Square Enix Financials: Net Sales Up, ¥13.7 Billion Lost

[Karloff]

Square Enix Financials: Net Sales Up, ¥13.7 Billion Lost

How do you lose $134.8 million when net sales go up 15.7%?

Square Enix lost ¥13.7 billion ($134.8 million) in 2012, despite a net sales increase of 15.7% over the previous financial year. The fiscal year ending March 2013 - which saw the launch of Tomb Raider, a title that enjoyed exceptionally good sales [http://www.escapistmagazine.com/news/view/123391-NPDs-March-Numbers-Show-Bioshock-And-Tomb-Raider-at-The-Top] despite not meeting all of Square's expectations - was dismal for Square Enix, and it blames underperformance of major console titles in North America and Europe, at least in part, for the loss. This despite that fact that, according to Square, net sales in the Digital Entertainment division went up 24.5%, contributing significantly to the overall net sales increase.

Significant decreases in operating income, primarily in the Digital Entertainment section - Square's biggest business segment by far - are cited by Square as contributing directly to the exceptional loss. The Digital Entertainment division saw a drop in operating income - that is, profit less expenses, like cost of goods sold - of over 99%, when compared to the previous financial year, a drop that suggests massive Digital Entertainment expenses and overheads managed to dig the division a hole it could not sell its way out of, and perhaps had no hope of escaping. The only Digital Entertainment titles to do well, in terms of costs and sales, were Square's mobile and tablet titles. As a result, one of Square's new initiatives to increase profits is to target smartphones and tablets as a game platform. The console market, highly competitive and controlled by a small number of firms, just isn't working out for Square so perhaps, it thinks, mobile is the better bet. Improving turnover is also key to Square's new vision of the future. Finally, constructing a product portfolio "tailored to consumer tastes in respective served regions" is, according to Square's briefing session, its third strategy by which it intends to return its HD Entertainment division to profitable status.

Square Enix anticipates an increase in operating income for the financial year ending March 2014; its target is ¥25 billion ($245.5 million), which it intends to achieve ASAP. "Bold implementation of the business transformation" is Square's means of reaching that operating income target.

Source: Square Enix financials 3 [http://www.hd.square-enix.com/eng/news/pdf/13q4slides.pdf]


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[FoolKiller]

Well... they could do the tablet thing

or

they could actually stop trying to make the glossiest games ever and go back to making shitty looking great games. I don't get how they haven't figured this out yet.

 

[JamesBr]

So wait, they make an overpriced game that sells really well, but was in fact so expensive that no number of reasonable sales figures could match the cost, and they blame it on the state console industry?

I would start looking at the the overhead cost of making these games than blaming the customers for not buying enough. 3,4 million sales by March is nothing to sneeze at, if your very successful game isn't turning a profit, maybe you should not pay so damn much to get it made.

 

[Owyn_Merrilin]

So wait, they make an overpriced game that sells really well, but was in fact so expensive that no number of reasonable sales figures could match the cost, and they blame it on the state console industry?

I would start looking at the the overhead cost of making these games than blaming the customers for not buying enough. 3,4 million sales by March is nothing to sneeze at, if your very successful game isn't turning a profit, maybe you should not pay so damn much to get it made.

Or they could start charging less and reaching a broader audience, ala Hollywood movies. Because hyperbole aside, an average Hollywood blockbuster still costs two or three times as much as an expensive AAA game, yet Hollywood makes money hand over fist on those movies. Reason being, Hollywood charges between a sixth and a third of what the game corporations charge, and sell an order of magnitude more volume as a result.

Either option could work, I'm just tired of all the blame being put on the cost of making games, instead of the ridiculous cost asked to /buy/ them. I know for a fact these companies are losing sales by charging such an absurd rate, because I know quite a few people who only buy used or on sale. You could argue that they aren't losing /money/ despite losing those sales, but it looks like Squeenix just showed that argument to be wrong.

 

[Bara_no_Hime]

How the hell do you even do that? Are they generating their own electricity by burning cash for heat, as if it were coal? How do you lose that much money without actually DOING anything?

I've been long wondering how they could consider Tomb Raider a failure, but apparently it's because Tomb Raider didn't magically stop the insane and nonsensical money hemorrhage they appear to have going on.

... personally, I blame Enix. Square Soft was better before they merged with those losers.

[sub]That was a joke. Please don't take it seriously.[/sub]

 

[fix-the-spade]

they could actually stop trying to make the glossiest games ever and go back to making shitty looking great games. I don't get how they haven't figured this out yet.

They could make great looking great games and make a profit if they were a bit smarter with their money.

For example, there wasn't really a good reason to build a new graphics engine from (almost) scratch for Tomb Raider when Unreal 3 could have been licensed for less. Ditto for FFXIII, of course this would require a huge amount of pride swallowing on SquareEnix's part to admit that no, they can't actually develop tech from scratch on time and within budget. I'm pretty sure Squenix will go bust before they do that, execs being so well known for their humility and so on.

