Square Enix Faces 10 Billion Yen Loss in Restructuring Efforts

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Square Enix Faces 10 Billion Yen Loss in Restructuring Efforts

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Sleeping Dogs, Hitman: Absolution and Tomb Raider all sold much worse than Square Enix expected, which may lead to the cancellation of future titles in these series.

Square Enix expected Sleeping Dogs to sell between 2 and 2.5 million units in the European and North American markets, based on its content, genre, and metacritic score. Hitman: Absolution was expected to sell between 4.5 and 5 million, and Tomb Raider between 5 and 6 million. The games sold 1.75 million, 3.6 million and 3.4 million respectively, falling quite short of their initial expectations. The result of this is the company incurring an extraordinary loss in an "effort to sort out items not achieving expected revenue levels, through scrapping those items and terminating production".

Former Square Enix president Yoichi Wada spoke about how almost 10 billion yen (around 100 million USD) was lost restructuring the company worldwide. 2 billion yen was lost when certain productions were halted and had work scrapped in Square Enix's Japanese studios, while a new studio focused on smartphone games in the US was closed down completely, at a cost of around 1 billion yen.

"Of course, we want to hedge risk in budgeting these units directly into the forecast, therefore we base the forecast on 80-90% of the total sales potential of each title. However, it is disappointing that our results fell below these marks."

3.5 billion yen is expected to be lost from "Loss on Evaluation of Content," where Square will make some revisions to their prospective yields for every game title and overhaul their business models. Wada says an additional 2 billion yen will be spent on general restructuring efforts worldwide.

There is some good news though, as Wada says that the company's social games are showing "solid performance." He expects net sales from Square's Social Gaming and Others category to reach 20 billion yen in fiscal year 2013. As is the Japanese way, Wada will be stepping down as Square's president to take responsibility for the company's losses. Yosuke Matsuda will be replacing him as Square Enix's new president.

Source: Siliconera

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Sad trumpet sound: Wha-wha-whaaaaa.

Something is wrong if you can move that many units and still lose.

Maybe they should release more Final Fantasy games, that has always worked, right? Wait! Better yet, just release trailers for a bunch of games and never release them!

If they have financial troubles in this generation, how in the hell will they ever survive on the next gen, when development costs will surely rise.

Damn that sucks. Hpe this restructuring thing works out, 'cause I quite like you, Sqeenix. While I thought the sale targets outright silly and impossible, I loved all of the games mentioned so much I bought all of them in Collector's Edition and 2 copies of Sleeping Dogs on Steam.

As is the Japanese way, Wada will be stepping down as Square's president to take responsibility for the company's losses.

That should be the only ay to deal with asshat CEO. Too bad honor and company pride doesn't exist in certain places.

They're selling games in the millions and reportedly not doing well? How does that work? I mean, I know how it works, games are expensive to make, but fuuuuuck. Something is WRONG here.

Dr.Panties:
Sad trumpet sound: Wha-wha-whaaaaa.

Something is wrong if you can move that many units and still lose.

Do you know what restructuring is?

Can we stop pretending that Square Enix's troubles don't stem from having to make the same MMO twice? Sales for those games weren't as high as you wanted? Okay, now explain why you needed them to be so high.

This is terrible new for me. Square Enix is now responsible for three of my favourite gaming franchises of all time (Kingdom Hearts, Tomb Raider and Deus Ex). I don't want to think about how this will effect any future releases.

Yeah restructuring is definitely the way to go, if they are predicting shifting that many units then something is up, hardly any games get close to that or even the numbers they are selling now and if they are still making losses after that then they need to change something.

itchcrotch:
They're selling games in the millions and reportedly not doing well? How does that work? I mean, I know how it works, games are expensive to make, but fuuuuuck. Something is WRONG here.

No no, these games earned them well over the production costs and then some, but as is now tradition everything triple A must be blockbuster or bust.
And because they predicted their sales will go well beyond all limits of reason that money was already spent on future projects, which puts them in debt that hinges on absurd estimates, so any game that doesn't reach them ends up looking like a loss... queue chopping franchises, studios and jobs.

