiatives accordingly.
Leveraging AI and the cloud in game development primarily involves incorporating new technological advancements into the gaming experience. By contrast, the uniqueness of blockchain is not purely technological. It lies more in its philosophical aspects as represented by the concept of decentralization that underlies the blockchain model."

A large part of this will see Square Enix invest in other blockchain-based businesses as a stakeholder, with three new investments announced in other blockchain companies (alongside two previously revealed blockchain investments listed in the report). While it's not listed in Square Enix's report, Singapore-based blockchain company Oasys recently announced a partnership with Square Enix, interestingly listing longtime Square Enix producer Yosuke Saito as "Director, Square Enix Blockchain Entertainment Division".

Additionally, Square Enix is also developing its own crypto products - such as new game Symbiogenesis, which many fans were crushed to learn was not a new Parasite Eve project just weeks ago.

For Square Enix, growth is key - and it's looking for new areas to create that growth after experiencing a year with a sales dip despite the release of a bevvy of traditional games including Valkyrie Elysium, The DioField Chronicle, and Stranger of Paradise: Final Fantasy Origin. The forecasts in the report seem to suggest that Square Enix doesn't expect Forspoken or Crisis Core: Final Fantasy VII Reunion, both yet to release this fiscal year, to reverse their sales fortunes.

Though not mentioned in the report, Square Enix will be hoping the next fiscal year is better - with both Final Fantasy XVI and Final Fantasy VII Rebirth seemingly slated for the FY starting in April 2023.