Square Enix: Disc Based Sales Are Killing Us

[havoc33]

Well Squeenix can now go and get stuffed, if they stop making games on disc I will stop playing their games, funny how that works aint it.

The problem isn't the sales, it's the dumbasses in the managers office that can't budget for a realistic level, oh what's that it made over 4 million and yet you can't afford to make another? Guess what, learn some accounting!!

Look, it's more complicated than that. We the consumers are asking for AAA hd titles and ever improving graphics, and they will be more expensive to develop. But yeah, a title that sells 4 million should be able to make a profit, I agree something went wrong there.

But loads of major developers are struggling, and many of them are caught in a catch22. Look at Sega and their Yakuza series for example. Now those games are quality games and you would think that gamers would pick them up, but the don't. SEGA spent next to no money on marketing, and as a result in the West only the "real" gamers have picked them up. Now Yakuza 5 won't even be localized, SEGA deems it too expensive, which is shocking, considering they wouldn't spend a dime on marketing, we all know that. This is saying something about what it takes from a AAA title these days to be successful.

 

[Depulcator]

They made FF All The Bravest.....yeah those disc sales are the REAL problem.

 

[immortalfrieza]

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 shold 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 to 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. 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 ownly 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.

Holy S***... I'm willing to bet money that nobody here can put this better than you LightKnight.

 

[Lightknight]

Holy S***... I'm willing to bet money that nobody here can put this better than you LightKnight.

Hah, thanks. I hope on some level they get it; That potential profit is not unlimited because the target market is finite. As long as they keep over spending like this, they'll be at risk regardless of the market conditions, disk-based games or not. Just because they don't have their budgeting under control. They're outspending their target market by millions of dollars.

This is a problem in any industry. I'm not sure why they're having trouble with this. I mean, I know I graduated from a college of business but surely some of their employees did too? Maybe at least one who occasionally enjoyed a few of the classes or just managed to stay awake?

 

[Psychobabble]

Warning Analogy Ahead:

If a company continues to push the envelope on how much money and time they sink into creating their next stand up arcade game for years on end, yet all this time still only charge a quarter per play, its no bloody wonder they aren't making any money. How much of a fool do these industry professionals have to be to not understand this simple principle. This leaves a company only 2 real options. Either raise your prices or cut your budget.

Everything else is just robbing Peter to pay Paul.

These game companies are really starting to remind me of Howard Hughes' insanity when making the film Hell's Angels.

 

[Psychobabble]

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 shold 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 to 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. 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 ownly 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.

Holy S***... I'm willing to bet money that nobody here can put this better than you LightKnight.

I have to agree that was a very well thought out summation of the issue at hand. Two thumbs up. Heck, two big toes up as well. And ... well ... good taste forbids me from mentioning any other body parts that may be standing at attention in adoration of the sanity in LightKnight's post.

 

[RJ Dalton]

And I suppose these sales expectations were totally reasonable and not, say, several hundred billion dollars?

 

[freedash22]

So the problem is the cost of making physical discs and their packaging. NOT bloated marketing budgets and unrealistic sales expectations?

"Shelf space is at a premium in a crowded marketplace."

Wow, Gamestop must be ripping you off very badly for that shelf space! What a big menace they are to this industry!

And your solution to this is digital publishing while still charging $50 to $60+ at launch for each game passing on the savings to yourselves and not to your developers and customers?

Here's a hint Square Enix, if you want to get rid of discs and have a valid reason of doing so, tell the fans that you are doing it to save the environment and that you want to save more trees by doing away with the discs, boxes and manuals. People will like that more than this common sense-deprived crap.

Ofcourse, you will kill retail store, shipping, disc publishing and printing jobs but with all the recent layoffs in Eidos, care for your employees' jobs seems to be the least of your concerns right?

 

[Arkaijn]

Sleeping Dogs, Tomb Raider and Hitman Absolution may have earned critical acclaim, but that's all
Read more at http://www.escapistmagazine.com/news/view/127630-Square-Enix-Disc-Based-Sales-Are-Killing-Us#MBMtsrzuhCqbYhPU.99

Now I know what to do if I ever develop a soulless open world title, an origin story that no one asked for and a watered down, action adventure "appeal to a broader audience" sequel to a stealth game and none of those titles do well.....

I blame the industry..

