Topic: Sell millions, still a failure?

[TJ Spyke]

So Square Enix released their financials today, and one thing I noticed that is further proof that gaming budgets are getting way out of hand. The re-boot of Tomb Raider has already sold 3.4 million copies (not even counting digital sales) since launching March 4, but the company still says the game has failed to meet sales expectations.


Overal, Square Enix expest to post a loss of ¥13 billion ($138 million) for the fiscal year ending March 31. This has led to long time CEO/President Yoichi Wada to resign, he had been CEO since Square and Enix merged in 2003 (before that he had been CEO of Square since December 2000). He will be replaced by by former company director Yosuke Matsuda.


http://www.gamesindustry.biz/articles/2013-03-26-square-enix-revises-full-year-forecast-expects-major-losses?utm_source=newsletter&utm_medium=email&utm_campaign=us-daily
http://www.gamesindustry.biz/articles/2013-03-26-yoichi-wada-steps-down-as-square-enix-ceo?utm_source=newsletter&utm_medium=email&utm_campaign=us-daily

[UncleBob]

I really with the Pietriots crew would make a new Wall of Shame series that focuses on companies that have went under or have posted severe financial failures (EA, SE).

Seriously - someone build a wall comprised of SE releases for Nintendo systems in the past five or ten years.

[broodwars]

Have we ever got a confirmation that those are confirmed sales numbers & not sales targets? Because Square-Enix has been pretty vague on that.

Either way, Tomb Raider is an awesome game made by extremely talented developers, but no one game (or even 3 games in this case) can make up for all the losses Square-Enix makes on all the crap it makes but doesn't manage to sell from Japan.  Seriously, how much money has S-E lost on Final Fantasy 14 by this point, and out of pride they keep throwing even more money at?  Dragon Quest X has apparently been underperforming, though Square-Enix isn't going to throw its DQ developers under the bus like they have their Eidos branch.

I like the Final Fantasy series (yes, even the 13 games), but that's seriously all Square-Enix has going for them from their Japanese developers these days and they can't expect their handful of Western games to pick up all the slack in a month or two.

[UncleBob]

For reference, here's their last two years worth of output for Nintendo systems in the US.

Bust-a-Move Universe - Ehh.
Fortune Street - Interesting, but totally niche title.
Theatrhythm Final Fantasy - Pretty popular, but a rhythm game well after that craze died.
Kingdom Hearts 3D: Dream Drop Distance - Wow.  This was probably the second most "last played" game I saw at the convention I went to over the weekend (first being Monster Hunter).
Heroes of Ruin - Fun game, but man SE did little to actually sell this game.  I had to go to eight stores before I could find it.  Hopefully, the upcoming digital release helps sales out.

[TJ Spyke]

Have we ever got a confirmation that those are confirmed sales numbers & not sales targets? Because Square-Enix has been pretty vague on that.

Either way, if they say that 3.4 million copies in less than a month is lower than they expected, that is a problem. Even taking out the cut from retailers and console manufacturers, that is still well over $100 million they have made from it.

But like UncleBob said, their support for Nintendo systems has been pretty weak overall. Hell, they can't even be bothered to publish the Dragon Quest games themselves (Nintendo does it).

[broodwars]

Either way, if they say that 3.4 million copies in less than a month is lower than they expected, that is a problem. Even taking out the cut from retailers and console manufacturers, that is still well over $100 million they have made from it.

It makes a HUGE difference whether Square-Enix expected 3.4 million sales & Tomb Raider didn't meet it, or if Square-Enix expected 5-10 million sales & Tomb Raider "merely" sold 3.4 million.

But like UncleBob said, their support for Nintendo systems has been pretty weak overall. Hell, they can't even be bothered to publish the Dragon Quest games themselves (Nintendo does it).

And why should they? Dragon Quest is practically a flop outside Japan, which is the only territory where it's worth a damn.  If I were Square-Enix, I wouldn't want to publish an almost-guaranteed bomb outside Japan either if someone else is willing to eat the loss instead.