But if they just kept their heads on straight for a moment things would work out just fine.

rapidoud:

Dr.Panties:
Sad trumpet sound: Wha-wha-whaaaaa.

Something is wrong if you can move that many units and still lose.

Do you know what restructuring is?

Do you know what reading comprehension is?

Mr.K.:

itchcrotch:
They're selling games in the millions and reportedly not doing well? How does that work? I mean, I know how it works, games are expensive to make, but fuuuuuck. Something is WRONG here.

No no, these games earned them well over the production costs and then some, but as is now tradition everything triple A must be blockbuster or bust.
And because they predicted their sales will go well beyond all limits of reason that money was already spent on future projects, which puts them in debt that hinges on absurd estimates, so any game that doesn't reach them ends up looking like a loss... queue chopping franchises, studios and jobs.

But if they just kept their heads on straight for a moment things would work out just fine.

Well... This is Square Enix. The guys who announced FFXIV before FFXIII was even released... So it's not surprising I guess. "bad news guys, we gotta take all the guys who were working on Tomb Raider 7 and have them work on the Deus Ex after the Deus Ex AFTER the Deus Ex that the public knows exists."

I think they need to have a good look at who decides who many copies they expect to sell. They are clearly over-estimating here!

I want another Tomb Raider game dammit...Enjoyed it so much.

On a sidenote about Tomb Raider...I actually found it to be more stealthy than the latest Assassins Creed, thats just not right xD

I find kind of funny that they say Tomb Raider, Hitman and Sleeping Dogs are doing bad considering thats their only source of revenue outside Japan. Is not like FFXIII-2 set the world on fire. Actually I can't remember the last proper Square Enix hit... Most of their latest success has to do with these gaijin games.

Cynisim aside, I hope they manage to fix their problems. If it doesn't hurt it doesn't work.

Dr.Panties:
Sad trumpet sound: Wha-wha-whaaaaa.

Something is wrong if you can move that many units and still lose.

There's great pains not to mention it in the public statement, but a huge (and I mean HUGE) portion of Squenix's losses can be attributed to one thing and one thing only.

Final Fantasy XIV

That thing was and is so bad they had to scrap it and start again, after release. Even The Old Republic looks like a roaring success by comparison.

Unfortunately there seems to be a huge amount of nepotism at Squenix. After Eidos/Crystal Dynamics delivered four hits on the bounce in two years (Deus Ex, Hitman, Sleeping Dogs, Tomb Raider) and made money on all of them, Squenix is all too keen to to shout about how they missed the (hugely inflated) sales targets placed on them. Tomb Raider is the fastest selling Tomb Raider ever, but the fastest selling edition of a nearly twenty year old franchise is still not enough to meet the target set by Squenix.

Meanwhile, Squenix's own massive, massive failure in the last two years is barely mentioned and Eidos is being made to lose staff. I'd like to think a new boss would equate to a change in direction, but the Japanese way of 'fire the boss, then promote his number 2' makes it seem unlikely, more likely they'll pursue Final Fantasy down the drain and let go of everything outside of Japan in the process...

Those expected sales figures were quite unrealistic to begin with.

Why does everyone suddenly expect each of their games to be insanely successful? Isn't it enough if a game is a huge success?

First, I would really like to hear a more accurate count for Tomb Raider's total sales up to this point; having just passed 1 month since release.

And second, whoever made the sales predictions went full retard if they actually expected to hit 5-6 million sales in the first sodding month. That's almost on par with Assassin's Creed 3 pace, which may well have been the biggest launch Ubisoft has ever had.

It's lofty even for The Last of Us which is one of the most exciting titles of the year. Even if they did manage to hit 3.5 million sales in a month, if they're sane they'll be jumping out of their shoes with that success for a new IP in the swansong of this console generation.

.....

... Hell, 5-6 million is about as big a launch as a game for gamers has any business hoping for, it's not a target. AC3 only came behind CoD and FIFA last year because those games can hit huge audience pools that aren't really gamers, and I still think they only managed to pull that off because their pre-release hype convinced people they were about to pull off another leap on a scale comparable to AC2.

AC4 may prove me wrong, but that's not what I'm expecting. I think that game would do incredibly well to hit 4-5 million in the first month.

