Square Enix: Disc Based Sales Are Killing Us

[Zombie_Moogle]

There's a reason why publishers set seemingly unrealistic sales targets, and this is it: in a marketplace where unreasonable costs are incurred, unreasonable targets are the only hope of making cash back.

This is where I disagree.

Setting unreasonable sales targets does nothing to actual increase sales. Why would it?

I'm not sure why Square Enix & my former employer got this impression, but both wound up losing a lot of money because of it.

 

[Lightknight]

Dear Square Enix,

This is how business is supposed to work:
1. Get a general estimate of what to expect in revenue. You're a big boy company who has been in the game for a long time and should be better at this than others. You should know your approximate target market and how well games in that area generally fare.
2. Budget conservatively based on the reasonable forecast. It is FAR better to budget for a game that you forecast will sell "ok" than it is to pour huge game-of-the-year money piles into a game just to try at making unrealistic numbers.
3. Stick to the budget. Hopefully the budget has enough room to invest more if parts of the project throw you some surprises.

If sales are dismal. You've lost some but not a tremendous amount and have perhaps gotten close to covering dev and marketing costs.
If sales are ok. You've made at least a little ROI.
If sales are fantastic. You've made a huge ROI and are in an easy position to followup with more of a beloved franchise that can pay for itself going forward.

That is the way it should be.

What you actually appear to be doing is:

1. Estimating that you can make COD sales if you spend a TON of cash beyond what any rational market veteran would consider spending in a non-COD genre.
2. You then budget for that pipe dream by overspending by millions of dollars with all of your employees too afraid to tell you you're spending too much because that includes them having a paycheck.
3. You then go even further over that budget with wild marketing campaigns and development fixes.

If sales are dismal. You've flushed what may be 8 or 9 digits of cash down the toilet.
If sales are ok. You lose a tremendous amount of money.
If sales are fantastic. You've made at least a little ROI. See, that's the thing. You have to sell huge amounts just to make a small ROI. Sales have to be out of this world to get the same return per dollar that you'd have gotten with a conservatively budgeted game.

You guys sold millions of copies of each title. Sleeping dogs has sold nearly 2 million copies with digital sales unaccounted for (got in the top 20 best selling games of the year). Hitman:Absolution popped out 3.6 million at retail. Tomb Raider sold over 4 million copies and had the most successful launch of any game this year with over 1 million units sold within 48 hours and is the highest grossing game in franchize history. Again, digital sales not accounted for.

The problem is NOT the game. It is NOT the development cycle. The problem is you. I loved all three of those games and so did a lot of other people apparently. If you can't make a profit off of 2 million + copies sold then you've done several things terribly wrong. You've got to budget for what you can reasonably make. You're a publisher for goodness sake. Market forecasting and risk analysis is basically your only necessary skill set aside from having vast sums of investible cash. You've got a limited target market that is scaled to what genre you're developing in, stop pretending like investing an infinite amount of cash will magically make the pond bigger.

 

[Lightknight]

Finally Square have realised what is wrong with the industry, really hit the nail on the head. If they get rid of disc-based games they can double their production budgets and still make millions of every title![/sarcasm]

I don't see how they can blame physical media for poor sales when they have sold pretty damn well at retail. Sure they get less profit because of so many people taking a slice of the money but that isn't exactly new. If they want more profit then they should reduce their costs and promote their digital sales more, like giving people a discount for buying digitally and not giving armfuls of exclusive stuff to people who buy the physical game. No free-to-play required.

It's simple. In a world without disks there are no moochers. People who borrow the game to play it rather than buying it new. If only digital versions exist, it is most likely purchased at a designed price every time.

That's where they think they'll make their money back. The problem is, they are in an environment where disk-based sales exist. They should be accounting for that and budgeting accordingly. Their failure to budget appropriately for this is a problem that would exist no matter what the environment. If they want to push for disk-only. Fine. They can do that all they want. But if they don't address this larger internal problem they will never make it back into the black.

 

[VasileD]

Is it just me, or is the whole Xbone debacle over used games being slowly bypassed anyway by the fact that publishers simply won't be making on-disc games anymore? You can't really sell a used game unless it's on a disc, right? That sort of makes me think if it was all worth it in the end, you know, all that rage over Microsoft not letting you sell or lend games to other people. Maybe that they just saw this trend in the market and simply wanted to streamline their console to it. BTW, don't want to start an argument or anything, just thinking out loud.

 

[Britpoint]

Incidentally, Deus Ex was profitable. If I remember correctly it pretty much saved SE's AAA figures for fiscal year 2011: http://www.gamezone.com/news/2012/05/14/square-enix-reports-profit-led-by-deus-ex.

It was an ambitious game, it was a brilliant game, but it was not an expensive game to create, relatively speaking. The graphical fidelity was perfectly good but nothing mind-blowing. Most of the impressive vistas in the game were simple painted backgrounds, they didn't spend huge amounts of resources on performance capture and trying to optimise sexy particle effects for the latest graphics cards. They made a game that didn't take technical wizardry to get performing on the ageing PS3/360, or on multiplayer that nobody ever asked for.

