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Single-player IP will cause problems for Square Enix

Veteran analyst Billy Pidgeon says Tomb Raider needs 5 to 10 million sales to be successful

The single-player focus of Square Enix's IP stable has left the company in a difficult position, according to veteran video game analyst Billy Pidgeon.

In a note passed to GamesIndustry International, Pidgeon predicted that that the imminent departure of CEO and president Yoichi Wada will herald positive changes for the company. However, the coming year will be "very tough" for Square Enix, as it waits to see returns on its investments in new markets.

"On the positive side, the company has made investments in online, social and mobile games including free-to-play games," said Pidgeon, an independent analyst who previously worked at Inside Network, M2 Research and IDC. "Many of these, such as the browser based games, won't bring in significant income for a year or more.

"For games with development budgets approaching $100 million to be truly profitable, ratings have to be above 8.5 and sales need to be in the five to ten million unit range"

"Some of these have done well in Korea, which is a very competitive and mature market, but Square Enix's micro-transaction-based role playing and collectible card games haven't performed well in Japan or in the West."

On the console side, the outlook is somewhat ambiguous. Square Enix has strong IP to work with, but making properties like Hitman, Tomb Raider and Thief successful enough in the landscape of modern AAA games is no small task.

"The AAA market is extremely competitive," he said. "Most of Square Enix's franchises are single player games, which are less popular than multiplayer. Square Enix has been a leader in that sector, but now faces stronger competition from multiple publishers, both large and small, including Bethesda, Capcom, Xseed, Atlus and Level 5.

"Square Enix's franchises are well established and require ever-higher production budgets to match and surpass past performance. The latest Hitman and Tomb Raider sold in the three million unit range and got Metacritic ratings above 8. Those numbers would rate as successful for JRPGs that earn more from vendors as exclusives and have manageable budgets.

"But for games with development budgets approaching $100 million to be truly profitable, ratings have to be above 8.5 and sales need to be in the five to ten million unit range."

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Latest comments (15)

Craig Burkey Software Engineer 8 years ago
This is where I think EA are getting it right with Single Player games like Dead Space 3, and Mass Effect 3, they prepared for lower sales with the dreaded Micro transactions to allow them to remain hopefully viable.

Edited 1 times. Last edit by Craig Burkey on 27th March 2013 9:36am

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Morville O'Driscoll Blogger & Critic 8 years ago
Square Enix's franchises are well established
And cult IP. Whoever looked at the Hitman IP and thought it could sell Skyrim numbers obviously hadn't played any Hitman game before. It's a solid concept, but a niche market. Thief is the same. Tomb Raider is the most mainstream single-player IP they have, but in trying to broaden the market for it, they've made something that is more Uncharted than classic TR. That's caused some fans of the franchise to be alienated, which means future lost sales (possibly).

Which is another way of saying the budget for niche franchises should not get anywhere near the excesses of mainstream IP. Companies just can't afford it.
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Dave Herod Senior Programmer, Codemasters8 years ago
Is this $100m confirmed or is it just magic numbers being pulled out of the air again?
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Show all comments (15)
Matthew Handrahan European Deputy Editor, GamesIndustry.biz8 years ago
@Dave: I believe it's an estimated number based on the fact that 3.4 million physical sales were not enough to hit Square Enix's first month target for the game. Very few publishers ever make the budgets for their games known, of course, but I'd say it's likely that, with marketing, $100m would be a conservative estimate for Tomb Raider.

Edited 1 times. Last edit by Matthew Handrahan on 27th March 2013 10:19am

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Marcia Deakin Licensing and Content Manager, Connect2Media8 years ago
Square have made a great game which has been well marketed and has had healthy sales. The teams involved need to be congratulated for doing such a good job. It's not often that established franchises produce a game that fans and critics love. The problem is that to over-estimate potential sales on a 'this is what it has to do' basis rather than 'this is what the market can do' means that its inevitably going to 'fail' . It is the business model/need to report to the market that causes the negative headlines.
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Jakub Mikyska CEO, Grip Digital8 years ago
None of the more recent Tomb Raider games came even close to the 5 - 10 million sales. If they were really hoping for this kind of sales and adjusted the budged accordingly, it is perhaps for the best that there is a management change.

