Today, Square Enix released its financial results for the six-month fiscal period ended on September 30, 2014. All in all, it was damn good for company and its new CEO. Net sales rose 18.6 percent year-over-year to 73.1 billion yen ($635 million) and net income grew 118.8 percent to 5.7 billion yen ($49.5 million).
The improvement in revenue was driven by free-to-play mobile and online multiplayer games in Japan; big winners include browser game Sengoku Ixa, mobile titles Dragon Quest Monsters Super Light and Schoolgirl Strikers, and MMO titles Final Fantasy XIV and Dragon Quest X. In the console game market, Square Enix had strong continued sales of titles released in the last fiscal year in Western markets. In fact, North America continues to lead in digital entertainment unit sales at the company, as it has since 2012.
The increased revenue is the result of a pivot at Square Enix. If it seems that outside of Final Fantasy XV and Kingdom Hearts III that Square Enix has given up on major Japanese standalone releases in favor of smaller games, that's because that's absolutely what's happening at the company.
Here's Square Enix's 2014 console and PC releases so far: Tomb Raider: Definitive Edition, Dragon Quest Monsters 2, Thief, Deus Ex: The Fall, Final Fantasy XIV (PS4), Theathythm Final Fantasy: Curtain Call, Murdered: Soul Suspect, and Sleeping Dogs: Definitive Edition. In contrast, here's the 2014 mobile releases: Final Fantasy VI, Deus Ex: The Fall (Android), Dragon Quest Monsters: Super Light, Guns N Souls, Deadman's Cross, Dragon Sky, Rise of Mana, Schoolgirl Strikers, Dragon Quest IV, Hitman Go, Final Fantasy Agito, Dragon Quest VIII, Final Fantasy: World Wide Words, and Final Fantasy: Record Keeper.
Square Enix has updated its shareholders with the company's new strategy for domestic and Western development. You can find a diagram from the released document below:
Instead of building major titles at Square Enix's Japanese and Western studios (at a cost of "several billion yen" each, with a billion yen equalling around $8 - 9 million), the publisher is focusing on what works best in each market.
In Japan, this means a single major title with significant resources around it, a few mid-sized titles built for around 1 billion yen, and then a host of smaller games built for around 100 million yen ($860,000). The "major title" banner probably covers games like Final Fantasy XV and Kingdom Hearts III. I'd guess the "mid-sized" section probably covers HD remasters and portable console titles, like Final Fantasy Type-0 HD, Kingdom Hearts 2.5 HD Remix, Bravely Second, and Final Fantasy Explorers. The mobile titles will continue in the vein of the releases above, leveraging Square Enix' extensive IP in ports and quick mobile experiences. Square Enix Japan is moving from an overall focus on traditional HD titles to a more diverse release schedule.
At Square Enix's Western studios, which are largely comprised of former Eidos studios, business remains largely the same. On this side, Square Enix will continue to produce major HD titles, though some resources have been moved to tackle mid-sized online games. The company will lower the risk on major titles through the "use of external funds," which explains the Xbox-exclusive status of Crystal Dynamics' Rise of the Tomb Raider. With this revelation, it's entirely possible that Square Enix approached Microsoft for the exclusive, not the other way around.
The mid-sized online titles include Nosgoth and Triad Wars, games respectively based on the Legacy of Kain and Sleeping Dogs franchises. A Sleeping Dogs sequel is not currently on the table, but I'd guess Just Cause 3 and another Hitman title will probably end up as major titles.
Square Enix is also heavily invested in expanding to new markets with its online and mobile titles. Final Fantasy XIV launched in China this year and a Korean launch is planned for 2015. Puzzle Bobble will be launched in China this Winter. The company is also targeting emerging markets like Central and South America, Eastern Europe and Russia, Southeast Asia, and the Middle East.
It's a different Square Enix, with the Western half focusing more traditional console games, while the Japanese half diversifies its offerings. For classic Squaresoft and Enix fans, it may be a shift away from the Square Enix that they know and love. We'll still get major titles, but it doesn't look like we'll be seeing experimental Japanese home console titles much anymore. The 3DS and Vita look to be the place to find games like that, as evidenced by the upcoming Bravely Second and FF Explorers. Fans of Eidos get to keep seeing new releases for their favorite franchises, at least for the foreseeable future.