Square Enix reports loss due to "Tough console market"

Attachment 40007Square Enix has reported a net loss for the nine months ending December 31st.


It blamed the result on what it described as “the increasingly difficult condition of the world-wide console game market, under which the Group is struggling to achieve a fair expected return on its investment”.


Net loss for the period reached ¥5,745m with operating losses hitting ¥4,853m. Net sales reached ¥102,795m, up from the ¥95,738m posted in the same period the year before.


Square Enix’s digital entertainment division saw net sales increase 7.7 per cent to ¥57,827m while last year’s operating income of ¥12,451m has slipped to a ¥392m loss.


On a better note, browser game Sengoku IXA and social game Final Fantasy Brigade are generating “acceptable profit”, while MMORPG Dragon Quest X “has been showing steady progress”


The company now predicts net sales for the financial year ending March 31st of ¥150,000m, up from 2012’s ¥127,896m. However, it forecasts a 30 per cent drop in operating income and a 42 per cent drop in net income at ¥3,500m.

[Source: Tough console market sees Square Enix report loss | Games industry news | MCV ]

Yes, blame the 'tough console market' and not 'we released a few games that got a trout ton of negative feedback' or 'we still haven't given you the game you've been asking about' or even 'we keep releasing deceptive teaser sites for trout games you don't care about'.

Yeah, definitely tough console market.

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Originally Posted by NeoCracker

Yes, blame the 'tough console market' and not 'we released a few games that got a trout ton of negative feedback' or 'we still haven't given you the game you've been asking about' or even 'we keep releasing deceptive teaser sites for trout games you don't care about'.

Yeah, definitely tough console market.

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Games SE released in the final nine months of 2012...

Bravely Default: Flying Fairy
Hitman: Absolution
Call of Duty: Black Ops II (Publisher for Japan)
Dragon Quest Monsters: Terry's Wonderland 3D
Quantum Conundrum
Chousoku Henkei Gyrozetter
Heroes of Ruin
Dragon Quest X: Mezameshi Itsutsu no Shuzoku Online
Final Fantasy VII (Windows)
Final Fantasy III (PSP)
Sleeping Dogs
Deus Ex: Human Revolution (Mac)
Risen 2: Dark Waters (Publisher for North America)

Out of curiosity, which of these games were good and which were rubbish? I thought a lot of them were supposed to be quite good. I suppose selling a Western FPS in Japan was never going to be a huge success, though. :p But yeah, I wouldn't say there are any massive original games there short of perhaps Sleeping Dogs and Hitman: Absolution, which weren't terrible going by the ratings I'm finding on metacritic. Not great, but not terrible.

Or are you basing all of that on Final Fantasy XIII & XIII-2, neither of which were released during the months they suffered a loss in? :p

I would imagine the main reason they made a loss is because they have been spending a lot of money and time on FFXIV/Tomb Raider and not releasing any FF / Eidos games.

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Originally Posted by Loony BoB

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Originally Posted by NeoCracker

Yes, blame the 'tough console market' and not 'we released a few games that got a trout ton of negative feedback' or 'we still haven't given you the game you've been asking about' or even 'we keep releasing deceptive teaser sites for trout games you don't care about'.

Yeah, definitely tough console market.

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Games SE released in the final nine months of 2012...

Bravely Default: Flying Fairy
Hitman: Absolution
Call of Duty: Black Ops II (Publisher for Japan)
Dragon Quest Monsters: Terry's Wonderland 3D
Quantum Conundrum
Chousoku Henkei Gyrozetter
Heroes of Ruin
Dragon Quest X: Mezameshi Itsutsu no Shuzoku Online
Final Fantasy VII (Windows)
Final Fantasy III (PSP)
Sleeping Dogs
Deus Ex: Human Revolution (Mac)
Risen 2: Dark Waters (Publisher for North America)

Out of curiosity, which of these games were good and which were rubbish? I thought a lot of them were supposed to be quite good. I suppose selling a Western FPS in Japan was never going to be a huge success, though. :p But yeah, I wouldn't say there are any massive original games there short of perhaps Sleeping Dogs and Hitman: Absolution, which weren't terrible going by the ratings I'm finding on metacritic. Not great, but not terrible.

