Square Fails To Circle Around Profitable Rectangles

By John Walker on November 6th, 2012 at 9:00 pm.

It’s pretty weird to hear the news that Square Enix made a loss in the last half year. £42m in fact. You don’t have to have consulted for them to recognise they’ve got a bunch of strong titles on their lists. But then when you think about 2012, it’s a year when not too many of them appeared. Human Revolution was last year, Hitman’s still to come, and Tomb Raider disappears ever further into the future. Sleeping Dogs put in a good showing, but wasn’t a massive blockbuster, and a bunch of Final Fantasy re-releases presumably drew in crowds, but seemingly not ones big enough. Although quite how Mensa Academy (Square keep promising me our review copy is on its way, but it never seems to show up!) didn’t keep them afloat I have no idea.

However, even though it hasn’t been a strong year in terms of Western releases, they’re still a publisher that handles many of the big name releases in Japan. And they still forecast sales of £475m. That’s loads! What are they spending it all on?

Square reports that “sales of console games as a whole fell short of the target for the six-month period”, but described sales of Dragon Quest Monsters and Terry No Wonderland 3D as “favourable”. Well, with a name like Terry No Wonderland 3D, how could it not? They also report that PC sold well for them, but development costs meant “stagnating profitability”. Arcades in Japan didn’t do well for them either, and they’re now banking on MMOs to “establish its profit base”, we assume mostly in Japan. You can root through their figures here and here.

If they get can Tomb Raider out in March 2013 as planned, hopefully the next six months will look up for them. And, I don’t know, perhaps spend less on idiotic advertising.

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90 Comments »

  1. MrLebanon says:

    They need to bring something with the epicness and charm of The first 2 kingdom hearts games on PC

    Then i’d give them all my monies

    • CobraLad says:

      Your monie wont save them from loosing millions on it.

    • boe2 says:

      This comment is pretty much spot on. Less focus on Final Fantasy, more focus on quality RPG’s

  2. Memph says:

    ” I don’t know, perhaps spend less on idiotic advertising.”
    I often wonder if this alone is why they seem to lose so much sodding cash. Or what quality of game we’d get if the monies from trailers for trailers of trailers went towards something else, like the game maybe.

    • Fanbuoy says:

      Well, the games would naturally benefit from being given more money. They probably wouldn’t sell as much though, seeing as people who don’t follow gaming publications wouldn’t be aware that there was a new game to buy. People blame marketing way too much. Bad marketing is bad, good marketing is good.

      • Phantoon says:

        Marketing’s job is to make sure that Marketing has a job.

      • SkittleDiddler says:

        The problem is that the AAA publishers overspend on marketing. It’s unnecessarily excessive to brand 747 jumbo jets with Starcraft 2 ads.

        • Gap Gen says:

          At the same time, I don’t know if Call of Duty would be as big as it is without overblown marketing.

          • Brun says:

            It probably wouldn’t. But it’s still doing things the wrong way – advertising shouldn’t become a substitute for making a game good enough to stand on its own. For many big publishers overspending on advertising is just a way to make up for what they KNOW would be mediocre sales, were the game left to stand on its own merits.

          • Emeraude says:

            I bet it wouldn’t.

            The problem is that any game has to be a Call of Duty scaled success nowadays (or for MMOs a WoW scaled success). The disappearance of small/middle sized companies and games has been hurting the industry a lot. Or maybe it’s only a symptom, I’m not sure anymore.

          • protospork says:

            Call of Duty would be fine with a slashed marketing budget. All the people still playing the current installment would see the announcement of a new one, and then the incessant “You gonna get the new call of duty, brah?” would clue in everyone else in their target audience. Maybe throw in a new flavor of mountain dew to round up anyone who misses it, and they’re set.
            If any games need something close to the current AAA marketing budgets, it’s new properties and long-hiatus ones (XCOM).

        • Fanbuoy says:

          On its own, sure. However, if it’s covered by media it could be cheaper than buying ad spots on each site that covers it. Also, consumer awareness through articles is more valuable than awareness from ads. I don’t know if they actually did put ads on planes or whether it proved successful, but it doesn’t seem like an inherently bad idea.

          There are many aspects of advertising and many more of marketing as a whole. Regardless of how people feel about it, there is not a single business that does not depend on it. Marketing gets a lot of flak for destroying games (among other things), some of which I agree with, but oftentimes it’s just used as an easy scapegoat when something fails.

