Japanese Profit/Loss ‘09: Square-enix Up, Nippon Ichi Down

Two Japanese companies have posted their profit/loss sheets for ‘09, since the fiscal year ends March 31st. The big gainer is Square Enix, publishers of the mighty Final Fantasy series as well as Supreme Commander and Just Cause. Projected profits are almost twice as high as last year’s, probably thanks to the combined Japanese Final Fantasy XIII and Dragon Quest IX launch in December ‘09. It’s not all good news though, with the quirky Nippon Ichi Software posting an absolutely insane 97.5% decrease in operating profits through the first three quarters of their ‘09 fiscal year. What’s up with that, dood?

Numerically speaking, Square Enix has an operating profit of 21.4 Billion Yen for the nine months ending December 31st ‘09, which is up 67.7% on profits on the nine months ending December 31st ‘08. Net sales for the period were up 30% at 135 billion yen. They’ve also announced plans to create a dedicated merchandising arm, which is sure to keep all the figurine fanboys happy. As stated before, projected operating profits for the full financial year are projected to be around twice that of last year, around 25 billion yen.

Square-Enix’s prodigious profits aren’t exactly a huge surprise. In between devouring Eidos back in March ‘09 and owning a couple of incredible franchises, Squeenix has been steadily rising back to glory after their relatively disasterous ‘07 financial performance. This year’s Q3 performances were probably helped greatly by the near-simultaneous release of Final Fantasy XIII and Dragon Quest IX in Japan in December. According to their press release, FFXIII shipped 1.3 million units to an install base of 4 million PS3 users in Japan. Square-Enix also shipped Batman: Arkham Asylum and Kingdom Hearts 358/2 this year, although Arkham’s Sequel is being published by Warner Brothers and will not affect sales projections. And their quiet earner FFXI is still pulling monthly subscription fees from gamers all around the world.

More interesting to gamers, perhaps, is the blanket statement that Squeenix intends to continue major growth next year. When the results this year are so good, what could this possibly mean? Speculation is that Square Enix will likely be announcing new developments in their huge IP (Intellectual Property) ranges. Last year’s acquisition of Eidos expands Square Enix’s portfolio of ‘huge’ IPs from Final Fantasy, Dragon Quest, and Kingdom Hearts to include Tomb Raider, Supreme Commander, Thief and Deus Ex, just to drop a few names. To give a brief lesson on finance in relation to gaming, release dates of huge IPs like these from the same company are usually staggered both to prevent ‘customer fatigue’ and to allow for the game’s natural development cycle to occur. Most of the previously announced major IP releases have dropped this fiscal year, with only FFXIV, Dragon Quest Monsters Joker 2 and Kane and Lynch 2 officially announced so far for the next fiscal year. What else could they be announcing? We’ll have to wait and see.

While Square-Enix bosses are probably breathing a sigh of relief and/or trying to decide what to do with their mountains of cash (probably make more videogames, to be honest), Nippon Ichi Software is facing finance problems of a different kind. The developers behind anime-inspired, ridiculously complex RPGs such as Disgaea, Phantom Brave and La Pucelle is said to be facing a operating profit decrease of about 97.5% from last year (no, they didn’t make a loss; they just made 97.5% less money than they did last year, okay?).

This may sound absolutely shocking on the surface of it, but the truth is they survived alright. Namco Bandai posted huge losses of around 11.7 billion yen last fiscal year and consequentially had to lay off around 630 staff, while Koei Tecmo posted a 1.84 billion yen loss, blaming poor Wii sales of Samurai Warriors 3.

The ease of Piracy on the PSP, which is the platform that NIS focuses on, probably helped add to their profit destrcution. That said, Nippon Ichi has to take some share of the blame for poor performance this year. Despite releasing 10 titles domestically and 12 overseas, a casual scan reveals that most of them were PSP or DS titles, and furthermore that they were mostly re-releases of Disgaea or ports of other games.

Hopefully Nippon Ichi’s woes are just part of a generalised downtrend in the market in particular, while Square-Enix’s triumphs are indicative of a return to business as usual. Either way, pray these guys make money, otherwise none of you are going to be getting awesome games, doods!

Sources: Nippon Ichi (translation)
Square-Enix Reference Materials Febuary 8 2010