[Ian Sane]

Square Enix is burning money in Japan and asking Eidios to make it up in America.  Has Tomb Raider made back its budget because that's all the development team should be responsible for?  It isn't fair to count the losses of other projects against this one game that has to "save" the company or whatever.  Of course the prime skill of a corporate exec is shifting blame away from yourself so it would be unrealistic to expect Square Enix of Japan to admit that the company's woes are their own fault.

The ultimate budget problem with games these days is simply that every publisher wants their game to have Call of Duty sales.  But there are very few "spots" per year for games with those kind of sales and too many games aiming for them.  The concept of a niche game seems to not exist anymore in the minds of publishers as the mainstream dollar is too enticing.  And naturally there is the assumption that to sell like Call of Duty one needs to have a huge budget.  The whole thing becomes an arms race.  And I don't think it's because graphic standards have gotten too high or gamers' expectations are too high but merely that publishers think that is the case.  They can't make a lower budget game with narrower appeal because they can't help but see how much number one is getting and they want to be in that position.  They can have all these beautiful paintings but they want the Mona Lisa, dammit, and will destroy themselves to get it.

I figure the whole thing is going to crash down real soon and the old guard like Square Enix, Capcom, Sega and, yes, Nintendo has turned into something so far removed from their golden years that I wouldn't miss them if they were gone, because they might as well have been for the last several years anyway (Nintendo less so than the others).  Blow it all up and start over with new blood.  Or at the very least may the situation become so dire so as to shake up these old companies and force them to be hungry again and get rid of some of the deadwood in their management.  Pull your head out of your ass or suffocate.

[magicpixie]

This is a link to what I presume are S-E's presentation slides:

http://www.hd.square-enix.com/eng/news/pdf/130326slides.pdf

The 9th slide shows that these are expected sales in fiscal year 2013(excluding digital download sales).  As such, I do think it's disappointing that Sleeping Dogs and Tomb Raider haven't done better.  I loved the hell out of both of them.  Hitman was an ok game, but it was ultimately hurt by trying to straddle the line between appealing to the franchise's core base and broadening its audience, imo.  Also, the marketing campaign for that game was absolutely brutal.

The point about FFXIV is valid, but I think from a corporate standpoint, it's understandable.  FFXI made the company a lot of money, and if they can hit that same market twice, that's a market that they would be serving for the next decade with various updates... under the old MMO model.  From the looks of things, the old MMO model may be over. 

And I agree with Ian about publishers having unrealistic expectations/demands for their games and the gaming community.

[Shaymin]

FWIW, Dragon Quest X has already made back its development costs in Japan. Whatever happens with the localization, it'll be cheap enough that the usual DQ sales will be enough to cover those costs.

[Adrock]

Ironically, people give Nintendo **** for not pushing the technological envelope, but look at where the industry stands. Nintendo has been predicting this for years. Third parties want better and better hardware, but so many of them fail to take advantage of it without practically falling into financial ruin. I don't know how that helps anybody. Was Tomb Raider's budget worth it? I haven't played it yet. However, it cost the president/CEO of Square Enix his job and after this restructuring, many others will lose their jobs as well so I'd say, "No. No, it wasn't." As a consumer (even one who has yet to play the game), I'm leaning towards no. A high bar has been set for the series with this reboot though we're probably not going to see this kind of effort (and budget) from Square Enix except in extremely rare occasions (e.g. Final Fantasy). What's going to happen now? Either no sequel of the same overall quality or no sequel period. Kind of sucks either way.

Here we are in 2013. Companies that haven't opted out are forced to restructure to survive (and who knows if that will even work). For all the times it seems like Nintendo doesn't get it, there are times when they totally get it. Nintendo hit a rough patch due to some mismanagement (e.g. Wii limping through its last year or so, 3DS launch, Wii U drought), but I still think they're one of the better managed game companies out there. They're entire business model revolves around making back their investments in as little time as possible. They've done this starting with protecting their IPs, something Eidos did not do. Tomb Raider wouldn't have needed a complete reboot (and really, it's like third restart) if they didn't sully the franchise to begin with. Take Zelda for example. It's one of Nintendo's more costly games to produce, but it's a cash cow. It sells on its pedigree. There will always be people who buy it because they know that Nintendo isn't likely to release a bad Zelda game. I didn't even like Skyward Sword, but I can admit that it was a well-made game and because of that, I'm going to buy the next one.