          • DerNebel says:

            They did put ads on planes in Korea, I think.

            But it was Starcraft 2 and it was Korea, so I don’t think overblown advertising would be wasted, not in a gaming culture that basically owes its heritage to LAN cafés and Starcraft.

          • syndrome says:

            @DerNebel

            Oh cmon why would Korea need fucking Starcraft ads??! Cmon, think about it. Yeah, it’s likely that Koreans haven’t noticed the most anticipated title in the history of Korean gaming so they will most certainly learn about it while boarding a 747… It’ll surely grab attention of those who are interested. Cmon, puhlease.

    • frightlever says:

      Businesses don’t want to make too much of a profit because they pay taxes on profits. So every so often they’ll take a write-down, post a nominal loss and the shareholders get to roll around in a fresh money pit of dollar bills that would have otherwise have had to be paid to the taxman. If you’re unclear on how they can post a loss and still have plenty of money, just think of it as having your cake and eating it to.

      NB sometimes a loss is just a loss, obviously. I doubt that’s the case here.

  3. Paul says:

    Just Cause 2, Deus Ex HR, Sleeping Dogs, what do they have in common? They are great games with fantastic PC versions. Hitman will probably join them. Square Enix has risen to be my favourite publisher of the big ones, and I buy pretty much all of their western PC games. Hopefully Hitman sells really well.

    • Emeraude says:

      Too bad all their PC products are riddled with STEAM. I have a fair list of their games I wanted to buy and didn’t/won’t.

      • woodsey says:

        Oh no, not Steam – the world’s mildest DRM. How bloody dare they?

        • Emeraude says:

          Personal opinion, and all that, but I fail to see how it is in any way “mild”. Hell, I find CD keys or, hell CD checks were far milder, if disagreeable.

          • Crossing says:

            Tell us how it isn’t mild then?

          • Kaira- says:

            Can’t sell or lend your games, need to register online, tied to a client which must be running if you wish to play (and it may simply tell you “nope, can’t play it now, check back later” if online)… doesn’t sound mild to me by any means.

          • Paul says:

            I like steam, so much convenience and games are cheap on GMG so I have no problem with it. I prefer it vastly to other forms of DRM.

          • El_Emmental says:

            CD Key are hardly Digital Right Management solutions, they do not guarantee the person using it is the owner/buyer nor “manage” anything – without internet check you can share a key to thousands of other users, and nowadays it’s so easy for crackers to make a fully working keygen, cd key are totally useless and manage nothing.

            Woodsey said “mildest DRM”, not “midlest piracy/anticopy protection”, DRM are bad, “defective by design” and everything. We all know that, we all wish we could live a DRM-less world.

            Sadly, so far, we can’t ; even if publishers suddenly decide to take such an enormous risk of releasing all of their games in the DRM-nude, only a handful of gamers (when compared with the other millions of video game players) will not pirate it if they like the title.

            If you need to wait a little (with the marketing hype constantly harassing you), or find one of the few reliable piracy websites to get a yaared steamworks version, and redownload/reinstall to get the patches, most people (who don’t know what “D.R.M.” stands for) will either skip that game or just buy it.

            Indie games can get away with DRM-less releases because their targeted audience is mostly made of gamers and they need much less sales to recoup their costs, AAA games can’t do that *yet*.

          • Emeraude says:

            My bad for conflating Copy Protection with DRM – though I personally do think it makes sense to do so.

            That being said, you’re seriously overvaluing the efficiency of Steam as a DRM if you think it works any better than those. I could be playing any and all game on Steam right now. The reasons I’m not have nothing to do with Steam itself.

          • El_Emmental says:

            well, how can I explain this…

            Emeraude, you’re a video game player, knowing what a DRM is, what a copy protection is, the differences and similarities between the two, reading Rock Paper Shotgun, commenting on the mildness (or lack of) of the Steam DRM in the comments section of a news regarding Square Enix financial result.

            I won’t judge how positive/negative it is (as it depends on what you’re looking in life), but you’re not like the average video game player/user, you’re much more aware of how the video game sector works, and as you indirectly mentioned, you fully have the capacity and knowledge to render the Steam DRM inefficient (by connecting to specific networks and communities known for such things).

