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Square Enix revises full-year forecast, expects major losses

Square Enix revises full-year forecast, expects major losses

Tue 26 Mar 2013 9:09am GMT / 5:09am EDT / 2:09am PDT
PublishingDevelopment

UPDATE: Tomb Raider expected to sell 3.4m units in debut month, but still falls short

Update: Square Enix expects Crystal Dynamics' Tomb Raider to have sold 3.4 million units - excluding downloads - by the end of the fiscal year on March 31. Despite the game only launching on March 4, the company's investor materials indicate that it still failed to meet its target.

IO Interactive's Hitman: Absolution, which was launched in November, is expected to have sold 3.6 million by the end of the fiscal year, and United Front's Sleeping Dogs 1.75 million. In both cases, the games are deemed to have fallen short of expectations.

Blame for the misses is partially attributed to Square Enix's "ineffective" North American sales force, which delivered around two-thirds of the unit sales in Europe.

Original Story: Square Enix has warned its investors to expect an "extraordinary loss" for this fiscal year following a revision of its financial results forecast.

For the year ending March 31, 2013, Square Enix now expects to make a net loss of 13 billion ($138m/91m) - 16.5 billion lower than the 3.5 billion ($37m/24m) net income forecast on October 30 2012, and well down on the 6 billion ($64m/42m) profit it posted the previous year.

The company also expects a drop in revenue, albeit less pronounced: from 150 billion to 145 billion ($1.5b/1b).

In a document issued to investors, Square Enix attributed its weak performance to, "slow sales of major console game titles in North America and European markets." The document didn't mention specific games, but the launches of both Hitman: Absolution and Tomb Raider fell after its last results forecast on October 30, 2012.

Other contributing factors included the "sluggish" performance of its arcade business, and around 10 billion in costs attached to major reforms and restructuring across the company to meet the shifting demands of the games market.

9 Comments

David Radd Senior Editor, IndustryGamers

359 78 0.2
This is in part a consequence of a sluggish game retail market all around. While the original forecasts for these games may have been met during a boom time in sales, the past few years have seen double digit losses in retail sales.

Posted:A year ago

#1

Christopher Bowen Editor in Chief, Gaming Bus

451 710 1.6
Tomb Raider sold 3.4m, and still didn't meet expectations; they wanted 3.6m, and because of that, they just lost their CEO.

How can anyone be excited for more powerful hardware, and the further increased costs associated with them, after this? After Resident Evil 6 "failing" with 5m purchases?

Posted:A year ago

#2

Matthew Handrahan Staff Writer, GamesIndustry.biz

119 93 0.8
Sluggish retail may play a part, but this seems to point towards a deeper and more troubling issue.

You only need to play Tomb Raider for an hour or two to get an idea of how much money it must have cost, and London is simply awash with ads for the game. I don't think the size of the AAA core audience can support games that 'need' 5m units in a month to justify the investment in production and marketing.

Posted:A year ago

#3

Rafe Gaskell Lead Programmer at the Design Institute, Coventry University

11 12 1.1
"excluding downloads" That's their issue right there. It shows how backward the management is if they're discounting a whole revenue stream, especially one that is proving more popular as time goes on.

Posted:A year ago

#4

Jakub Mikyska CEO, Grip Digital

202 1,107 5.5
Popular Comment
If Tomb Raider dropped the stupid and useless multiplayer that nobody wanted, it may have been a cheaper game to make, with lower break-even sales needed. If Hitman: Absolution was a proper Hitman game that everybody wanted, it may have gotten some good reviews and sold better.

Perhaps the problem is not entirely in the sales force...

Posted:A year ago

#5

Christopher Bowen Editor in Chief, Gaming Bus

451 710 1.6
@Andreas - Remember that Resident Evil 6 was considered a failure at 5m total sales (this includes downloads, I think). There were also reports about Dead Space 3 being in a similar situation with similar numbers, but EA denied those, for what that's worth.

That's scary. I've said it elsewhere, but if 5m units is your baseline, then we're getting too top-heavy, and that's *NEVER* a good thing for any industry. Isn't that right, 1983?

Posted:A year ago

#6

Christopher McCraken CEO/Production Director, Double Cluepon Software

111 257 2.3
I'd like to put a thought out here. Notice how they keep talking about the stuff they're publishing? Square is not actually making much of anything these days. They're relying on other studios. Now, I wonder why that could be? Perhaps because when Square bought Enix, it sealed their fate: to slide down the slippery slope of obsolescence.

To be blunt: by buying their competition, they had nothing to compete against, and so started to fall into irrelevancy. Sure Dues Ex saved them some face last year, but now we come to this year...and the numbers don't look so good for Square. Final Fantasy 14, a game they apologized for at least twice...cost them a great deal of their credibility in the RPG/MMO genre.

Sales targets, while they may be an underlying factor for the losses, they are simply the end result in a company with systemic problems. By removing their primary competitor, they forgot that once you're at the top of the hill, you actually have to defend it. Square bought Enix, and slowly over time...they stopped making things. They stopped making interesting things. They just stopped.

So, really...this does not shock me in the slightest. Not one bit. The die was cast the moment someone put the ink to the paper in the merger between Square and Enix. Square-Enix lost it's way. Add to this their insufferable habit of telling players they know what's best for them, and you have .... well ... this.

My only question now is: what does this mean for the future of Squeenix? Will these losses result in making them attractive for acquisition? I don't know. What I do feel though, is that this slide into obsolescence was not necessary. Sometimes, you don't have to buy everyone to have everything. Sometimes, having someone or thing you can strive to do better than...is a good sound business practice.

Posted:A year ago

#7

Paul Gheran Scrum Master

123 27 0.2
+1 Jakub

So many people, studios, and franchises to name. It's exhausting.

Posted:A year ago

#8
5m sales is just stupid to me. Maybe at square it's like this:

Dev - we need more money for our gaming vision.
Management - ok

3 years later...

Dev - it's finished and it's great.
Management - awesome! So how much did we spend?
Dev - $100m
Management - ...so... 5m sales just to break even? Ummmm... let's hope we sell 10m units then...

Posted:A year ago

#9

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