The lights are on
In its recently issued 2013 annual report, Square Enix has shone the spotlight on the home console market as a primary reason for its financial failure. The report calls out Tomb Raider, Sleeping Dogs, and Hitman: Absolution as both game development successes, but commercial failures.
The report states, "In the HD games category, we delivered three major titles in the fiscal year under review, primarily in Europe and North America. These titles—Sleeping Dogs, Hitman: Absolution, and Tomb Raider—failed to reach their respective targets, and resulted in financially unsatisfactory consequences, whereas the HD business in Japan remained strong through sales of the Nintendo 3DS version of Dragon Quest VII: Eden no Senshitachi” (Warriors of Eden) and others."
The report continues to pin the blame for financial failure partially on incentive programs for retailers, including "price protection, back-end rebates, and promotional cooperation costs." The document also identifies competition on store shelves, but seems to attribute that phenomenon to physical media exclusively, because of competition and the related, aforementioned retailer incentives.
One proposed solution in the report is to find ways to monetize and deliver content prior to a game's release. No examples are provided.
2013 saw a precipitous drop in Square Enix revenue. The company finished the period with ¥6,081 million ($61.08 million) operating loss as compared to ¥10,713 million ($107.6 million) operating income in 2012. The financial results led to the resignation of former president and CEO Yoichi Wada, who has been replaced by Yosuke Matsuda.
[Source: Square Enix]
Our TakeThat Square Enix recognizes the critical success of the three titles in question is a step in the right direction (before they just labeled the titles as commercial failures). We already know we're getting a next-generation Tomb Raider sequel, and my fingers are crossed that the other two series get additional entries.
What is surprising here is that Square Enix seems to have been caught off guard by the competition at retail, which has ramped up significantly at the end of the generation. Rapid retail price drops have been a reality for years now, and co-marketing isn't a new phenomenon this generation, let alone this year.
The remainder of the report hints at an increase in free-to-play titles and exploration of other business models. How those might affect franchises that are traditionally an up-front purchase remains to be seen. Let's just hope this doesn't mark the introduction of microtransactions into all of Square Enix's traditional offerings.
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I hate how people talk about this topic. racism?
Those three are all great games but looks like they needed spend so much time and money to develop. Do you remember HM and TR changed their release date? do you remember SD was an abandoned son of Activision?Besides they all are on new engines and first title on the current gen.
you never know if it's 'commercially successful' or not without knowing how much it cost in development.
The expectations they had for those games were insane. It's their own fault. When you sell 1 million copies and that is considered a failure, you obviously need to set more realistic goals...
With SquareEnix setting expectations as high as they did for these games I don't think they will ever have a commercial success again. Well, at least not in the eyes of the folks who run that company. I don't know what the sales are now, but Tomb Raider sold over 3 million copies in one month. If that didn't make it's money back and then some then somebody in the accounting department needs to be fired.
Tomb Raider has to be more like Uncharted 3, but with less people to shoot and more dungeon crawling (Tomb Raider: Anniversary). That's the best way to grab us old Lara fans to jump back in full swing.
I wonder how the free copies of Tomb Raider and Bioshock Infinite(obviously not a Square-Enix game) that I got with my new video card fit into their financial analysis.
All 3 of those games were great and sold well. The problem is that horrible MMO they've beat into the ground.
Again, another example of publishers and the suits at the top being completely oblivious. It's their spending habits and expectations that are the problems. I think all these guys need to pay CDPR a visit to see how it's supposed to be done.
Failures my ass. Shut up Square Enix.