Square Enix has invested a record-breaking $792 million into new projects and business models, including new games, studio ramp-ups, and emerging technologies like blockchain.
Square Enix just reported its best year ever. During FY22, Square Enix hit new all-time highs across sales, operating profit, and overall profits. The company raked in $3 billion in net sales thanks to strong over-performance in the MMO segment and consistent earnings in HD Games and mobile. What's even more interesting is how much Square Enix is re-investing into new projects.
Throughout FY22, Square Enix's production account spending grew to a new high of $792 million. Every year the company invests around 26-30% of its net sales into the production account, which is a big budget that's spent across all of its upcoming projects. As net sales rise, so too does production investment.
What's even more interesting is the timing of this investment.
Square Enix just sold Crystal Dynamics, Eidos Montreal, and its Western mobile game dev studios to Embracer Group for $300 million. That's less than half of this year's production account spending.
The main reason for the sale was to cut losses (both studios had substantial losses) and to lean out for more targeted games.
So what is Square Enix spending money on?
The primary focus is always games and content, whether it be new AAA games like Final Fantasy VII Remake Part 2 and Dragon Quest XII, or new expansions for Dragon Quest and Final Fantasy XIV. Smartphone gaming is also an incredibly important part of Square Enix's focus as the segment typically earns more money than HD Games/MMO.
However, Square Enix is starting to break into blockchain gaming. A sizable portion of its recent FY22 earnings report discusses its future business models including emphasis on blockchain and NFTs. The company plans to invest into Animoca Brands, the Sandbox, and Ubitus cloud solutions to help power its new vision.
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