[13/05] Square-Enix financials: ¥13.7 billion loss

[Ohri-Jin]

Mon, May 13, 2013 | 12:41 BST
Square-Enix financials: ¥13.7 billion loss, cites ‘competitive’ console market

Square-Enix has posted its financial report for the financial year ended March 31st, highlighting a ¥13.7 billion loss amid what it has called a ‘competitive’ console market. The company will now look to the PC, mobile and tablet space with greater focus to reverse the trend.

NeoGAF poster miladesn got a hold of the company’s financial report, which opens with a net sales increase of 15.7% – up to ¥14.7 billion from ¥12.7 billion in 2012.

However, due to the cost of company-wide reform, the company’s net income loss ended at ¥13.7 billion, prompting renewed focus.
The report states, “In response to the latest environmental changes in the game industry, the Group has implemented various strategic initiatives such as a change in its development policy, organizational reforms and redesign of some business models.

“As a result of of such initiatives, the Group posts the extraordinary losses in addition to the recurring loss, which leads to net loss of ¥13,714 million for the fiscal year ended March 31, 2013″.

The confirmation of structural reform follows confirmation of lay-offs at Square’s European and UK offices, its LA office, and the high profile departure of president Yoichi Wada.

Elsewhere, the company’s Digital Entertainment arm – which covers all games – has seen a 99.7% decrease in operating income to ¥44 million, suggesting it barely broke even last year. In FY’12 is hit operating income of ¥89 million by comparison.

The report cites the, “Under-performance of major titles for consumer game consoles in North America and Europe”, as a key factor.
However, the report states that the browser and smartphone market has proved continually profitable for the company, backed up by the “Steady performance” of MMO Dragon Quest X and “Kaku-San-Sei Million Arthur” in Japan.

It seems that browser, tablet and mobile will be of great interest to the company moving forward.
The report continues, “The business environment surrounding the Group is in the midst of major changes, where smart devices such as smartphone and tablet PCs are spreading rapidly, while the console game markets in North America and Europe are increasingly competitive and oligopolistic.

“In light of such environmental changes, the Group is focusing all efforts on a substantial earnings improvement through driving reforms of business structure in order to establish new revenue base”.

Could this point to less Square games on home consoles? We’ll know more moving forward.


Source - http://www.vg247.com/2013/05/13/squ...illion-loss-cites-competitive-console-market/

 

[Tyler Breeze]

I can't wait to see Fleur's post about this! XD Okay, as for me, I'm gonna say this is kinda sucky. I guess I'm living in the past. Apparently phone games and such are the new "thing", which is driving me crazy. Maybe it's just because my current phone is rather slow, so I can't enjoy many games on it. As for SE losing money, all I can say is oh well. I'm sure they'll find a way to bounce back from it somehow.

 

[Ohri-Jin]

I can't wait to see @Fleur's post about this! XD Okay, as for me, I'm gonna say this is kinda sucky. I guess I'm living in the past. Apparently phone games and such are the new "thing", which is driving me crazy. Maybe it's just because my current phone is rather slow, so I can't enjoy many games on it. As for SE losing money, all I can say is oh well. I'm sure they'll find a way to bounce back from it somehow.

Well I think im still a hardcore gamer. I dont game as much as in the past but I still sink my teeth in a good game days in a row till I complete it and hardly touch it again

PC social games/Mobile games and Tablet games has kinda destroyed the console gaming market. Casual makes big profit so the companies want to focus on those type of games for the casual market. Im sure there are some dedicated "hardcore" games on those platforms, but Social Mobile/Tablet games are ruining the industry imo!

Thats why Wii was a big hit and WiiU is struggling because of this.

SE its good to have a steady income from that section of the market, but dont forget your dedicated "hardcore" gamers. Mainstream is mehhhh...

 

[Linnaete]

I can't wait to see @Fleur's post about this! XD

Yes, did someone call?

-----------

I present to this discussion a bunch of slides and Tweets. Please enjoy reading them while you nail screws into your bleeding cranium.

If anyone wants to read the pdf file that details Square's current situation, you can find it here. All 22 pages.

Here's a sample of some of the slides that will give us a pretty damn good clue of what we can expect more from Square-Enix:

Notice the THIRD point:

"Construct a product portfolio TAILORED TO CONSUMER TASTES in RESPECTIVE SERVED REGIONS"

Meaning?