 

[Pedro The Hutt]

I've said it before and I'll say it again, just cancel FFXIII-Versus, just how many billions of yens have you sunk into that project over the last seven or so years?

 

[Teoes]

..one of Square's new initiatives to increase profits is to target smartphones and tablets as a game platform. The console market, highly competitive and controlled by a small number of firms, just isn't working out for Square so perhaps, it thinks, mobile is the better bet.

Isn't that what a load of companies are doing? I have this image of every single big publisher thinking "Welp, the console market is controlled by everyone else and we just can't make money on it, so let's pull out and concentrate on mobiles!". Cue the console market turning into a ghost town.

 

[SonOfVoorhees]

Some companies state "this year sucked" but they made profit. But they go by what they THINK they should have sold, so even though the sold a lot and made profit. Its not as much profit as they wanted so they failed. Retarded.

 

[Colt47]

..one of Square's new initiatives to increase profits is to target smartphones and tablets as a game platform. The console market, highly competitive and controlled by a small number of firms, just isn't working out for Square so perhaps, it thinks, mobile is the better bet.

Isn't that what a load of companies are doing? I have this image of every single big publisher thinking "Welp, the console market is controlled by everyone else and we just can't make money on it, so let's pull out and concentrate on mobiles!". Cue the console market turning into a ghost town.

Companies are saying they are cutting back on investing in consoles, not completely giving up on them. What this means is that kickstarter and indie games are going to have a stronger presence on the home consoles much like how it's currently going on the PC. No one should be surprised by this given how all the major publishers are adding all sorts of clutter to their games such as Uplay, Origin, Games for Windows Live, Blizzards content management system, etc.

This is especially apparent in how much stronger peoples reactions are to a game that gets delivered poorly. If Origin wasn't around and the game didn't require an always online connection, would people have made such a major uproar about EA's Sim City? People would have more likely taken the Dark Souls route of creating a fan patch and would have bought the game anyway, while EA would have spent less money on extraneous software. These publishing companies are flailing about at something they can't do anything about and are hurting themselves in the process. If they just keep things simple for the consumer and avoid anything beyond a basic auto update system people would be a lot happier.

But anyway, companies saying they are focusing on mobile and cutting back on console development is expected and something not to look too deeply into.

 

[Owyn_Merrilin]

..one of Square's new initiatives to increase profits is to target smartphones and tablets as a game platform. The console market, highly competitive and controlled by a small number of firms, just isn't working out for Square so perhaps, it thinks, mobile is the better bet.

Isn't that what a load of companies are doing? I have this image of every single big publisher thinking "Welp, the console market is controlled by everyone else and we just can't make money on it, so let's pull out and concentrate on mobiles!". Cue the console market turning into a ghost town.

Companies are saying they are cutting back on investing in consoles, not completely giving up on them. What this means is that kickstarter and indie games are going to have a stronger presence on the home consoles much like how it's currently going on the PC. No one should be surprised by this given how all the major publishers are adding all sorts of clutter to their games such as Uplay, Origin, Games for Windows Live, Blizzards content management system, etc.

This is especially apparent in how much stronger peoples reactions are to a game that gets delivered poorly. If Origin wasn't around and the game didn't require an always online connection, would people have made such a major uproar about EA's Sim City? People would have more likely taken the Dark Souls route of creating a fan patch and would have bought the game anyway, while EA would have spent less money on extraneous software. These publishing companies are flailing about at something they can't do anything about and are hurting themselves in the process. If they just keep things simple for the consumer and avoid anything beyond a basic auto update system people would be a lot happier.

But anyway, companies saying they are focusing on mobile and cutting back on console development is expected and something not to look too deeply into.

I just got a mental image of EA as a pokemon and piracy as a move that gives the status effect confusion, so thank you for that.

 

[GAunderrated]

SE has lost all of their main designers/talent years ago but their management still has the blind mindset that they are a top dog.

You just have to play FF: all the bravest and FFXIII to see how far into their own anus's they have gone. Despite that Atlus and a few other developers are keeping my JRPG fix quite alive.

 

[LordMonty]

This is basically crazy uncanny valley bussiness logic... How much did they need to spend on games developement where did it go? is this just over paying people at the top like mad men? I really cannot get my head around how much money they needed to make to just break even? gah going to play Diablo 3 and maybe it sucks a bit but at least Bliz made some money from it.

 

[Mylinkay Asdara]

I've bought FF9 on, like, every platform it is available on, ditto Tactics, 7, 6/3, and FF original recipe. I gave subscription fees to FFXI for 7 years and I'm seriously thinking about buying into FFXIV now that you people promise you've fixed it.

I'm doing my damn part - now SE, seriously, sweethearts - make the things you're really good at making that plenty of people still like and stop messing around with whatever it is you've been up to lately - I don't even know what that is because after you wandered away from turn based RPGs I kinda lost sight of what y'all were doing while I was sucked in to that great MMO you made, the one that worked.