Well, in fairness it makes sense they are laying off staff in the area they are cancelling projects in. The company isn't going to cut into it's own local game development, especially since that is the Japanese branch that defined what Square Enix was before the adoption of the foreign game development branches. The only issue is that the Japanese Development branch has had the worst performance over all compared to the foreign ones.

Honestly, it isn't even worth complaining about or over analyzing. Let them do what they want: Just like EA or any other publisher, it's up to them how they want to succeed or dig their own grave.

Steven Bogos:
Square Enix expected Sleeping Dogs to sell between 2 and 2.5 million units in the European and North American markets, based on its content, genre, and metacritic score.

I'd love to hear how ANY of these actually justify those sales projections.

And as always, Square-Enix refuses to admit to being wrong in anything, or to have any failed games of their own so they just blame their Western subsidiaries and call Tomb Raider a failure despite selling 3.5 million copies in three weeks (not counting digital sales, I might add).

F U Square-Enix. Just admit that a huge amount of that loss is that you're pumping money into FFXIII Versus for EIGHT years now and that it hasn't made you a single yen yet because hey, it's still is in development and will be for the foreseeable future.

They expected Tomb Raider to sell 5.6 million units? And they's their conservative estimate?! Are they fucking high?! There's no way in hell these games would have hit those numbers. Let me tell you the expectations I had for these games, Square. Sleeping Dogs: 600,000. Hitman Absolution: 1.4 million. Tomb Raider: 2 million. And that's me being generous.

Sleeping Dogs is a new IP, and from what I could tell it had a decent marketing push. But by playing it... I just couldn't see it selling more than 800,000. The fact it sold 1.7 million is pretty goddamn amazing.

Hitman has never been a huge seller, and isn't a "mainstream" franchise. But this new game seemed like it had a good marketing push and was talked about quite a bit. Didn't see it selling more than 1.7 million. It selling 3.6 millions is incredible.

Tomb Raider hasn't been doing so great. The past few games weren't that good quality-wise or sales-wise. But this new reboot was drawing a lot of attention, looked great, and had a good marketing push. I can see it selling 2 million, but not more than 2.5 million. It selling 3.4 million is fantastic.

Expecting Sleeping Dogs, Hitman Absolution, and Tomb Raider to sell 2 million, 4.5 million, and 5 million, respectively, are in no way realistic expectations. They're the expectations of madmen.

Wow; Sleeping Dogs, Tomb Raider and Hitman 2, all great selling games in their own right, are selling Poorly by Square Enix's standards?!

Call of Duty, what have you done?! You made everyone aim for your crazy sales, and if they don't sell like that, then they officially screw game manufacturers! This kind of "Oh, at least 5 Million in the first month" mentality is gonna be the doom of so many games and game companies!

And Square Enix should have known none of those games would sell what they were expecting, but they assumed they could get CoD numbers.

Really one of the main things at this point that can save Square Enix is when Kingdom Hearts HD 1.5 ReMix is finished being localized in the NA region and the Pal region, and when FF X HD is released. I would have thought that KH HD 1.5 ReMix would have boosted their sales when it was released in Japan, heck it was released early on March 12th instead of on the 15th. I've already imported my copy, but one of the main problems that Square is having is the same problem that most developers set unrealistic expectations for their game sales. They mainly look at games like BF3 and CoD and think that their game has failed if it doesn't sell a ridiculous amount of units in a single month. Honestly I don't know why games like CoD and BF3 make the money that they do, but if developers keep the mindset that they have to sell 5 million copies in a short amount of time then it's gonna lead to their own downfall, which is a shame because it really shouldn't have come to this.

Then their is the whole thing with FF Versus XIII which was supposed to be a PS3 launch title and in 8 years it's still not been released. That project is taking up so many resources at Square that if it tanks it'll destroy them. Heck the reason why Kingdom Hearts 3 is taking so long is because most of the Kingdom Hearts team is working on Versus XIII apparently. Plus according to other sources Versus XIII won't even be released until FF XIII-3 is released.