I read it as: "JRPGs primarily for Japan. The west? Ehhhhh, well, we have a bunch of neat, homogenised shooty shooty bang bang action games for you!"

Yes, they are expecting THAT many people to have smartphones by 2015 out of about 7 billion people in the world, according to that slide. I call bullshit.

Yes, they plan to cut down so they spend less than they did in 2000. So who is up for the chop?

"Bold implementation of business transformation" to reach that target "ASAP". How they intend to get up there as soon as possible and with sort of strategies they have in mind? Your guesses are as good as mine.

I also call this bullshit. There's being optimistic for the future, and then there's WE'LL BE THE FIRST PEOPLE TO BUILD A FUCKING BRIDGE TO MARS MADE ENTIRELY OUT OF ROCK CANDY STICKS!

-----------

Basically, expect the following things from Square-Enix:

+ Trimming their spending on development down. This sounds both ominous and a relief at the same time. It would have helped things like Tomb Raider if its bloated development costs weren't that high. At least then they wouldn't have the grievances they do now when they lament about Tomb Raider not meeting targets despite selling 3.5 million in the first few months! It can potentially be a good thing if only it means they stop wasting money and effort on trivial crap. On the other hand, "trimming their spending on development down" can mean ANYTHING. I expect more FFXIII-2s for Japanese console outputs. You know, reusing those assets like there's no tomorrow!

+ More money however, on MARKETING. You got that? They want to trim the fat down in development costs, but they want to advertise more. This implies they still want Call of fucking Duty sales numbers and it doesn't matter what the game being marketed is. God help us.

+ I absolutely guarantee that they will be even LESS willing to gamble handheld games for the west if their names are NOT Final Fantasy or Kingdom Hearts. Remember Bravely Default: Flying Fairy? Yes, that is not Square publishing it. Or developing it for that matter. Nintendo is the one publishing it in the west. Square deserves absolutely no credit whatsoever for the English version of Bravely.

+ Focus testing to rule the agenda. I hope you like focus groups.

+ Chances of new console IPs? Or revival of old IPs on consoles anytime soon? I think you will more likely find your next door neighbour mating with a pig outside on the lawn right now.

+ I won't be surprised if they stop bothering making and testing new in-house engines. I think they also realised how much of a disaster Crystal Tools has been, and the benefits of Luminous haven't even been seen yet!

+ MORE smartphone games. MORE social games. MORE smartphone games. MORE social games. MORE smartphone games. MORE social games. MORE smartphone games. MORE social games. Have I mentioned MORE smartphone games and MORE social games yet?

---------

Eidos as it seems, has turned out to be more of a liability for Square-Enix than an aid. By no means has it been a tremendous disaster that I am sure the drama behind Crystal Tools, FFXIV and the perpetual Versus no-show have been for Square-Enix Japan, but it's not been good either.

Meanwhile, Dragon Quest X the MMO seems to be doing just "okay" for them in Japan. ARR: FFXIV is either just about going to recuperate losses made throughout the whole fiasco of the need to temporarily stop subscriptions for the game, nuke it and rebuild it almost from scratch; or it will be another financial powder keg hell ready to go off.

---------
And before ANYONE says that a FFVII remake will fix things, NO. With fan expectations of a Final Fantasy VII for consoles (at this rate, PlayStation 4) being as outlandishly overblown and as technically excellent as possible, it will likely become the most expensive project in the company's history. Couple that with how easily dissatisfied large swathes of people will be towards any full-blown remake of FFVII and I predict that it will finish Square-Enix off, not save them.

---------

PC social games/Mobile games and Tablet games has kinda destroyed the console gaming market. Casual makes big profit so the companies want to focus on those type of games for the casual market. Im sure there are some dedicated "hardcore" games on those platforms, but Social Mobile/Tablet games are ruining the industry imo!

Incorrect.

The console market is destroying itself. The social and mobile markets are becoming increasingly attractive for smaller players exactly because it's low risk, while in terms of the triple-A console gaming industry, bloated budgets, bloated costs, unnecessary Hollywood voice actors being used for no adequate reason, reliance on focus groups and statistics, necessity and reliance on other forms of money-vacuuming (such as the proliferation of DLC good and bad, cross-promotional advertising with things like Mountain Dew and Doritos, bits and bobs of microtransactions), the need to homogenise products, AND think that they MUST sell Call of Duty numbers; has led to where we are today.