Excuse me while I go out and blame the sun for making a creeper blow up my ores chest

 

[Lightknight]

Sleeping Dogs, Tomb Raider and Hitman Absolution may have earned critical acclaim, but that's all
Read more at http://www.escapistmagazine.com/news/view/127630-Square-Enix-Disc-Based-Sales-Are-Killing-Us#MBMtsrzuhCqbYhPU.99

Now I know what to do if I ever develop a soulless open world title, an origin story that no one asked for and a watered down, action adventure "appeal to a broader audience" sequel to a stealth game and none of those titles do well.....

I blame the industry..

Excuse me while I go out and blame the sun for making a creeper blow up my ores chest

I'm not 100% on what you're actually blaming here. Sounds like you're mocking them for what they made. The games sold HUGE numbers in the market place in addition to the critical acclaim they each recieved. Sleeping Dogs was in the top 20 selling games in its year and that is the lowest selling game of the three. None of those games were soulless or watered down. They all sparked controversy and explored new areas. 2 million units sold for Sleeping Dogs, 3.6 million for Hitman, and over 4 million units for Tomb Raider. That's all just disk sales and not accounting for digital sales. Tomb Raider was the most successful launch of the year so far and grossed the most revenue of any other game in franchise history by FAR.

So the games themselves or the vision they had aren't to blame. These aren't the watered down variety of things. These are major and impressive titles that quite clearly have a soul of their own. So be careful not to blame the wrong thing. The problem was their budgeting. If you can't make a profit off of 2+ million units sold when getting to 1 million copies is no small feat, then you've clearly overbudgeted and completely overestimated the market. In other words, if you can safely anticipate 1 million units sold, you don't go and budget like you could sell 4 million units. That's essentially what happened here.

The job of a publisher is basically just that. Forecasting anticipated revenue and accounting for expenses and risk. Beyond that it's just investing the right amount of money into an appropriate budget. They did nothing right here. As for their complaint about disk sales, these are a known expense and would have been part of the initial forecasting of revenue less expenses for projected return on investment. Someone was VERY far off.

 

[spartandude]

. 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.

.... what?

So let me get this straight, they are admitting that rather then saying "we think this game will sell X amount therefore it gets amount Y in funding" but are instead saying "we have spend Y in funding therefore we now want it to sell X".

Heres an idea, if you budget your games to how much they will likely sell rather than increasing targets after youve funded it then there might be a flaw in your business plan.

 

[Lightknight]

What's funny is that they're acting like there was some kind of unexpected expense in doing business that they didn't foresee. Maybe a new entrant into the market who has never dealt with retailers before but Square Enix? Hah. A lot of those contracts they are talking about like buy back plans are to mitigate the risk of a game being a dud. Not a huge success like this one. If the retail market was somehow disadvantageous to them then someone negotiated a bad deal.

For a game that sell well, every unit that a retailer has on shelves is a unit that the publisher has already sold. It's best to think of the retailer as a customer and gamers that buy from retailers as the ones buying the first and most expensive "preowned" but not preused copy. From the numbers listed, these games were flying off the shelves. No contract should have harmed that. A popular game is one gamestop and its ilk want to have on their shelves. So I'm thinking it's the marketing number they threw in there that is the tremendous huge slice of the pie that's doing them in, and that's their fault for budgeting that high.

 

[Seracen]

Wow...


Let's totally blame the retailers for the faults of game sales and success shall we? I'm actually bloody well tempted to fly down to Japan, and with my grade-school equivalency of Japanese, tell the bugger off and make him watch the Jimquisition episode (among the other videos that state the same) so that some day they might understand the unnecessarily high budgeting for jack squat is the issue here.

In ONE month, it sold roughly 3.4 million copies. ONE FRAKKEN MONTH! And they decided that was an absolute failure. What game sells more than that in the span of a single month (Call of Duty being the exception here)? Within 48 hours it had a million sales easy. It had, bar none, one of the strongest launches a game could have. Yet because it didn't hit 5 million, it was a flop to them, and to boot now they are arguing that its all the physical media's fault.


Let me repeat what I said... Wow.

+1...

Yeah, if "disc based sales" are killing you, it's time to revise the budgets. Other industries have to struggle with this all the time, yet somehow make it work. Marketing and publishing aren't some new beast to be tamed. This isn't your first rodeo Square, stop being stupid.

The Cheesecake factory isn't going to stop selling cheesecake if their business model yields no profit. Instead they will re-evaluate and reorganize.

Stop being lazy and pedantic Squeanix, and just admit that the money you dumped into MMO's is not being bolstered enough by sales from your other games, however "good" or "bad."

Also, maybe if they made JRPG's worth caring about, they wouldn't be in such a state. At this rate, their "Saving throw" of FF7 Remake isn't far off, so maybe that's a plus!