Square Enix Restructures, CEO Resigns

Square Enix has just posted disappointing numbers resulting in a major restructuring which includes selling off all of their F2P titles to Sleepy Giant.

In view of the rapidly changing environment of the game businesses, the Company has decided to implement major reforms and restructuring in its development policy, organizational structure, some business models, and others. The Company expects to incur loss of approximately ¥10 billion from such restructuring efforts to be recognized as extraordinary loss about loss from restructuring in the settlement of the account for its fiscal year ending March 31, 2013.

The extraordinary loss are composed of loss on disposal of content (approximately ¥4 billion), and loss on evaluation of content (approximately ¥4 billion),and the other(approximately ¥2 billion).

Tentpole titles Sleeping Dogs, Tomb Raider, and Hitman: Absolution all missed their projected targets.

Following the publication of these results, Yoichi Wada has stepped down as CEO.

It’s too bad they never came up with a good Final Fantasy entry for this generation, that feels like a missed opportunity. They gave us FF13 instead, which was really quite terrible (it’s the first FF game I could never get through) and then proceeded to keep shoveling a ton of FF13 garbage (sequels, spin-offs, spin-offs that were never even shown after announcement, if I remember right, I sort of stopped following when everything was 13-related) down our throats instead, as if anyone wanted that stuff. What a fiasco. What’s wrong with making a FF game like the old ones, but not an HD remake OF the old ones? Seriously? Or do something innovative for the franchise, like merging the open world success of a Skyrim and the Final Fantasy settings, sort of like a blend between FF12 and Fallout New Vegas! That could have been fun and a big draw I would have thought.

The full slides are interesting. Square Enix expected Hitman: Absolution to sell 3.6 million and Tomb Raider to sell 3.4 million right out of the gate.

Am I reading that right in that they completely discredit digital sales?

Looks like they wanted to achieve a baseline projected sales of physical units of those titles. Could be they had a physical shipment target to balance cost of production, shipping, distribution, etc of those units? If they achieved that, anything sold via digital is higher margin. Pure digital software delivery can also have some weird revenue recognition rules, depending on the market, so maybe they cannot recognise some or all of those sales this fiscal qtr and consequently year.

3.6 million for hitman absolution? what the hell they were thinking?

The actual numbers for the three titles mentioned in the OP are perhaps less grim than you might think. Sqenix “only” missed their revenue targets by 5%, which is perhaps not surprising considering Sleeping Dogs was a new IP, Tomb Raider was a major relaunch of a struggling franchise, and there was no major FF on the schedule. (Which is the dog that did not bark of this report. Like BleedTheFreak says, FF is the foundation of the company but has been in eclipse this whole generation.)

From wiki

As of March 2011, the games have sold a combined 8 million units.[47]

And this one was released on mature platforms and with more development and marketing budget.

Well, I clearly helped their CEO resign, since I bought my copies of Tomb Raider and Sleeping Dogs through Steam.

It’s absurd they don’t count digital sales in those numbers.

No, not really. That’s what they’re expecting to actually ship/sell sans downloads by March 31 now. Those are the numbers they’re disappointed by.

blood money came out in 2006, that’s six years before absolution. the franchise was basically dead.

Then it sucks that their business model can’t work with 3.4 million Tomb Raider sales, not including digital.

A lot of the Japanese devs seem to be struggling with the new gaming business model, perhaps due to smaller capacity to weather AAA flops or perhaps due to smaller staff or something else entirely. Either way, the sheer cost of development of major titles (primarily due to art asset costs skyrocketing with complexity) in this generation has really put the hurt on them; it’s partly why, I think, we see so few AAA JRPGs this generation for non-handhelds.

More to the point, unless you’re THQ/EA/TAKE2/ACTIVISION sized, you have a real damn hard time developing more than 1-2 major, high-quality, high-def releases at a time and an even harder time surviving if one or more of them tanks. And hell, with the numbers EA’s releasing and the recent death of LOLNOPETHQ (thanks for the correction downthread), frankly, I’m not even sure the Western powers can handle it anymore. God help 'em all come next generation.

Don’t you mean the recent death of THQ? My understanding was that Ubisoft was doing okay, as things go.

I think that this one of the major problems in the gaming industry right now: unrealistic high expectations of how many copies a game will sell.
We saw it with THQ’s idea of making “Homefront” a freaking platform for years to come while branching out to books etc. (seriously!).
We also saw it with EA expecting Dead Space 3 to sell 5+ million as a recent example.

No idea how they get these numbers? Rolling dice while drinking heavily?
Just ask me / us the gamers of how their game will do and I bet we nail it most of the times!

My first prediction for my special friends at Crytek: Crysis 4 will sell equal / less than Crysis 3’s disappointing sales unless you radically revamp the setting and make it true open-world again regardless how good it looks.
That one was free guys!

From my point of view, this would seem to be an issue with them wanting the lifetime sales of the previous version up front on the new one, no matter what the franchise.

The industry is bonkers on the top end. Basically, if you’re in charge of an AAA publisher, you have to get Call of Duty sales or you fail. At the very least, you have to do some serious explaining to stockholders as to why you’re not publishing the next Call of Duty and raking in a jillion in sales.

the sales expectations is related to the budgets. these AAA games need to sell millions to break even because they cost so much to make; part of it is the sheer cost of the art assets, but a lot comes, I think, from bad management and bloated designs. IIR crysis 3 cost three times crysis 1, which is ridicolous. the industry seriously need to slim down otherwise they will continue to lose money year after year, unless somehow you got a huge hit in your hands (like Skyrim or Assassin’s Creed)

I’m pretty sure they just start with expenses and then back out the sales number based on that, independent of any kind of market reality.

This should be blazoned on every debate about scoring and the value of metacritic.

What are the only things reported to investors about their games (the only people that they answer to)? Sales and Metacritic score. Beware.