Sure, there are smaller players who ARE in the console business because they have the good fucking sense NOT to be daft with budgets and expectations, such as From Software with Dark Souls, but they are few and far in between. Square-Enix is one of these large corporations that have shit the bed as much as the likes of EA, Capcom, Ubisoft, and the rest of their ilk.

If social and mobile games bother you so much as the console market finds itself being strangled from within by the triple-A industry, there's the indie front. Thank God for that. And thank God that Sony seems to be embracing them with open arms when it comes to the PlayStation 4. Because if there is another big gaming market crash, we have somewhere to turn to (that isn't mobile gaming) while new players on the console market prepare to rise and take over from the dead dinosaurs. I suppose there's handhelds as well, but that's sadly becoming less and less ubiquitous than it had been before.

 

[Shaissa]

Ok for people that have Iphones and Tablets, What type of games do they think they are buying? It isn't the games that cost $15-$20 around here at least, I see people getting free Angry Birds, Cut the Rope, Candy Crush Saga etc... all the crap that is FREE! so how is this going help a video game company?

Secondly again with the "low sales from the west" bull shit... Sorry that one of the top selling games of the year thus far isn't enough to save your asses from the failed release of XIV, the no news of Versus, the sad shit that you guys. Also how is Dragon Quest X making them money? I thought it did poor sales in Japan?

Also Square-Enix might just stay in japan if they really focus on Smart Phones and other shit like that. Or maybe they might do so poorly they will just be the next company to be bought out at this point

Also Square whose fault is it that XIII was a failure (I admit it, I do enjoy the games,) When no one asked for a part 3 of this story, you gave it to them, everyone cries for Versus, you all but shut your damn mouth on that, They tell you XIV isn't ready you rush the release, forcing yourselves to fire everyone on the staff, and saying it was all there fault and making a version 2.0, which you are hoping to probably do 10 million sales knowing your numbers.

What other games were coming out for you guys... Oh Right, Final Fantasy X/X-2 HD... you guys probably want 12 million sales on that.... and Kingdom Hearts 1.5 HD you probably want 12 million on that.

I will say this Square, Continue to blame us Westerns for buying games, and you will probably be bought out by someone with half a brain when it comes to realistic numbers and knowing what consumers want... at this point I would take, EA over your bullshit of blaming customers.


Also Fleur... NICE!

 

[Ohri-Jin]

@Fleur

I have to agree but I can not believe Tomb Raider had as much development costs + all side costs like marketing etc. as Bioshock Infinite. Well I havent actually played Infinite. This analyst with his 100 mill claim...

This is bad though. With next generation I expect more dev costs and what not. This makes me wonder about other games tbh. Exclusives have they sold as good as Tomb Raider?..Im not sure.

Im now curious about all exclusives and the costs to make them.



About Hitman: Absolution. This game is brilliant and it deserves way more credit. Amazing thrilling story and great stealthy gameplay. Weaponry mechanics is one of the best I encountered in a TPS. This game definitely deserves more sales. Im sad I didnt buy it fullprice when it released.

I bought Tomb Raider though.

Eidos needs to be safe. SCREW SE and their crazy shit. I mean THIEF is coming!

Your post actually made me worry more than I initially was.


Why do I have a feeling its just SE own shitty fault...
http://www.gamespot.com/forums/topi...high-profile-game-development-costs-and-sales

Bioshock Infinite sold 3.7 million copies

 

[Tmoo]

Fleur: Post of the year. The big name console devs/publishers are burning themselves to the ground with their bloated budgets and anti-consumer practices, and fittingly consumer loyalty is dive-bombing. The smarter companies know their market and aren't trying to imitate COD numbers. I have a special hatred of From Software's partnership with Namco Bandai, but I'll save that for another time.

 

[Paddy McGee]

Fleur: I think most of the staff of the business department at my institute would be proud of that post. Top job... Remind me to hit you up for any report advice!

though,

Twas only missing a slide-show... Or is that an added extra?


Anyway, I can't help but feel pity for the employees of SE. If Square are aiming to cut costs, I can certainly see quite a few "Fodder workers" getting the sack to save a few pennies.

But, hopefully something like this could perhaps cause SE to cope on. I mean, a shock to the system always helps get the juices flowing. Maybe they might let certain "lost causes" die, and perhaps move on. If SE were to drop Versus XIII- while the backlash could be potentially big - it would free up some breathing space...

Also, looking at the shots of FXIV RR, they seem to have improved it somewhat. Maybe they could recover some of that loss?


