Video game publisher Square Enix reported 79% decline in operating profit, according to its Q2 2023 earnings on Friday, marking its worst intraday drop in almost three years, according to a Bloomberg report.
The Japanese company, known for its popular Kingdom Hearts and Final Fantasy (FF) franchises, said the long-awaited FF release this year didn’t meet expectations.
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Square Enix’s stocks were down as much as 15% on Monday, getting to their lowest since May last year.
Square Enix President Takashi Kiryu said that as well as the disappointing FF release, the supply constraints causing a slow release of Sony’s Playstation 5 also limited sales.
Kiryu said that the company will be taking steps to boost sales further now that the Playstation 5 is more widely available.
“Launched in November 2020, the PS5’s rollout was impacted by supply chain disruptions and semiconductor ship shortages caused by the Covid-19 pandemic,” Benjamin Chin, analyst at GlobalData, told Verdict.
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By GlobalDataChin notes that countries are now shifting priority to favour secure supply chains over efficient ones, amid rising tensions between the US and China.
“Fortified supply chains, combined with a fall in consumer and enterprise demand for semiconductors compared to the pandemic years, are expected to result in an excess of semiconductor chips,” Chin said.
Adding: “The impending chip glut will help alleviate supply chain shortages plaguing the consumer electronics industry.”
The news comes as capital raising deals in the video game industry have already seen an increase in 2023, compared to a substantial decline in 2022.
According to research firm GlobalData's deals database, $7.9bn has been spent in capital raisings in the gaming industry so far in 2023. This already beats the total value of deals made in 2022, which totalled just $5.1bn.
Gaming enjoyed an extremely healthy 2020 and 2021, as the the industry welcomed an increase in users and spending as lockdowns kept much of the world inside.
In 2022, the value of capital raising deals in gaming totalled $21.4bn, followed by $21.8bn in 2021.
The gaming industry will be worth $470bn in less than a decade, increasing by more than double from its 2021 $197bn valuation, according to GlobalData.
