Wada: "Huge loss was like a voice from the heavens"

Square Enix reveals high sales expectations for Tomb Raider, Hitman and Sleeping Dogs

Former Square Enix president Yoichi Wada has said that the "huge loss" the company incurred in the last financial year was like "a voice from the heavens" ordering his resignation.

Yesterday, Square Enix released the transcript from the shareholder meeting that preceded Wada's departure, in which he outlined the contributing factors to the "shocking" ¥12.8 billion negative variance in its expected FY2013 operating income.

"I, personally, would have liked to wait and hand over the firm when it is at its best, however the huge loss was like a voice from the heavens telling me it's time to move on," Wada said. "After given much thought, I have judged that it would be best to support the company in other ways as I hand over my roles and responsibilities. For this reason, I have decided to step down."

A key factor was the ¥7.5 billion dip in net sales from the company's Digital Entertainment segment, which covers console and PC releases. After strong early performance following the acquisition of Eidos in 2009, Square Enix invested heavily in products aimed at the North American and European markets. However, due in part to a "huge slump" in North American retail, nothing on its FY2013 release slate performed as expected.

Sleeping Dogs was expected to sell 2 to 2.5 million units, but it sold only 1.75 million. Hitman: Absolution was expected to sell 4.5 to 5 million units, but it managed only 3.6 million. And Tomb Raider was expected to sell 5 to 6 million units, but hit only 3.4 million by the time the fiscal year ended four weeks after its launch. Wada also said that the sales estimates used in the company's reports are actually 10 to 20 per cent lower than each title's, "full sales potential."

The other major factor was the "extraordinary loss" incurred through the company's efforts to combat what Wada described as an "outdated" revenue model, and a selling capacity that was, "far weaker than we ever imagined." In fiscal 2013, Square Enix incurred a ¥4 billion loss on disposal of content, more than half of which came from culls at its Japanese studios. This also involved the ¥1 billion closure of a new US division devoted to casual gaming on smartphones.

"We have done everything we can do to adapt and respond to the drastically changing environment. However, we have not been able to accomplish satisfactory results since FY2011," Wada said. "I intended to do what had to be done, but these results came despite my best efforts. We are performing negatively in the Amusement sector, negative in EUR/NA console games, and although Social Media Games are doing well, MMO is not performing to the level we anticipated.

"The seeds that we have planted have by chance, or by necessity, all worked in synch negatively resulting in a huge loss for FY2013."

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Latest comments (7)

Morville O'Driscoll Blogger & Critic 8 years ago
Wada also said that the sales estimates used in the company's reports are actually 10 to 20 per cent lower than each title's, "full sales potential."
There's no doubt that each of the Eidos titles will make the estimations (+10-20%) over the games' lifetime. So why were they aiming so high for such a short-period of time? They needed to perform well for the good of the company, yes, but surely recognising the short-term success and then letting the long-tail play out is better than trying to squeeze all possible sales into 1 financial year?
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Perhaps if the short term immediate sales were translated into teh medium to lifetime value of the game products, I believe the EIDOS titles will do remarkably well.
Half glass full, half glass empty perspective perhaps?
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Michael Revis Writer, NerdReactor.com8 years ago
So why were they aiming so high for such a short-period of time?
Overestimating seems to be a habit of large companies these days. Remember when Capcom was aiming for Dragon's Dogma to sell 10 million units at launch?

Edited 1 times. Last edit by Michael Revis on 9th April 2013 5:14pm

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Show all comments (7)
Greg Wilcox Creator, Destroy All Fanboys! 8 years ago
Which is why speculation needs to be fired from this industry. let games find their niches and do the "evergreen" thing Nintendo does with its games and their longer lifespans because people pick them up when THEY want to, not because of billions wasted on hyping and hoping the numbers aren't so nebulous...
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Paul Jace Merchandiser 8 years ago
the huge loss was like a voice from the heavens
Most normal people would have just called it common sense*shrugs*
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Actually, when you look at the numbers, I think Square did well in the EUR/NA console . More interestingly is the giant elephant in the room, the Japanese market. Was there any mention of the performance of its sacred cows?
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Pete Leonard , Amiqus8 years ago
There is an interesting discussion around this in last week's Giant bombcast.
Their general feelings were that the insane figures for sales on all three of these products were primarily driven by previous (huge) losses on 'stalwart' japanese franchises like Final Fantasy, and not supporting other games which were likely to do well given their fan base such as Kingdom Hearts.
I have to agree - all three sales results do not feel like failures to me - I appreciate that costs are far higher than they used to be but consider this:
Sleeping Dogs in a new franchise brought back from the dead - a fan base has not only been established but it is considered one of the better open world games this gen - like the FPS market, very profitable for the winners in this category but super tough to break. They pulled it off. Now it's time to build that franchise and reap the benefits - plus it would be crying out for the kind of qualitative DLC that GTA or Borderlands got - lots of potential here.
Absolution may not quite have hit expected figures given it's been out 5 months but it could hit 5 over 12 months with other promotions and to be fair, mixed reports on this game may have caused some buyers to jilt buying a copy. But it's not a franchise to give up on.
Tomb Raider is a reboot and it's not had any true success like it used to for 2 console generations so this should be seen as a huge success - it could do Arkham city numbers over the 12 months from release.

But they have to give investors something which is a shame to pile all this on franchises that I'm SURE they know would not have done these numbers - look at EA with Dead Space 3 - no way were they expecting that until Warfighter absolutely bombed and then these later titles have to make up the numbers.

As time settles I am pretty sure thse franchises will continue to be supported and they have an awesome back catalog from Eidos to exploit - but Dr. Wong is spot on - why is there no accountability held in Japan? I personally think this is the fallout from slippage that occured from FF13 onwards........
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