            We can’t say the same of the vast majority of people buying and playing video games. That’s where Steamworks (the Steam DRM “solution”) is being the least problematic DRM solution => accepted by all publishers (even the most paranoid ones) <=, as it's providing an offline mode, very few servers downtimes, no invasive privacy breaches (the hardware survey in opt-in, not opt-out), and many side-services (such as Steam Community, Workshop, Big Picture, Mac, soon Linux, etc).

            For the average user, the average usage, it -is- the "mildest" DRM. One could say "sadly", one could say "hopefully", depending on how you see it:
            - the biggest, first online-check (true) DRM system who took control of millions of gamers' libraries and lives
            - or the rather-gamers-friendly Valve-driven digital distribution platform getting better overtime, allowing players to buy legal licences for the cheap and play together

            Personally, my heart goes out to GoG.com and the Humble Bundle store solution (they provide it for indie developers, such as Legend of Grimrock), but when it comes to mainstream gaming for the masses, I slightly prefer Steam over Origin or other smaller DD platforms (who aren't always reliable), but it's a choice between the devil and the deep blue sea indeed.

        • fooga44 says:

          Steam is not mild, if your internet goes out before you boot your computer most of your steam games won’t start. Not only that you encourage legal encroachment and rolling back of citizen’s right to own what they buy. Anyone who supports it is a moron and a sucker.

          • Milky1985 says:

            Network went down for a bit before i got home yesturday, most of my steam games still ran.

            Sorry to burst your bubble but the offline mode does work on occasion, its not quite the awful travesty (louder bits of) the internet seems to think it is.

            But hey , facts get in the way of a good rant!

          • El_Emmental says:

            Then I’ve been a moron and a sucker, for using the Offline mode for 3 years without any problem, only getting an Internet access (not filtered to block Steam) on the week-ends. To be frank, I quite enjoyed it, being able to play any of the ~20 singleplayer games I had installed back then.

        • Naum says:

          Also, Steam currently has a quasi-monopoly on digital game sales comparable to those of Google, Apple, Microsoft and, to a lesser extent, nVidia and Intel in their respective fields. Little good has ever come out of a market being dominated by one company, and I don’t see why it shouldn’t be harmful in this particular instance.

      • frightlever says:

        If you’re boycotting Steam, and presumably GFWL and Origin what games are you left playing? Stick and ball?

        • Kaira- says:

          It’s as if there isn’t any games outside those three.

          Oh wait.

        • HadToLogin says:

          Maybe he set his sails high and cruise seven seas drinking a lot of grog.

        • Emeraude says:

          Oh I still have a modicum of choice, though I’ve seen it dwindling these years. I blame you and Valve for this, of course.

      • Chalky says:

        STOP RIDDLING YOUR GAMES WITH CONVENIENCE I LIVE ON THE MOON AND HAVE NO INTERNET etc etc

        • syndrome says:

          The Moon, RLY?
          People, we have a whaler aboard.

          /watch?v=doJj5hKyXuw

        • Emeraude says:

          I just love that line of argumentation. It’s always so beautifully cyclical.

          Steam is a convenience *to you*. Personally I find it intrusive and useless at best. Overall dangerous at worst. Why would I want to use a “service” that takes away from me while giving back nothing I want in return ?

          • syndrome says:

            Actually it does give you a convenient and streamlined way of interacting with other players, other games, and a funneled way to survey the scene, check for the latest news, player comments, reviews etc. It can also recommend you some games you perhaps wouldn’t find otherwise, you can haz achievements, and the updates and patches are delivered automatically, which is usually a neat thing. There are features such as Steam overlay (to chat with your friends and browse) which you can use even in games that aren’t bought on Steam, you can trade with others, and if you are poor or regular, you might as well grab a game at a 25% or even 75% discount price. Aaand, the infrastructure covers a wide range of payment options. Also it’s non-mandatory. You can buy the game directly from the developer, which is also ok.

            However, I don’t understand what do you mean by “Steam doesn’t give you anything”. It’s an excellent, lightweight service, and the only DRM you need, which proved to be a non-invasive industry standard, and even let’s you copy the entire games folder to another computer — provided you log in locally (as usual) it will find all the games, without the need to redownload or reinstall anything, overriding the need for dirty Windows registry keys, the need for custom (perhaps faulty) installers and other 3rd party bullshit, and grouping files together (subsequently giving room for superior cracks and underground releases, which is odd but true).