Or are you basing all of that on Final Fantasy XIII & XIII-2, neither of which were released during the months they suffered a loss in? :p

I would imagine the main reason they made a loss is because they have been spending a lot of money and time on FFXIV/Tomb Raider and not releasing any FF / Eidos games.

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Yeah, the 'bad games' comment was mostly directed towards FF XIII and XIII-2, but more recently my other points stand. ;P

Endings aside, I wouldn't call them bad games. They still got decent ratings. XIII still had great sales and XIII-2 was a very good game (again, ending excepted) that was received favourably as far as I recall.

>>> I blame capitalism :D..:luca:

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Originally Posted by Loony BoB

Stuff.

Out of curiosity, which of these games were good and which were rubbish? I thought a lot of them were supposed to be quite good. I suppose selling a Western FPS in Japan was never going to be a huge success, though. :p But yeah, I wouldn't say there are any massive original games there short of perhaps Sleeping Dogs and Hitman: Absolution, which weren't terrible going by the ratings I'm finding on metacritic. Not great, but not terrible.

Or are you basing all of that on Final Fantasy XIII & XIII-2, neither of which were released during the months they suffered a loss in? :p

I would imagine the main reason they made a loss is because they have been spending a lot of money and time on FFXIV/Tomb Raider and not releasing any FF / Eidos games.

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Yeah, that's an all right number of games, but they don't strike me as "AAA" stuff. There might not be that much money in being a publisher for someone else's games as there is in selling your own (well-received) games. In either case, I don't think it's a bad idea to sell western FPS games in Japan. Just going by the sheer number of japanese people, I suspect there are more people playing Black Ops in Japan than there is where I live, in Norway, so why not just release it there?

I dunno if the game has japanese voiceovers in Japan though. It certainly isn't changed at all in Norway, except the game's manual, which is a norwegian/swedish/danish combo-manual.

Oh, I was going on the assumption that western-made games still do absolutely horribly in Japan. I don't know if CoD follows that rule or not.

EDIT: Oh, wow, it got number one over there. Impressive! I remember looking at a top 50 list of sales in Japan for a year and there was only one Western-made game on the list. Can't remember what year... it was in the past 3-4 years, I think.

Looks like we're one step closer to the FFVII remake...

I bet digital saw a sales increase- that is such a dumb thing to say, look at the amount of digital content you added compared to last year. That is a spin statement. And I am sure the it is the console game's fault that you messed up FF14 so badly.

They didn't mess up FFXIV badly last year. They did great with FFXIV last year. FFXIV was released long before that. Their initial predictions for how well FFXIV will do in the current fiscal year were never likely to be all that amazing considering they have been planning a restart for over a year now.

The things that went wrong during those nine months: Sleeping Dogs and Hitman: Absolution both did not sell as well as SE were hoping. These aren't terrible games (I say this going by the metacritic ratings which are high 70's/low 80's) but if they don't sell, they don't sell. Perhaps it was a bad result from marketing or perhaps these games just didn't have the X-Factor that made it a must-buy, perhaps the competition at the times was too great, perhaps the games just aren't that popular anymore, perhaps SE overestimated, perhaps the market for video games is suffering. Could be any of these things.

I genuinely think this is the main reason for the dip in revenue for SE during those specific nine months. Still, despite that, it's easy to pick out nine months of a company's fiscal year and say "You didn't perform very well!" while ignoring that the biggest blockbuster game they have coming out that fiscal year (Tomb Raider) is being sold within the other three months. In fact, the games in which SE is pouring the most of their resources - FFXIV / Tomb Raider) are both being released shortly after those nine months, not to mention Seekers of Alduin.

I do think it's a very unflattering picture to paint. Yes, it's not a great result for Sleeping Dogs and Hitman to struggle, but it's also not a backbreaker for SE. They will still likely turn a profit for the fiscal year due to Tomb Raider and hopefully have a healthier outlook for the following fiscal year with FFX HD, FFXIV:ARR, Lightning Returns, perhaps Versus/Thief 4 being released, not to mention inevitable DLC for Tomb Raider.

Heres a Tip bob: never use metacritic a an actual source
Just... Dont
Its horrendously unreliable and flawed

All the other review-collecting sites out there come up with similar results. Although I'd love to hear of a better way to guage how good a game is if you know of one!

