Square Enix announced yesterday that the company has had a net rise in sales compared to last fiscal year. Titles such as Kingdom Hearts III, Just Cause 4, and Shadow of the Tomb Raider lead the charge as major sellers, with Kingdom Hearts III being notable for continuing to be the top selling game in the United States in 2019 and continuing to be supported with an update in late April that added a harder difficulty called Critical Mode as well as a new game plus option. Just Cause 4 has not been received as favorably by critics or fans, citing a noticeable downgrade in graphical fidelity from previous entries and a general lack of innovation in both story and gameplay, but has continued to sell strongly along with Shadow of the Tomb Raider and even managed to win the 2019 Webby Award for best action game of 2019.
Not all of news posted in the earnings report is positive, however. Operating and ordinary income is down, and although Square Enix notes that recurring subscriber numbers with ongoing service-based games like Final Fantasy XIV and Dragon Quest X are still “brisk”, costs associated with making large scale AAA games have dampened overall revenue. It is noted, however, that amusement-based sales have increased, which is a euphemism for stand-up machines like pachinko in Japan often associated with gambling which is technically illegal. Konami infamously nearly wholesale swapped over to amusement development and has abandoned the traditional video games market due to increased costs in development, to the ire of many fans of their intellectual property.
Some worry that other famous video game developers may follow suit chasing short term returns. While video games are a multi-billion-dollar industry, AAA developers are having harder times justifying the increased cost of making blockbuster games and lower returns than in previous years. This issue has become even more apparent as indie developers sometimes see massive returns with much more lean development costs, and digital marketplaces put indie rock stars on a somewhat even keel with major publishers in terms of advertising space and market share. There are fears that AAA development might be reaching the end of a bubble that might burst soon, and while indie games are known for the innovation in gameplay, many of the staggering leaps in graphics and narrative quality in the last decade have been achieved only through the massive investment in research and development done by larger studios and the monolithic publishers that help fund them. Recent controversies involving the state of life working in a AAA development house, including working inhumanly long hours during crunch time and rampant sexual harassment, have compounded these fears as calls for unionization have become popular on popular social media platforms such as Reddit. Only time will tell if AAA developers will be able to adapt to a new market and cultural reality or if smaller developers will take charge of the industry by the end of the decade.