Square Enix revises full-year forecast, expects major losses
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.
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?
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.
Perhaps the problem is not entirely in the sales force...
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?
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.
So many people, studios, and franchises to name. It's exhausting.
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...