Square Enix Faces 10 Billion Yen Loss in Restructuring Efforts

[Steven Bogos]

Square Enix Faces 10 Billion Yen Loss in Restructuring Efforts

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 [http://www.siliconera.com/2013/04/08/square-enix-detail-where-their-losses-are-coming-from/]

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[Dr.Panties]

Sad trumpet sound: Wha-wha-whaaaaa.

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

 

[Clive Howlitzer]

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!

 

[al4674]

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.

 

[mechalynx]

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.

 

[rapidoud]

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?

 

[SecondPrize]

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.

 

[Voulan]

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.

 

[Dragoon]

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.

 

[Smooth Operator]

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.

 

[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?

 

[SwiftBlade18]

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

 

[Maerx]

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.

 

[fix-the-spade]

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...

 

[rofltehcat]

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?

 

[Khanht Cope]

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.

 

[Colt47]

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.