Yes, you read it right! There is a possibility that Square Enix has cancelled the upcoming new game of Luminous Productions due to the global pandemic of COVID-19.
Thanks to the ongoing CoronaVirus, the production and transportation of the copies of Final Fantasy Remake 7 was less than expected which led to 3.5 million sales at launch. This reduction came after a 36% drop in game sales volume in FY19, which in turn led to a whopping 55% drop in total HD Games revenue throughout the year. Although Square Enix president, Yousuke Matsuda is happy with the game’s performance, he has noted that the disk sales has missed the revised internal estimates.
These problems have likely encouraged Square Enix’s recent $52 million write-down in it’s content production account. For those wondering what is a write-down? A write-down is done to help the company with their offset expenses when assets are expected to drop in value. Also the fact that content production accounts includes games currently in development.
Now, it would not take a lot to add two and two together and conclude that Square Enix has cancelled or vastly adjusted the new Luminous Productions project.
Nonetheless, Square Enix still targets for hitting ¥40 billion operating income target in FY2020, courtesy to Marvel’s Avengers, Final Fantasy 7 Remake and many other unreleased titles. Yet Matsuda warns investors that COVID-19 might interrupt in further development causing it to throw off their target. Therefore, no yearly forecast was discussed.
A section in The Financial Report states, “In the fiscal year ended March 31, 2019, the Group posted a loss on disposal of content of an extraordinary loss due to the in-depth review of the business strategy for Luminous Productions Co., Ltd., a wholly-owned subsidiary.The loss comprises ¥3,425 million in loss on disposal of content production, ¥170 million in impairment loss on intangible assets and ¥41 million in other expenses,”
For those uninitiated, Square Enix Holdings Co. Ltd. is a Japanese video game developer, publisher, and distribution company known for its Final Fantasy, Dragon Quest, and Kingdom Hearts role-playing video game franchises, among various others. It got reorganised from Square Enix Co. Ltd. in October 2008. Headquartered in Tokyo, the company employs around 4600 people worldwide.
Luminous Productions on the other hand, is a subsidiary of Square Enix that was formed in March 2018 from the development team of Final Fantasy XV in one of the 12 Business Divisions of Square Enix, Business Division 2. The company aims to make new video games under the Luminous Studio engine.