Anyway, how much is
[h=2]¥13.7 billion[/h]
in American Dollars?

 

[Razberry Knight]

I also agree that this isnt smartphones fault, however SE assuming hardcore gamers will be willing to buy full-fledged games on smartphone as many tend to save space for music and other apps. Chrono Trigger for example has tons of uploads. Im better off playing the ROM. SE has the potential to make quality games on smartphone but they dont habe the brains to do it. Im a huge FF adventure fan and they made a feature phone remake. But theyre not released here. Imagine a full FF Legend 1-3 , Romancing Saga, and old classics bundled.together with their original but slightly updated graphics on iOS orr smartphone. Or make a smartphone exclusive series similar to Chaos Rings

 

[Linnaete]

Ok for people that have Iphones and Tablets, What type of games do they think they are buying? It isn't the games that cost $15-$20 around here at least, I see people getting free Angry Birds, Cut the Rope, Candy Crush Saga etc... all the crap that is FREE! so how is this going help a video game company?

Speaking as an iPad owner with the RPG charts on the Appstore in front of me now, Final Fantasies IV and V are supposedly doing quite well, despite their relatively high price tags compared to other iOS games. And I suppose that as handhelds start to diminish in the west and mobile is on the rise, Square has made more money out of these quick and easy ports than their handheld effort equivalents.

Also, iOS gaming seems to have become dominated with "freemium" games. You pay a small bit of money for a game, but the game COMPELS you to go to their in-game store and spend real-life money. They're called in-app purchases and while they're usually fair enough (I mean, you don't HAVE to pay even more money if you don't wish to), but it has been insidious for tricking small children with iPhones who run up hundreds of dollars worth of bills on these games. This applies also to games that say they are free to begin with.

EDIT: Oops, I got it mixed up somehow. Yeah, Razberry's right, FF: All The Bravest isn't a freemium game. It's a freemium game with a the nerve of having a price tag.

I can only name one Square-Enix game so far that has gobsmackingly TRANSPARENT with this sort of blatant monetarism. I can think of ONE Square game that - to put it in Jim Sterling's way - has pushed the boundaries in directly MONETARISING the player, getting rid of the game as the middleman, making the consumer the courier and their wallet the cargo. Final Fantasy: All The Bravest.

DO NOT BE SURPRISED IF THEY PULL SIMILAR STUNTS LIKE THIS AGAIN.

And if you want a non-SE example of how INSIDIOUSLY bad "freemium" can be to an unsuspecting idiot or child:

-----------

EDIT: I forgot about social games! Mobage games in East Asia are bloody huge for some reason.

-----------

@Fleur: I think most of the staff of the business department at my institute would be proud of that post. Top job... Remind me to hit you up for any report advice!

Haha, I don't even do business. I can't promise I know what I'm on about for everything else.

Anyway, how much is
¥13.7 billion

in American Dollars?

Uhhh, my converter says it's about 134.7 million USD.

-----------

By the way, before someone does it first, let me correct myself on something in my previous post:

+ Chances of new console IPs? Or revival of old IPs on consoles anytime soon? I think you will more likely find your next door neighbour mating with a pig outside on the lawn right now.

I forgot about Drakengard 3/Drag-On Dragoon 3.

But whether the West will see it released is another thing.

 

[Razberry Knight]

Freenium is actually free games that have in-app purchases. All the bravest is not freenium. And thats why many hate the game, for its cash cow purposes and not offering anything else

 

[José Mourinho]

I am curious to know where the depreciation and amortization expenses are coming from, having increased nearly 150% in the space of a year and also where the capital expenditure has gone, because a 9.6 billion raise in those alone is a huge expense and yet they expect to decrease that by 5.8 billion in the space of a year; it's an insanely unstable fluctuation. I would like to see how they're planning an expected operating income of 25 billion by next year because in all honesty within the next year I don't see huge sellers. The Final Fantasy XIII series has lost its way, even those who highly anticipated it somewhat couldn't care less any more, Final Fantasy X, X-2 and Kingdom Hearts 1.5 will certainly be great for nostalgic value, but many of the people who originally played the titles have probably moved away from gaming nowadays. Square-Enix may very well be able to change the structure of the company, but it's going to be an evolving process, not one that will happen in the space of the year.

I'd like to see how much the change of directors and President cost the company, because such changeovers tend to lead to millions worth of compensation handed out.