And that sold, what... 3 million copies? Less than Tomb Raider I think, yet it was a success. So they know how it's done, they just need to have the courage to do it again. Make no mistake, the great game comes within the first 25% of the budget. The bells, whistles and marketing is what bloats things to the point of being unsustainable.

 

[RandV80]

F2P is such a misnomer. Yes it can start out as free, but a developer isn't going to spend money all that money making a game to give it to you out of the goodness of their hearts, they still expect to make money off of it which means they expect that at some point you will pay. For one of the big players like Square to see F2P as being more lucrative than a traditional single sale disc it means they're either looking at F2P as cheaper to develop games, in which case they could still just make the cheaper game and slap a cheaper price tag on it, or they're looking at making the same types of game but under 'F2P' expect that the gamer will actually end up spending more money than if it was a single $60 purchase. So like I said, a misnomer.

Now you know what I wish Square had the balls to do? In light of their apparent failings of recent big budget games that sold really really well but still didn't make them money, then combined with the recent success of throw back kick starter games, make FFXVI a brand new retro[i/] game. Drop the insanely expensive HD graphics and movie quality cut scenes, and focus on making a deep, compelling, and lengthy story with great characters and music set in a massive game world. Graphics wise I'm not necessarily going back to SNES quality, but something like of a 2.5D type more aesthetically pleasing FFVII/FFIX (just look up images of Project Eternity to see how amazing this can look on a vastly smaller budget) or a FF Tactics 3d-lite with a bit more detail an sharper animations. Set a more modest budget and sales figures and release it at a cheaper price, $30 or so, and as much as possible release it on everything.

For that I would totally throw my money at them. And I'm not saying it should be their direction from now on, just a one off to help them recuperate from the expensive mess that happened too Final Fantasy this most recent console gen.

 

[Lightknight]

Is it just me, or is the whole Xbone debacle over used games being slowly bypassed anyway by the fact that publishers simply won't be making on-disc games anymore? You can't really sell a used game unless it's on a disc, right? That sort of makes me think if it was all worth it in the end, you know, all that rage over Microsoft not letting you sell or lend games to other people. Maybe that they just saw this trend in the market and simply wanted to streamline their console to it. BTW, don't want to start an argument or anything, just thinking out loud.

Publishers will continue to sell games on disk. I don't see anyone pulling out of that. Until digital sales far outweigh physical sales they would be potentially losing a huge sum of money by doing so.

They aren't complaining that selling them on disk is expensive. They are actually complaining about how people can hand the game to a friend who then doesn't have to pay the publisher for it. Their complaint is the preowned market.

I think developers would be better served by negotiating at least some of the profit for used games from Gamestop if that was possible.

 

[medv4380]

However, supplying games to distribution channels has become much more difficult in the video game market due to an increase in the number of titles, in particular, blockbuster titles competing with each other.

I don't buy it. NPD has been reporting consistently that the number of retail releases has been down for the last 2 years now being replaced with more digital only releases. If anything, they're just over estimating what sales should be, and need to find something to blame. Sales history clearly indicated the Max the game could sell was 5 million, and would more than likely sell between 1-3 million at best. When the high sales figures for a series is the late 90's, on systems with a larger install base, maybe you should rethink your formula.

 

[Alcamonic]

If they want the disc based alternative to be inferior to direct download, how about they actually make the direct download from say Steam, be equal or less in cost compared to the physical copy on Amazon?

 

[LadyLightning]

Graphics wise I'm not necessarily going back to SNES quality

Why the fuck not? Final Fantasy IV, V and VI were objectively the best games in the entire franchise in every way that matters for an RPG: story, gameplay, and characters. Why Square thought it was a good idea to throw those away in favor of pretty graphics is beyond me.

 

[J.McMillen]

Honestly, as a long time Steam user I can't remember the last time I actually bought a physical copy of a game for my PC. And I've bought Hitman: Absolution, Tomb Raider, and even Deus Ex, all digital through Steam. If I buy a physical copy of a game, it would be for extras that were included with the disk (which hasn't happened in a long time).

Years ago I use to be one of those that held on to the boxes the games came in. That was until those old oversized boxes were taking up nearly two bookcases. At that point I got some kraft envelopes, dumped the manuals into individual envelopes, labeled them, then through out the boxes. Two bookcases reduced down too two boxes.

As for consoles, they really need to be able to expand HDD space easier and cheaper than current options allow. If I want to hook up a 3TB external hard drive, I should be able to use it for anything the console allows. Games, music, video, everything (especially games). And as long as users can re-download games they have already purchased (as Steam does), digital distribution on consoles should be more viable.

 

[Gennadios]

People are missing the writing on the wall here, SE is pointing it's finger at digital distribution, but it's competition that it's really complaining about.

Ergo, they won't just do away with disks, they're planning to start their own DD service, a la Origin. I wonder how well it'll go for them.