            You don’t need disks, CD keys, and many of the games will work in the offline mode. Although I can see where you’re coming from, I have sincere doubts they will ever change their DRM policy, because that would just make people buy from the devs directly. Valve is reknowned for taking care of its community and customers, and a great deal of transparency involving decions over user privacy and user ownership, otherwise Steam platform wouldn’t become so popular.

          • Emeraude says:

            None of the things you mentioned I find in any way desirable. Making steam needless bloatware to me.

            I just want to buy my game, and be able to play it and part with my possession whenever I feel like it. I wouldn’t even mind Steam if not for Steamworks – to each his own, enjoy it, let me ignore it.

            As things stand, Valve is the worse offender among the DRM manufacturers right now.

          • El_Emmental says:

            “I just want to buy my game, and be able to play it and part with my possession whenever I feel like it.” You’re from the past then… kids these days want to ‘share’ and play everything online, you’ve became part of a minority, congratulation and welcome aboard ! :D

          • Emeraude says:

            Damn I so love that smug, self–congratulating “we are the future, deal with it” posture.

            You’re making it sound like my wants and those of that supposed new majority are mutually exclusive… which is utter bullshit. There is *nothing* that demands the services imparted by Steam should make its DRM mandatory. Everyone *could* be satisfied.

  4. PC-GAMER-4LIFE says:

    Square Enix is going the same way as THQ. Tomb Raider is their only hope of staying afloat its quite ridiculous that its taken them 5 years to get this next Tomb Raider title out when they cut the games down so much from the Core Design classics you could easily crank them out every year like COD/NFS/Assassins Creed etc etc.

    • Cytrom says:

      Choosing the EA / Activision way, and mass producing terrible sequels with flashy graphics, heavy microtransactions, dlcs and subscribtion fees combined with agressive marketing would be more profitable indeed, but without theese few companies still taking risks, and going for quality instead of quantity we wouldn’t have any “AAA” games anymore that are actually good.
      (While I like indie games for what they are, a game that was put together by a well organised, large group of top talent, and every aspect of it has high quality, can be so much more than something put together by a bunch of amateurs, or even professionals, but with low budgets, time constraints or other compromises can ever hope to achieve. Unfortunately indie game developement will never really be able to replace AAA game developement, without completely defying its definition.)

      Even if it ultimately leads to square’s demise, I’m glad that at least they are trying to produce good games, too bad the brainwashed consumer monkeys who make up most of gamerkind are ruining it for us all, by paying for shit and rewarding terrible customer treatment with loyalty, instead of rewarding true quality.

    • woodsey says:

      It’s hub-based, which would most likely make it more complex to create than the old ones.

  5. h4mst4h says:

    Didn’t Square Enix recently decide to publish heroes and generals?

    • MrLebanon says:

      That they did, I just got an email from the Heroes and Generals team about this

  6. Barnox says:

    “You don’t have to have consulted for them to recognise they’ve got a bunch of strong titles on their lists.”

    Oh you.

    • Dinger says:

      Now, you see, this is thebproblem with games journalism. Say nothing, and we can say “musta been all those consulting fees”, and let everyone pile on with indignation at the games journos getting filthy rich off of payola and real jade Tomb Raider statuettes. Instead one lame-ass bit of snark and all the fun is gone. Heck, half the audience is off bashing the sites that gave Hale 4 a 9.8, and the other half is trashing Eurogamer for giving it an 8. Everyone’s a critic, and most people are Djs. We don’t expect more, but we do appreciate it.

      • sinister agent says:

        I liked the part where John said a funny.

        • Phantoon says:

          I liked where we analyzed every part of it because the discussion, in general, is dead. We should still be talking about it, but we are not.

      • syndrome says:

        “Everyone’s a critic, and most people are DJs.”

        TRUE FUCKIN DAT
        even god is a dj these day, and his critique is, well, wrath
        but I’d give him a weak 7 for all he’s done

        now if you excuse me, there is a table to turn, and a face to poker

    • benkc says:

      Made me chuckle.

  7. Zelius says:

    Square Enix has one major problem: their Japanese division needs to embrace Steam, like their international division already has. They’ve got a massive backlog of RPG titles that could be re-released on Steam, and have already been ported for multiple other systems. And then they need to get rid of their console-exclusive stance for future RPGs. Also, why they exclusively chose their own archaic digital service for their only PC (re-)release recently is beyond me.

    There is money to be made here, yet they’re too stubborn to realise it.