/sigh

 

[JamesBr]

So wait, they make an overpriced game that sells really well, but was in fact so expensive that no number of reasonable sales figures could match the cost, and they blame it on the state console industry?

I would start looking at the the overhead cost of making these games than blaming the customers for not buying enough. 3,4 million sales by March is nothing to sneeze at, if your very successful game isn't turning a profit, maybe you should not pay so damn much to get it made.

Or they could start charging less and reaching a broader audience, ala Hollywood movies. Because hyperbole aside, an average Hollywood blockbuster still costs two or three times as much as an expensive AAA game, yet Hollywood makes money hand over fist on those movies. Reason being, Hollywood charges between a sixth and a third of what the game corporations charge, and sell an order of magnitude more volume as a result.

Either option could work, I'm just tired of all the blame being put on the cost of making games, instead of the ridiculous cost asked to /buy/ them. I know for a fact these companies are losing sales by charging such an absurd rate, because I know quite a few people who only buy used or on sale. You could argue that they aren't losing /money/ despite losing those sales, but it looks like Squeenix just showed that argument to be wrong.

I may be mistaken about this, but hasn't the price point for games remained largely the same while the cost to create them has gone up? I seem to remember always paying ~60$ for a new game, even back in the SNES era. Even counting inflation, game budgets have ballooned. Would this not mean that you are in fact paying less for a game, considering the time/money spent on it? While I do agree that game prices are awfully high and is part of the problem with nailing those high sales figures, that actual number on the price sticker hasn't changed much relative to the budgets (to my knowledge, I could be remembering incorrectly).

 

[Owyn_Merrilin]

So wait, they make an overpriced game that sells really well, but was in fact so expensive that no number of reasonable sales figures could match the cost, and they blame it on the state console industry?

I would start looking at the the overhead cost of making these games than blaming the customers for not buying enough. 3,4 million sales by March is nothing to sneeze at, if your very successful game isn't turning a profit, maybe you should not pay so damn much to get it made.

Or they could start charging less and reaching a broader audience, ala Hollywood movies. Because hyperbole aside, an average Hollywood blockbuster still costs two or three times as much as an expensive AAA game, yet Hollywood makes money hand over fist on those movies. Reason being, Hollywood charges between a sixth and a third of what the game corporations charge, and sell an order of magnitude more volume as a result.

Either option could work, I'm just tired of all the blame being put on the cost of making games, instead of the ridiculous cost asked to /buy/ them. I know for a fact these companies are losing sales by charging such an absurd rate, because I know quite a few people who only buy used or on sale. You could argue that they aren't losing /money/ despite losing those sales, but it looks like Squeenix just showed that argument to be wrong.

I may be mistaken about this, but hasn't the price point for games remained largely the same while the cost to create them has gone up? I seem to remember always paying ~60$ for a new game, even back in the SNES era. Even counting inflation, game budgets have ballooned. Would this not mean that you are in fact paying less for a game, considering the time/money spent on it? While I do agree that game prices are awfully high and is part of the problem with nailing those high sales figures, that actual number on the price sticker hasn't changed much relative to the budgets (to my knowledge, I could be remembering incorrectly).

Only if you ignore the economy of scale, the unit cost, wage stagnation, and the fact that those high prices people keep quoting from the past all come from overpriced stores. Notice that nobody has ever produced a Walmart flyer to compare to that Electronics Boutique one that keeps showing up?

 

[ShadowKatt]

I have a better solution to the problem: Let Square-Enix die like it should have done a LONG long time ago, lose ALL their properties, auction them off to other studios, and then MAYBE we'll get a decent Final Fantasy or Kingdom Hearts again?

Kingdom Hearts, you remember that game, right? The one you played on the PS2. On a console. With a controller. On a tv.

NOT A FUCKING HANDHELD

Or how about a Final Fantasy that you actually, you know, PLAY. As in pushing buttons and making effort, as opposed to watching the game control 2/3s of your party so it can watch you die, or reward your exceptional luck with a half hour cut scene.

Or how about a new Dragon Quest game? Wouldn't that be nice? I'm sure not everyone's forgotten about it yet, just, you know, the people that OWN THE FUCKING PROPERTY.

I loved squaresoft as if it was a sibling, a brother, a sister, but then Enix came along and merged with them and since that day the company has gone downhill faster than fucking lead in free fall. I want to see them dead. I want them to fail so that someone with a modicum of design talent and fiscal responsibility can take over and maybe, just maybe, we'll get a decent game again.


'Til then, I suppose we'll have to be happy with the re-released HD remake of Final Fantasy X/X-2. For, you know, laughing. In HD.

 

[wgar]

It's actually perfectly logical to lose more money when you get more sales, as you're spending more inefficiently to get more sales.