SQUARE ENIX HOLDINGS CO., LTD.
3Q FY2019/3 Financial Results Briefing Session (Teleconference) Q&A
Date/Time: February 5, 2019 (Tuesday); 6:00-7:30 pm (JST)
On behalf of the company: Yosuke Matsuda, President and Representative Director
Q: Could you tell us approximately how much you booked in advertising costs in 3Q for titles to be launched in 4Q?
A: We don’t disclose our advertising costs for individual titles, but we spent a reasonable amount.
Q: What can you tell us about the timeline for your FY2020/3 releases?
A: I cannot go into any detail at the moment, but I believe we will be able to make various announcements in the lead-up to this year’s E3.
Q: How likely are you to reach your operating income target of ¥40-50 billion with the lineup you have planned for FY2020/3?
A: We believe operating income of ¥40-50 billion will be attainable in FY2020/3 with the lineup we currently have planned, but we still see risk of deviating from our target depending on when we release new titles and on how our development efforts progress.
Q: At your 2Q earnings briefing, you discussed changing your policy to developing smart device titles, but how has that gone?
A: The titles we launched in 3Q were already set for release prior to the change in our approach, so they are not reflective of any change. As of FY2020/3, we plan on reorganizing and consolidate the 11 existing business divisions within SQUARE ENIX JAPAN (SQUARE ENIX CO., LTD.) 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 of improving profitability.
Q: What were the main reasons you posted an operating loss of ¥1.7 billion at the HD Games sub-segment?
A: The main reason is that we launched “JUST CAUSE 4” in December 2018, but it got off to a sluggish start, so we were not able to offset the amortization charges on the development costs. Additional sales of “SHADOW OF THE TOMB RAIDER” during the holiday season and the launch of “DRAGON QUEST BUILDERS 2” were also not enough to compensate for the shortfall of “JUST CAUSE 4.”
Q: Why did “SHADOW OF THE TOMB RAIDER” and “JUST CAUSE 4” get off to a weak start? If initial sales volumes are lower than they traditionally have been but digital sales are extending the lifetimes of games, don’t you need to change the timing of your advertising efforts?
A: We think the main reason is that we were unable to provide an experience that was novel enough that players would choose to buy them before any of the other numerous major titles on the competitive landscape. Also, while it is true that we are seeing a shift away from sales of boxes to digital downloads, with this many titles competing with one another, initial sales are definitely an important element in increasing user awareness. For that reason, we do need to engage in a certain amount of advertising just ahead of a new title’s launch.