Everybody wants the next COD, but counting with this kind of sales is like if I was counting that our next PSN game will sell around the same number of copies as Minecraft.

If Tomb Raider dropped the stupid multiplayer and the resources were used to add more single-player content as DLC to add more revenue streams, that would have worked better for them, I believe.
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David Radd Senior Editor, IndustryGamers8 years ago
I think people are overlooking a key compoment of Tomb Raider and why it may have underperformed - the atmosphere and content rating. Tomb Raider has heretofore had a rating ceiling of T for Teen, making it acceptable for most ages. However, it was a conscious decision to make this game M for Mature, and it's a pretty hard M at that with its visceral death scenes. For a franchise that has always enjoyed a degree of mainstream success among young girls, it might not of been the best decision when reaching the widest possible audience.

Now I want to say for the record I respect what Crystal Dynamics has done with the franchise, and I think this reboot was a bold design decision. But just because it's a neat revamp of the franchise does not mean it necessarily it will reach the sales heights of previous entries.
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Victor Perez CEO, Games GI8 years ago
Main question is to get as much as the gamer want to spend in your game, not the same a fan than a casual one. Flexible content and prices must be a priority in the games design.

Edited 1 times. Last edit by Victor Perez on 27th March 2013 2:59pm

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these companies need to get their budgets under control, trim the fat and perks, lose the do nothing suits, and learn to make games again via a strict tight budget, like just about every indie does.
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Craig Bamford Journalist 8 years ago
Jakob has it. The most important job here wasn't for S-E to have Tomb Raider sell COD numbers. That simply wasn't going to happen. If they thought it would, they're bizarrely mistaken.

No, the most important job was to repair and revitalize the IP. They've unquestionably pulled that off, which opens the door for TR serving as a lucrative franchise going forward. TR2 may turn out to be S-E's Assassin's Creed 2 or The Dark Knight, and Crystal Dynamics have showed that they've got the chops for it.

The only question is whether they ignore the analysts' implied advice to shoe-horn in a multiplayer mode. It didn't drive numbers for Bioshock 2 or Assassin's Creed, and the immense popularity of Bethesda's single-player outings suggests that it isn't necessary, either. Don't chase back-of-the-box bulletpoints.
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Pier Castonguay Programmer 8 years ago
That makes me sad, because Tomb Raider is probably the best game I played this year and I want to see more of these. Very sad that it's that risky to create a project like this.
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Paul Jace Merchandiser 8 years ago
When your game needs to sell between 8-10 million copies in order to be successful you have a serious problem. AAA or not, they really need to set a realistic budget for these games and $100 million or more is only acceptable if your title is COD, Halo, GTA and a very small handful of other IP. The vast majority of the rest need to have a budget of around $50-$60 million MAX and realistic sales projections of 1-3 million where they can STILL be successful(might have to adjust that budget alittle thought). After Homefront sold 2 million copies(and was not considered successful) and now with both Tomb Raider and Hitman reaching sales around 3 million copies(not counting digital) each and also seemingly not being successful for SE something drastic needs to change--ASAP.
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James Prendergast Process Specialist 8 years ago
@ Paul Jace.

The problem with this is that everyone and their dog has been saying that spending more money than you can realistically bring in - adjust your game budget accordingly! - since the beginning of the current console generation. It was an argument against the $10 price hike for games and involved in various other "blame the consumer" arguments and still nothing has changed...

It's quite clear that there's a big problem in the industry but the industry doesn't appear to want to self-correct.
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Dave Herod Senior Programmer, Codemasters8 years ago
@Matthew - Makes sense. It's just after hearing Ken Levine respond to the reports of Bioshock development costing $100m according to "analysts", it's hard to believe such estimates. If you include marketing then $100 million definitely sounds feasible, as I have seen a lot of Tomb Raider advertising.
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Adam Campbell Product Manager, Azoomee8 years ago
Maybe the industry needs to re-evaluate how much it spends on making grand productions and using expensive marketing tactics if its such a problem making a return. I don't think the sales projections for Tomb Raider were realistic at all but that's just one game out there...
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