Another issue is the whole thing with Final Fantasy XIV. Square believes that switching games to MMOs would be a great idea to make money when they look at FF XI, which was the most profitable FF game ever released actually. So they decided to apply that concept to the Dragon Quest franchise and look at what happened, no one bought it due to the fact that a once single player oriented game now focused more on being multiplayer, and mind you the multiplayer for it was less than spectacular to be sure.

As a general rule sequels sell better. Absolution may as well be a reboot considering how long it's been since the last Hitman game. Sleeping Dogs is a promising new free roaming IP and Tomb Raider is a fantastic reboot of the beloved franchise. Sequels will do better. Please for the love of whatever you might hold sacred, don't cancel them!

I'm calling it - CoD tainted sales expectations and game mechanics. It did so well on sales that game companies expected that by trying to integrate CoD-like elements into their games, these new gamers would explore other genres, meaning that these companies would get major cash. But do you really want to invite a group known to not care about the work that goes into a game, and verbally abuses other players as a result of their own mistakes? Do you really open yourself up that kind of player expectation by tapping into the CoD crowd?

...And yet it's been a few years since that major flux, and I believe that sales for the latest CoD (and CoD competitors) have dropped; could it be that these so-called "gamers" were never gamers at all, just people following a trend until it dried up? It should tell us that there is more to the sales scene then just a game selling really well.

At least be happy that you sold over a million. Any company should be happy about selling over a million copies, and should be worried about having to sell or expecting to sell over five to ten million, as it should be a red flag that your company is bloated and possibly pandering for players that really isn't suited for your game's genre. (Yes, companies are responsible for defining boundaries of genres - Blurring the lines causes problems between the desires of core players and those who are just outside the line, making it harder to wholly satisfy.)

captcha: three strikes
That last ball was a foul, but Square does have two strikes on them.

Question, did they still make make a profit even if they failed expectations? This is the one thing I find the most confusing.

I've seen this a few times now, "Hitman, Lara, Dogs didn't hit expectations, blah blah blah," but millions sold. Does this mean that these games were sold at a loss of profit or are the stuffed suits just mad they didn't get as much as they wanted?

The company is a bloated dead fish.

It isn't a coincidence that dozens of the most popular and iconic names under the Squaresoft umbrella left the company when Enix bought in. SE has released almost nothing but uninspired, overbudgeted crap since. The Shinra Electric Power Company is more reputable at this point.

I wish Eidos could change publisher. Preferably to someone who isn't completely retarded.

Dr.Panties:
Sad trumpet sound: Wha-wha-whaaaaa.

Something is wrong if you can move that many units and still lose.

They were already losing. They were just (unrealistically) hoping these titles would dig them out of that hole. Which was toootally realistic.

Never saw any ads on the websites I frequent for sleeping dogs, or a tv spot for that matter. And I read that Tomb Raider sold the most copies of any Tomb Raider game made to date? Not to mention they messed way too much with Hitman's mechanics and level design, made it more of a shooter. I bet those games still turned a profit anyway, just not as much as they wanted.

fix-the-spade:

Unfortunately there seems to be a huge amount of nepotism at Squenix.

Pedro The Hutt:

F U Square-Enix. Just admit that a huge amount of that loss is that you're pumping money into FFXIII Versus for EIGHT years now and that it hasn't made you a single yen yet because hey, it's still is in development and will be for the foreseeable future.

QFT. Square Enix are coming across as complete dicks. Everyone can see it, everyone keeps trying to point it out, and yet they refuse to admit that they're being completely unfair. And if their "social market" is doing well, it must be in Japan only because my first reaction was "What social market?"

The_Scrivener:
The company is a bloated dead fish.

It isn't a coincidence that dozens of the most popular and iconic names under the Squaresoft umbrella left the company when Enix bought in. SE has released almost nothing but uninspired, overbudgeted crap since. The Shinra Electric Power Company is more reputable at this point.

Pretty much this. The most notable thing they've done outside of ruining Final Fantasy is the cutscenes in Deus Ex HR, which were... pretty decent, actually. Good on the developer to not let squeenix anywhere near the story or gameplay or it would have been a lot worse.

...I just miss Square.

It's been two weeks since those Tomb Raider numbers were released. Can't help wondering where the game is sales-wise today. I'd expect it to at least have passed 4 million units, plus digital.

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