 

[RandV80]

Graphics wise I'm not necessarily going back to SNES quality

Why the fuck not? Final Fantasy IV, V and VI were objectively the best games in the entire franchise in every way that matters for an RPG: story, gameplay, and characters. Why Square thought it was a good idea to throw those away in favor of pretty graphics is beyond me.

Don't get me wrong the SNES FF games are my favourites and I'm perfectly happy playing the games today, just that if they were to actually make a full scale retro game on a modest budget it wouldn't make that big a difference whether they went with a FFVI, Chrono Triggers, FFVII/IX, or FF Tactics art style. VI is my favourite FF but as long as the story, characters, music, length, and massive world (kind of funny how as JRPG genre 'advanced' the world maps/playing fields kept getting smaller and smaller) are the prime focus I'll take the modest one-gen upgrade in visuals. One of the problem with latter games with their fancy graphics while the characters may look nice is it became exponentially more expensive to build so everything just... shrunk.

Back to the point though I never did care that much for FFVII but I have to admit that I always loved some of the set pieces as the game map. And these can be cheaply done, they're just actually 2d images that create the illusion of 3D, so you just can't rotate the camera.

 

[SecondPrize]

Yeah, I totally believe that it's discs and not the fact they had to make the same MMO twice that has them in the shitter. Totally.

 

[Childe]

If companies could learn something along the lines of money management they would be in much better shape. Instead of just throwing millions of dollars at a game they intelligently figured out who they needed to market the game too, reduced ads to places where those types of people go, and used money intelligently on making the actual game they would do much better.
But no they just throw money at games and expect them to make a full return, or at least makes a good chunk of the money back. I mean come on. Did anybody at these companies ever learn money management????

 

[Altorin]

Graphics wise I'm not necessarily going back to SNES quality

Why the fuck not? Final Fantasy IV, V and VI were objectively the best games in the entire franchise in every way that matters for an RPG: story, gameplay, and characters. Why Square thought it was a good idea to throw those away in favor of pretty graphics is beyond me.

I recently replayed through FFVI, a lot (there were about 4 different playthroughs going on in my household at once and I was sort of the go to guy for it, knowing pretty much everything about the game) and let me tell you, through adult eyes, I was not very impressed. Don't get me wrong, I actually love the game, it's just that the most interesting things in the game (to me at least) were barely touched upon, and the ending immediately devolved into slapstick comedy..

i didn't remember all of the slapstick. It soured the entire experience for me. It had a chance for depth and it just spat all over it. I don't think I'll look at the game the same way.

nothing to do with the graphics, just something that's been on my mind lately

 

[cerebus23]

Yea i thought unreal engine, cryengine and so on were supposed to make game development easier and more efficient?

Where is the problem?

If gta 5 really cost 250 million to make that is insane for a game, at that cost it better be a 10/10 and run flawlessly to boot.

Somehow i doubt it will reach one of not both of those goals. Especially with their track record in the past on multi system releases.

Then we got basically all the major consoles using the same hardware for the first time ever, that alone should cut some dev costs. No more sony cell architecture making ports that much more difficult.

So what is the issue? run away salaries? people ordering too much beer and pizza at work? CEOs wanting to much pay for the actual work they do? Especially while they run a company into the ground? Ad budgets too large especially in the age of internet advertising, viral marketing there are viable alternatives to massive tv buys. Voice acting costing too much? how about find some no name new talent instead of hollywood stars that can go pimp your game for you with a known face.

I know programmers and artists and deisngers work long hard hours to make deadlines, but some of the stories this years have shown a clear trend in the industry to just shovel money at a game and then get fobbed off through the dev cycle, see gearbox sega and ACM.

There are clear problems in the industry, as a whole and as budgets get larger and larger despite the tools available, faster and faster computers, ahh the good old days when some filters in photoshop would take several minutes to apply. nm compiling maps and game assets on older pcs took hours if not days at times, when everything should be more efficient overall. Yet dev cycles grow larger and larger, budgets skyrocket.

 

[DarkhoIlow]

Here is a small tip Squeenix: how about you don't invest tens of millions of dollars on marketing your games and then expect absurd game sales (same thing happened with Dead Space 3).

Perhaps then you shouldn't say that 80%+ Metacritic scored games with 3.5 million copies sold was a failure.

 

[roguewriter]

All of these games sold reasonably well by the standards of other company projections, especially Tomb Raider which had both critical and admirable commercial success. It's insipid to blame not meeting unrealistic financial/profit figures on Disc sales and retailer practices.

I work for Gamestop, and when Tomb Raider dropped we had a significant number of pre-orders, off the rack sales, and almost no returns (at least at my store and other sister stores); There are plenty of other Triple-A titles I can think of that didn't have nearly that kind of success and I haven't seen their developers/publishers bitching about it or trying to shuck the blame.

So for Square-Enix to try to pin the failings of their greed on us? Fuck you. You have amazing and even beloved properties, that doesn't mean you're going to rake in 'Avengers' money on any of them no matter how well made they are/were.

 

[userwhoquitthesite]

"Disc Sales are killing us"

Maybe if you didn't pour all your money into pointless crap?