From all the things I've read and heard from friends, site reviews and user reviews, the games were good but not enough to run off to your mate going "oh my God, you've got to check this out!" It could also be argued that they were poorly marketed (not saying they weren't marketed a lot, just poorly) or that SE has unreasonable expectations. Either way, the games underperformed and I anticipate this is the main reason for the drop in revenue. It's easy at a Final Fantasy site to assume that the revenue has been lost through the most recent Final Fantasy games, but sales of FF games were never expected to be through the roof in this period by anyone that I've known, while Sleeping Dogs and Hitman Absolution were certainly the biggest games released during those nine months.

Ill pm you my problems with metacritc when o ge a keyboard in front of me. I dont want to derail the thread, and i typo enough in one sentence let alone a fullon rant on my ipod.

I hope this doesn't mean they continue to focus more on cell phone games and DLC.

Bob- You missed my point. Yeah 14 wasn't f'ded up last year but they spent lots of time & money fixing and getting set to relaunch 14 in those 9 months. How is that the console game market's fault?

With the length of development cycles as they are, it's not fair to point to the such a limited time frame as nine months and suggest that the games that came out in those nine months has anything to do with why they've lost money. As pointed out, Square Enix is pouring massive resources into the continued development of Final Fantasy XIV. Granted, they actually charged subscription fees this past year, but I imagine that doesn't do much other than offset the costs of concurrently developing new content for an existing product while concurrently developing what amounts to a new game.

There are still a few titles expected to drop before the end of the fiscal year (such as Kingdom Hearts 1.5 HD). How much money went into developing games that aren't out yet? Final Fantasy Versus XIII? Final Fantasy XIV: A Realm Reborn? The new graphics engine they've developed? Without seeing a breakdown of the costs and the expected returns, it's hard to make evaluations at this point.

This is why I hate the focus on quarterly reporting. The importance of short-term gain vastly outweighs long-term strategies.

SE has had a hard past couple of years. But hopefully this year they can finally stop spending at a loss so much money towards FFXIV and work on developing more AAA titles. Between FFXIV, FFXI, Tomb Raider, and DQX, this next year could be good for SE. I know the economic report from last November that I wrote about a little while ago expected higher profits in 2013, but then again they all probably do in order to console shareholders. :p

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Originally Posted by Del Murder

I hope this doesn't mean they continue to focus more on cell phone games and DLC.

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Oh please don't let this be true.

I would really like to see their revenue numbers compared to other developers' numbers for last year. Then we'll know just how much that "tough console market" really factored in. I'm not saying it wasn't in part because of that. With the economy, probably a lot of people aren't spending money on more frivolous things like video games at $50 a pop. But it probably had way less to do with it than they say.

The reason I hate any kind of reporting is because it gets gamers talking about garbage that doesn't matter, much less things we have expertise on.

Looking at that lineup, I can't say it was bad. It's just hard to make games just below the top tier (Sleeping Dogs, Hitman: Absolution) make a splash. I think if they dedicated 5 or so teams to churning out 3-4 RPGs on HD consoles every year they'd be alright. They shouldn't be going half-ass with a little bit on console, a little bit on handheld, a little bit on mobile, a little bit onilne. Go hard on one and put a few things on another. Publishing can take care of the rest.

Please wake up SE and stop being in denial.

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Originally Posted by Dr. rydrum2112

Bob- You missed my point. Yeah 14 wasn't f'ded up last year but they spent lots of time & money fixing and getting set to relaunch 14 in those 9 months. How is that the console game market's fault?

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That can explain a predicted loss, but they were expecting better returns. When they tell shareholders they expect money to come in, they were never telling them it was going to be flooding in from FFXIV. The "console game market" explanation is for the shareholders, and it is there to explain why they did not meet their own expectations.

They never expected any money to come from FFXIV in those nine months, and they always expected to be pouring resources into it. They expected to be making a loss in this area, I'm fairly certain of that, because pretty much everyone knew it. However, the console games they did release did not create their expected revenue, and therefore they are correct in stating that the reason they did not meet their expected revenue for the nine months was due to the console game market and not the MMO market.

Ouch! is pretty much on the ball with saying that without the breakdown of the numbers we can't do much analysis. I don't expect them to bulltrout the shareholders as if they can't read the numbers, though, and those shareholders probably get to see more details than we do.