Square Enix had a rough couple of quarters in 2018 according to its latest earnings report. Operating income is down across Square Enix's various divisions, and the company is planning a major reorganization of its 11 business divisions moving forward to increase profitability.
Operating income for Square Enix's Digital Entertainment segment for quarters one through three in 2018 was ¥14.8 billion, down ¥21.5 billion from the same period last year. Square Enix attributes the loss to slow sales for triple-A video games during a competitive holiday season, particularly Just Cause 4.
Square Enix President Yosuke Matsuda singled out slow sales of Just Cause 4 as the main reason Square Enix posted a loss of ¥1.7 billion in its HD Games sub-segment. Shadow of the Tomb Raider and Dragon Quest Builders 2 ultimately enjoyed solid sales, but not enough to compensate for the shortfalls from Just Cause 4.
With income down across digital entertainment, amusement (arcades), and merchandise, Square Enix plans on undertaking some drastic measures. Matsuda says Square Enix will be "reorganizing and consolidate the 11 existing business divisions at [Square Enix] into four business units in order to increase the efficiency of our workflows, make more effective use of our resources, and consolidate our expertise with the aim or improving profitability."
Despite the losses, Square Enix has a much higher income target for the coming fiscal year: between ¥40 – 50 billion. According to Matsuda, this is due to the "strong lineup" that Square Enix has planned. So far only the next expansion of Final Fantasy XIV: Shadowbringers has been announced, and Matsuda says it plans on making more announcements ahead of E3.
All told, it's been a tough year for publishers. EA reported a dismal Q3 fiscal quarter, and Activision Blizzard's record-breaking year was offset by the news of tremendous layoffs across the company.
Square Enix says it should end the current year strong thanks to Kingdom Hearts 3, and it looks like it's bullish on the year ahead. As far as we know Square Enix is still working on the untitled Avengers game and Final Fantasy 7 Remake. Whether both will show up in the coming year is up in the air.