Square Enix restructuring as Tomb Raider and Hitman sales fall short
Developer and publisher Square Enix has changed its positive predictions for the financial year from a healthy profit to a crippling loss, and announced plans to bring in reforms and restructuring. Sleeping Dogs, Hitman Absolution, Tomb Raider all failed to meet high sales expectations. The company had forecast a net profit of around $37 million for the fiscal year, which ends March 31, but has now revised that to be a whopping $138 million loss. Ouch.
Developer and publisher Square Enix has changed its positive predictions for the current financial year from a healthy profit to a crippling loss, and announced plans to bring in expensive reforms and restructuring. Sleeping Dogs, Hitman Absolution, and Tomb Raider all failed to meet high sales expectations. The company had forecast a net profit of around $37 million for the fiscal year, which ends March 31, but has now revised that to be a whopping $138 million loss. Ouch.
In the announcement [pdf], it said actual sales "substantially fall below" its predictions, "primarily due to slow sales of major console game titles in North American and European markets."
In an accompanying presentation, Squeenix said that sales of Sleeping Dogs, which it picked up after Activision dropped it, Hitman Absolution, and the new Tomb Raider all fell short of expectations, "despite the high critical acclaim."
Excluding digital sales, the three games are currently predicted to sell 1.75 million, 3.6 million, and 3.4 million copies respectively by the end of March. Evidently, that's just not enough. North American sales are singled out as particularly low, compared to expectations.
Square Enix resolved, "In view of the rapidly changing environment of the game businesses, the Company has decided to implement major reforms and restructuring in its development policy, organizational structure, some business models, and others."
This process is expected to cost ten billion yen, or around $105 million dollars, which accounts for a huge chunk of this year's new projected loss.
Company president Yoichi Wada is to bow out, with his replacement yet undecided. How exactly reforms will affect games in development and future games remains to be seen.
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Alice O'Connor posted a new article, Square Enix restructuring as Tomb Raider and Hitman sales fall short.
Developer and publisher Square Enix has changed its positive predictions for the financial year from a healthy profit to a crippling loss, and announced plans to bring in reforms and restructuring. Sleeping Dogs, Hitman Absolution, Tomb Raider all failed to meet high sales expectations. The company had forecast a net profit of around $37 million for the fiscal year, which ends March 31, but has now revised that to be a whopping $138 million loss. Ouch.-
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It might have fallen off sharply. They may have gotten a million sales but that only translates to about $35 million in grosses but that is probably only half of what they spent when you take into account dev costs and marketing. Heck Tomb Raider is on the amazon gold box deal of the day as I type this.
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That's exactly what happened with Dead Space 3; Frank Gibeau mentioned EA wanting that game to sell 5 million. There are some serious problems with publisher expectation management, budget bloat, and project management.
Consider that Metal Gear Rising: Revengeance sold 300K in Japan, and was labeled a success. Persona 4 Arena sold something under 200K (I forget whether that was US or US + Japan), and was also an amazing success. It is very possible to make great games on a low budget. It's hard, but it's possible.
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Wait...I don't understand. Didn't Tomb Raider come out like three weeks ago? It's already sold over 3 million and they're calling it a failure? And that's excluding digital sales! i bought my copy on PSN; so did a couple of friends. I thought my brain hiccuped and I read the headline wrong because everyone I know who plays games, has played Tomb Raider.
I agree that we need more details on what exactly is going on at Square Enix. -
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yeah, I didn't know much about this game outside of Shack chatter. It was free on PSN+ and I played through it last week, fantastic game, solid (if predictable) story, nice setting executed beautifully. It would be a shame if there isn't a followup - it took a lot from GTA4, including the bad stuff, and honed it into something so much better.
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Complete speculation, but the difference is about $175 million ($138 + $37), divide that by, say, $60 for the cost of a game = they wanted to sell maybe 3 more million copies?
On another note, Tomb Raider was the first new game I paid full price for since Uncharted 3 came out and we got the collector's edition, but I usually wait for sales.
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I'm not sure if gamers are a "pathetic lot" today. I'm wondering if the market is just getting saturated. I want all three of those games, but I haven't had the time to play even half the games I own. So for me it's just not something I can justify. If I don't have time to play it, and I have a huge backlog of games that I don't have time to play... it makes it hard to spend $60 on something that just sits on a shelf. Console crash? I welcome it in some ways... as long as I don't lose my job. :) Also I think in large part the cost of development is just getting to be too much, we need to find better ways to make games with great graphics... the pipeline is too convoluted and requires a great deal of time and effort, which means capital expended. If a game costs $100 million to make then you can almost surely figure on not making that money back. A new console generation could cause a short-term bump in games sales, but more hardware power also means more cost for development on the art side. You can only outsource so much... Long term I wonder if the trajectory of the industry is tenable.
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If you think this is foreshadowing some bad trends now, just wait until publishers like Square see the sales numbers for Walking Dead: Survival Instinct. The fact that a game that looks like it was made on a 99¢ Store budget is likely to outsell any of these titles should make you want to bang your head on a table.
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Sounds like Square Enix is blaming the devs they own for their problems but leaving out the failures of their internal development studios which have been a mess for years. How many copies did Final Fantasy 14 sell compared to Tomb Raider? These games have kept Square Enix afloat but now their taking the blame for not working miracles and selling ten million copies. Their expectations can not have been any higher than their sales turned out unless they were just simply engaging in wishful thinking. Crystal Dynamics has already said sales were higher than they expected so it just seems they are getting scapegoated for the failures of the home office.
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I'd like to know, is this net losses of $138 million from just those games only or from all games produced this year?
I'd like to know because Eidos has produced great titles for Square and it would be absolutely criminal to place the comapny's woes on a studio that's doing more than its own share. In my opinion it's their in-house stuff that is over budgeted and under performing.
They probably spent a metric ton on revamping Final Fantasy XIV alone and unless Realm Reborn absolutely stellar, they will get probably nothing back from it.-
A translation of Square Enix said today from corporate speak to plain truth would be, 'While Tomb Raider and our other western developed series are all selling well enough to make healthy profits they cannot both make a profit for themselves and cover the losses of the Final Fantasy series inlcuding 14 which not only lost a ton of money but which is now being rebuilt from scratch to lose more money, Versus 13 which has had years put into it without anything to show for it, and the 13 series which despite not doing well for two games now has a third on its way."
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Advertising & upper management probably took a significant chunk of the money.
The game is awesome. The adverstisments...well
http://tinyurl.com/ae7jd62
Main reason why I hope kickstarter flourishes. I'd rather directly support developers than go through a host–parasite relationship.
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I liked Sleeping Dogs but I wish it was more in depth like GTA. It just didnt have much extra content other then the story. Hitman on the other had is garbage. I stealth kill a guy with poison and then i change cloths and they STILL know who I am. I have played all the hitmans and this one is just junk.
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The good news on a dark day here is that focus should now shift heavily to the DX franchise, which outdid expectations in sales and was very well received. I like Hitman and I played Tombraider like everyone else, but neither were ever landmark series for me personally like DX has been. I'm really hoping they don't shoot themselves in the foot by screwing up the wonderful formula Thief uses too much, which is worrisome based on their unnecessary takedowns system and early reports on the AI.
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