Square Enix has notified company investors of an extraordinary loss of ¥22.1 billion (AUD $216 million) seemingly tied to the cancellation of new game development projects. In a public notice, the company has confirmed a close review of the studio’s development pipeline has inspired a write down for ‘content abandonment losses’ which will appear on its FY March 2024 statements.
“At the meeting convened on March 27, 2024, the Board of Directors of Square Enix Holdings 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,” the notice reads.
“As a result of a close examination of the Group’s development pipeline undertaken in keeping with this revised approach, the Company expects to recognise approximately ¥22.1 billion in content abandonment losses on its books for the fiscal year ended March 2024.”
At this stage, the exact nature of the ‘abandonment losses’ has not been detailed, but it’s fair to assume they involve the cancellation of upcoming game projects – likely of the unannounced variety (we can assume titles like Kingdom Hearts 4 and Final Fantasy 7‘s final chapter are safe).
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Square Enix has not specified which games have been caught up in its rescope, and it’s highly likely we may never know the impacted games. In circumstances like these, there’s generally an air of secrecy around management decisions – despite the general fascination that comes with cancelled projects.
The news of Square Enix’s major write down follows analyst reports that Final Fantasy 7 Rebirth has allegedly not sold as well as anticipated – but it’s unclear if game sales had an impact on the company’s decision.
It’s worth noting Square Enix forecasted a strong year in February 2024, with revenues set to rise significantly year-on-year. That forecast will be adjusted with the planned ¥22.1 billion write down, but it’s unclear how significantly this will impact Square Enix’s future forecast. We’re likely to hear much more about the company’s plans in the near future, with the release of its latest financial results.
