Japanese video game developer Square Enix Holdings, famous for its Final Fantasy franchise, reported disappointing Q2 financial results, led by poor sales on its mobile gaming titles.

In a statement, the company said that its mobile and PC games launched in the prior fiscal year failed to generate additional expected revenue on top of that from existing established games.

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With mobile gaming dominating digital video game sales in 2017, Square Enix has been keen to increase its slice of the $59bn mobile gaming pie.

However, with demand increasingly shifting towards high-end free-to-play games, also known as ‘freemium’ games, Square Enix has been forced to reevaluate its mobile gaming strategy.

Square Enix mobile games: price barriers

In June Square Enix Montreal head Patrick Naud confirmed that the developer was no longer working on any more of its ‘Go’ mobile games, which included titles such as Lara Croft Go and Hitman Go.

While the games had some critical success, other titles, such as Final Fantasy XV: Pocket Edition, drew criticism for being lazy imports of older console games.

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In an interview with PC Games Insider, Naud described the premium mobile game market as “diminishing”.

“Despite the critical success and the great revenue we’ve had, it’s sad to see that our games are only played by a small slither of the population because of the price point,” he said.

He pointed specifically to the price – Go games are priced at $4.99 – as the biggest barrier.

“That’s such a big barrier for mobile users. A lot of people consume mobile games only and they have all these options, all these games; why should they invest money in this one unless they’re very convinced?”

The future is free-to-play

Meanwhile, Nintendo showed with its 2016 hit Pokémon Go that free-to-play mobile games can be extremely lucrative. The augmented reality game became the fastest game to make over $500m in revenue.

Global hit Fortnite has also been reaping the rewards of the free-to-play, in-game purchase business model. The Battle Royale game mode generated revenue of $100m in its first 90 days on iOS for developer Epic Games.

And developer Bethesda also saw success with Fallout Shelter. The free-to-play game brought in $5.1m over its first two weeks with only unobtrusive add-on microtransactions in the game.

The company has five more mobile titles coming out this year, including a mobile reboot of Final Fantasy XI. The latest offering in the  8th best-selling video game franchise of all time.

In other areas of the company, Square Enix reported a decrease in net sales of console games and a year-on-year increase of its Amusement segment.