I think a lot of companies can learn from Nintendo's example. You don't absolutely need super big budgets. Since the gaming industry is and will always be smaller than the film industry, these companies have to find another way; they have to focus on understanding their audience. If you break down what gaming is at its most basic level, it's interactivity. That's where its enjoyment comes from. There's a reason why a game like Mario Kart always sells well. There's no plot and the graphics aren't anything to write home about. However, even everyone's personal least favorite one is still pretty fun. Release consistently good products (don't rush them to market) and build up trust from consumers and you won't need inflated budgets. Sell millions, still a failure? You're doing it wrong.

[TJ Spyke]

Since the gaming industry is and will always be smaller than the film industry

Actually, for the last 8 years or so the video game industry has made more money than the film industry.

[broodwars]

Ironically, people give Nintendo **** for not pushing the technological envelope, but look at where the industry stands. Nintendo has been predicting this for years. Third parties want better and better hardware, but so many of them fail to take advantage of it without practically falling into financial ruin. I don't know how that helps anybody. Was Tomb Raider's budget worth it? I haven't played it yet. However, it cost the president/CEO of Square Enix his job and after this restructuring, many others will lose their jobs as well so I'd say, "No. No, it wasn't." As a consumer (even one who has yet to play the game), I'm leaning towards no. A high bar has been set for the series with this reboot though we're probably not going to see this kind of effort (and budget) from Square Enix except in extremely rare occasions (e.g. Final Fantasy). What's going to happen now? Either no sequel of the same overall quality or no sequel period. Kind of sucks either way.

Like I said, though, the problem wasn't with Tomb Raider, or either of the other 2 singled-out Western releases for that matter. The problem is Square-Enix setting ridiculously high projections on these games assuming that they are going to be so massively successful that they make up for the EXTREME losses all their other Japanese projects have been incurring.  There's no way that Tomb Raider hasn't made up its budget by now if you buy into that 3.4 million sold figure, but for some reason Square-Enix decided that game was going to make up for all the billions of yen they've lost on FF 14, Dragon Quest X, and other notable failures (or at least "underwhelmers").

Square-Enix set sales targets that there's no way these three games could ever hit, all for the sake of then blaming those games for their losses when it came time to explain things to the shareholders. It's almost nationalism at its business worst.

[Adrock]

Since the gaming industry is and will always be smaller than the film industry

Actually, for the last 8 years or so the video game industry has made more money than the film industry.

Charlie Brown, you blockhead. Who said this was strictly about revenue? Let's look at my entire sentence, not just the part you quoted.

Since the gaming industry is and will always be smaller than the film industry, these companies have to find another way; they have to focus on understanding their audience.

The film industry is bigger because it reaches a much wider audience due to the kind of entertainment it is. I don't see the video game industry ever becoming that pervasive. With all these games companies closing or restructuring, the film industry seems far more stable and sustainable. The games industry is still relatively young in comparison so it's still developing an identity. It just needs to collectively figure out a way to stabilize itself.

Many of these games companies are trying to make the equivalent of summer blockbusters which is admirable but misguided. It seems like they're trying to follow the movie industry's lead, but they're not the same. Games cost more when released, but the pool of people buying is much smaller. Does the higher cost balance out the smaller audience? Additionally, how do you market to them? I'd argue that it's more difficult to market games. Publishers can't market a game the same way a film distributor markets a movie. Selling a movie starring Ellen Page is easier than selling game featuring Ellen Page's voice and likeness. Games companies often use visuals and push bigger budgets to get prettier looking games (perhaps in a bid to legitimize itself?), but that only works some of the time. The bubble is going to pop, if it hasn't already. If their products are underperforming, they're doing something wrong.

The main point of my previous post was that Nintendo is a company that hasn't run into the same problems as these other companies because of how they conduct business. They focused on gameplay first simply due to the type of entertainment gaming provides. It amazes me that so many companies can see this work for Nintendo time after time yet still feel compelled to do the opposite. Sure, they don't have Mario and Zelda. At the same time, Nintendo didn't always have Mario and Zelda. Nintendo had to create Mario and Zelda and they earned the respect those series command.

