/r/ffxivdiscussion: Square Enix Notification of Recognition of Extraordinary Losses

[Swordsman]

I thought this was important to report this here on the official forums as well to help keep players in the loop.

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Notification of Recognition of Extraordinary Losses
SQUARE ENIX HOLDINGS CO., LTD. expects to recognize extraordinary losses pertaining to abandonment losses associated with its content production account on its books for the fiscal year ended March 2024, as detailed below.

Details

1. Nature of the extraordinary losses At the meeting convened on March 27, 2024, the Board of Directors of SQUARE ENIX HOLDINGS CO., LTD. (the “Company”) voted, in light of the myriad changes underway in the environment surrounding its Group, to revise the Group’s approach to the development of high-definition (HD) games with the intention of being more selective and focused in the allocation of development resources. As a result of a close examination of the Group’s development pipeline undertaken in keeping with this revised approach, the Company expects to recognize approximately ¥22.1 billion in content abandonment losses on its books for the fiscal year ended March 2024.

2. Outlook
The Company is carefully reviewing its consolidated forecasts for the fiscal year ended March 2024 to assess the potential for impact from the above or other factors. Should revisions to its forecasts prove necessary, the Company will promptly disclose the same.

Here's a link to the official SE PDF file: https://www.hd.square-enix.com/eng/i...0430_01_en.pdf

/r/ffxivdiscussion thread: https://www.reddit.com/r/ffxivdiscus...ecognition_of/

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Notable comments:

"Looks like this is specifically regarding abandonment losses and will most likely impact secondary franchises or spinoffs rather than their heavy hitters. I wouldn't expect this to heavily impact FFXIV directly."

"Square Enix just has major problems with decision making. Like with Foamstars, it was evident to anyone with eyes and a brain that it would be DOA and lose a lot of money, but somehow the executives at Square Enix let it get all the way to release, where it promptly died day 1 and lost tons of money. I've never seen such a big company make such horrible decisions constantly."

"All this really means is they will state the loss separate from other expenses in the financial statements so that this year isn't completely judged by an extraordinary expense that isn't directly related to this year's revenues.
Said cancellation likely has nothing to do with FFXIV."

"It's naive for people to think this doesn't affect FFXIV at all.
Square Enix seemed to be pinning their hopes on FF16's performance covering for failures like Forspoken and poorly-marketed AA titles like Harvestella and Valkyrie Elysium. It performed to their expectations in a vacuum but could not claw back the lost money.
It wouldn't surprise me at all if they also pinned their hopes on FF7 Rebirth to cover for failures in other departments and have hit the panic button now it's allegedly underperformed (we will know for sure on May 13 when they release their quarterly earnings).
So, what games do you think they're going to turn to now? FFXIV is the only game consistently printing them money with an avid and large install base. We may very well start seeing subscription price hikes, cooler stuff locked to MogStation etc. No guarantee, but a company is going to be considering those options.
A lot of the reason Tekken 8 fans are currently dealing with battle passes and online store coins is presumably because Bamco's launch of BLUE PROTOCOL flopped hard and knew that Tekken would be guaranteed a huge install base on its name alone. So even though FFXIV isn't under threat of closure, there's a chance we're going to be shouldering the burden of Square Enix's streak of f-ups."

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As you can see, there's some back and forth in the subreddit comments about whether this will have an effect on XIV or not. I'm really hoping there isn't.

Feel free to discuss amongst yourselves below. Cheers.

[Valkyrie_Lenneth]

Do you have any original ideas or do you just repost reddit threads these days?

You didn't even post your own opinion on the topic. You just copied other people's comments without even crediting who wrote them lol

[Boblawblah]

Do you have any original ideas or do you just repost reddit threads these days?

You didn't even post your own opinion on the topic. You just copied other people's comments without even crediting who wrote them lol

On topic: I don't care about this topic, FFXIV will be fine.

[VerdeLuck]

everyone suddenly becomes a financial expert and a shareholder whenever numbers get mentioned, curious.

[Jeeqbit]

It's pretty obvious they need to focus on titles they know will work. There is room for 1 experiment or two, but trying to throw out 20 mobile and new games or whatever they are doing doesn't seem smart.

FF16 and FF7 underperforming is most likely due to restricting it to Playstation. I hope they got paid a big enough sum by Sony to make up for the losses.

FF14 should be alright because Yoshi-P is on the board and the CEO and their family plays so it would at least be a difficult decision for any of it to affect FF14.

[Kaurhz]

I would like to think their resolution or thought process is a little more advanced than "Oh just hike up prices of subscription" - This can very easily lose them profit as much as it would gain them profit, after all, you make it non-feasible for a lot of people to sustain a consistent subscription.

About the only plausible one I could foresee is them adding more cool stuff to MogStation, or, well, at the very least increasing the pace with which they put stuff out on the MogStation -- But then my only doubt is here, if this were within their interest then they probably would have done some moves already, seeing as many, many people have been gagging for them to add more cosmetics, e.g., Hilda's hairstyle.

It does of course affect XIV in some shape or form, but the latter notable comment you've mentioned is just taking an extreme of one possible solution.

[LilimoLimomo]

They just need to invest more in NFT's, surely that will make the line go up.

[Swordsman]

Also, I recommend you find some reddit threads from a user named CutieShut-In, citizen. Those threads and the comments within will provide great entertainment.

Bro, CSI is 110% actually Titanman. I'm not bringing those posts here, lmao. He get's pretty creative I'll admit.

They just need to invest more in NFT's, surely that will make the line go up.

Some SE c-level executive is definitely thinking about this unironically, lol.

[DiaDeem]

My prediction? They're gonna axe that garbage Symbiogenesis NFT game that nobody's even playing, and they're probably done giving PlayStation any kind of exclusivity. Both XVI and Rebirth were part of this fiscal year, and both missed on the XBOX/PC Market. If they're reporting "Extraordinary losses" then that means the exclusivity deal was just not worth it.

Other than that, I don't know what else they can do. They haven't done particularly well in the mobile market either, so my hope is that we'll see more mid-range games that don't cost as much to make but can still sell well like Octopath or Triangle Strategy. Not every game needs to be Porsfoken.

Also, other than XIV and XVI, I'm glad they're done making their own engines. There's a charm to an in-house engine, but they're insanely costly to make and rarely justify the time and expense.

[Mosha]

Both XVI and Rebirth were part of this fiscal year, and both missed on the XBOX/PC Market. If they're reporting "Extraordinary losses" then that means the exclusivity deal was just not worth it..

I wouldn't have much faith in Sony's exclusivity deals if they were publishing their first-party games to Steam. The writing has been on the wall for the last few years. But tbf its SE its a miracle they are still in business.