[Oblivion]

Since the gaming industry is and will always be smaller than the film industry

Actually, for the last 8 years or so the video game industry has made more money than the film industry.

wat

[TJ Spyke]

Since the gaming industry is and will always be smaller than the film industry

Actually, for the last 8 years or so the video game industry has made more money than the film industry.

wat

I guess you don't remember all the news reported the first time it happened. In 2008 video games sold $32 billion worldwide, while movies sold $29 billion worldwide.

[Spak-Spang]

You know I remember people complaining about Nintendo "phoning" in games like Mario Party 18934 and what not.  But you know each one of those games was enjoyable to play.  They were pretty cheap for Nintendo to make and made a profit. 

The thing is, when you are going to have a blockbuster be it a movie or game, you must have side projects to fund those bigger blockbusters.  Don't assume that Blockbuster alone is enough.  This is a very important business lesson that both the video game and movie industry can take home.  For everyone Iron Man 3 and Zelda game that comes out...hugely expensive movies and games that take years to make, market and give to audiences, you need to have smaller budget games and movies to pay the bills so to speak. 

Because, putting all your eggs in one basket and hoping for the Grand Slam...is foolish.  Nintendo is pretty good about not putting all its eggs in one basket.  The DS came out.  Nintendo fed us a BS line about the 3 tiers Gameboy, Console and DS.  That was bull.  Nintendo wanted to rebrand its portable system, and create this new machine.  But they were risking the market not calling the Gameboy, and they were not sure the console would succeed.  So spin.

The Wii was underpowered to help Nintendo with the risk of a drastically different console and a fairly risky concept of motion controls.  Even the Wii U is carefully designed to help Nintendo survive if it fails.  The same is true with all its games.  Nintendo only releases 1-2 big AAA games a year.  And then they carefully spread out the other releases of smaller budget games throughout the year.  But still they only push a new game published by Nintendo ever 2 months or so....sometimes 3.  This is to help space out everything to maximize profitability...which should be the goal of all these companies.

[Oblivion]

Since the gaming industry is and will always be smaller than the film industry

Actually, for the last 8 years or so the video game industry has made more money than the film industry.

wat

I guess you don't remember all the news reported the first time it happened. In 2008 video games sold $32 billion worldwide, while movies sold $29 billion worldwide.

That was in 2008. You said the last 8 years, which I highly, highly doubt. Plus, the video game industry doesn't even have concrete numbers for sales (we have to rely on bullshit numbers from VG Charts or "shipped" units from the publishers themselves. I highly doubt that figure is accurate. At least in the film industry you can actually trust those numbers.


Also, I bet Avatar, The Dark Knight Rises, Skyfall, Inception, and The Hobbit might be swaying the numbers in a different direction.

[NWR_insanolord]

People in the industry have real numbers. The full NPD report gives exact figures for literally every game sold, but it costs thousands of dollars to access so we use the sample they give out for free. I don't think that figure was generated by outsiders; if I had to guess the numbers were compiled by the ESA, who would know exactly what sales were.

[MagicCow64]

I highly doubt that figure is accurate. At least in the film industry you can actually trust those numbers.


Also, I bet Avatar, The Dark Knight Rises, Skyfall, Inception, and The Hobbit might be swaying the numbers in a different direction. :

Actually you can't really trust the film industry either as far as overall P&L goes. Studio accounting is extremely byzantine and often intentionally masks both profitability and unprofitability, depending on the tax impetus or spin necessity. There are also the phantom marketing costs, which is becoming a similar component of the game industry.

[Oblivion]

Hollywood accounting has nothing to do with how much money they get from sales. That has to do with whether or not they actually make a profit.

[MagicCow64]

Yeah, I said P&L; wasn't the original quibble about whether the game industry actually makes more than the film industry?

[Louieturkey]

More confusion ensues.  Crystal Dynamics is now saying that Tomb Raider is the best selling launch in the TR series and that it's the most successful 2013 game so far this year.  This really makes me wonder what SE was thinking in regards to sales.  Did they really think it could reach Call of Duty levels?

[UncleBob]

Is it a question of sales vs expectations or sales vs. budget?

[pokepal148]

it's a question of where is the industry going, if square enix was expecting, what i'd call a third tier franchise compared to the other things they have, their idiots

[UncleBob]

*snicker*