    • aliksy says:

      Didn’t they rerelease final fantasy 7 but not on steam? If they put out a FF-classics on Steam I would probably pick it up. Well, ok, only if it’s as good as an emulator. I need frame skip and save state, but if hobbyists can do it I’m sure square can.

    • Emeraude says:

      Why only Steam ? Let them embrace digital distribution, including but not limited to it, preferably with non DRM versions offered. Though with Wada’s take on the industry, I don’t think we’ll see those any time soon.

    • Zelius says:

      @aliksy

      Yeah, that was their recent re-release I mentioned, which they’ve made exclusive to their own digital store, for reasons I can’t fathom.

      @Emeraude

      You are absolutely right. I just mentioned Steam because that would likely be the most profitable distributor, but they should indeed spread out to as many distributors as they can.

  8. thelongshot says:

    It probably was all spent on that money pit that is FF Verses XIII.

  9. Misekato says:

    Just a heads up, on a quick look that 42mill loss in pounds you have is based on the consolidated results, which includes their merchandising, publishing, and what not (which have suffered their own losses). Based solely on their digital entertainment sector, their loss was 2,088 mill yen, aka 16.2m pounds. Still a loss, but not as bad. There sales in the sector actually increased, but not by alot, and I couldn’t find their development cost or advertising for digital entertainment separately.

    Their estimate of sales around 475m pounds is actually not a bad estimate, given that this period (6 months), they achieved sales of 474.88m pounds( 61,055m yen).

  10. Moraven says:

    The few long development times for Final Fantasy games has taken a toll.

    FF14 had a crap launch, turned to free, and basically is being remade. FF11 has been their most profitable FF game, which is why they wanted to update it with FF14. But they have failed pretty hard so far.

    If they remade FF7 it would sell.

    And…we need Kingdom Hearts: Mickey Jedi.

    • Phantoon says:

      They… did.

      In fact, they remade it, for the third time a couple months ago. It’s out. It’s a thing.

    • Phantoon says:

      Well, they want to make movies, not games. It’s pretty obvious.

      • Emeraude says:

        Some of them do.

        I’ve lost most hopes for Kitase a long time ago. That being said, they still have people like Kawazu (I’ll concede his games are an acquired taste, but they certainly *are* games) and the remnants of Quest, among other talented people.

        My take on Square-Enix’s troubles is management not being up to the task of facing the growth the company in particular, and the industry in general has known. The transition seems to be hard on them.

      • Wedge says:

        Except they did try that… and we all know how that turned out.

    • Baines says:

      FF14 didn’t just have a crap launch. It was pretty much crap. The status of the game was a running joke for months on some sites. Sankaku Complex in particular loved to post about its outsourcing, issues, repeated extensions of the “complementary” free period, plummeting numbers, and the like.

      • Emeraude says:

        Not only that but they were pretty much killing FFXI before backpedaling when FFXIV turned out to be such a fiasco, hurting one of their biggest stable income source in the process.

  11. Brun says:

    Don’t go belly-up until you’re done with Just Cause 3 please.

  12. Mr. Mister says:

    As long as they publish Just Cause 3, I’m fine

  13. Crossing says:

    Release your final fantasy stuff on PC. All the old ones, remade, and the new ones too. Instant cash.

  14. InternetBatman says:

    They republished all their old games on Nintendo’s Virtual Console, you think Steam would be easier than that.

  15. Wedge says:

    I figure this is mostly losses from their incompetent domestic operations that have been hemorrhaging cash making awful sequels and spin-offs of Final Fantasy. Their Eidos acquisitions have been releasing quality work that has all sold reasonably well I think.

  16. ZIGS says:

    On a related note, what the hell happened to Thief 4? (I refuse to spell that “other” title)

  17. pilouuuu says:

    Simple solution. Make a Final Fantasy remake and make PC versions for all your games.

  18. ocelot113 says:

    Ogre Battle 64 need a sequel. Get on it.

    • apocraphyn says:

      They don’t have the original creators of the series with them, anymore – of particular note is the lack of Yasumi Matsuno, who was the big mind behind Vagrant Story, FFXII and all the other Ivalice titles, as well as the Tactics Ogre/Ogre Battle series.

      Granted, they recently got most of the old team together to recreate the second Ogre Battle game on the PSP, which was an absolutely fantastic remake. Maybe it’s possible. I would give most of my limbs for another proper RPG headed up by Matsuno – maybe now that he’s working for Level 5, he’ll have more freedom.

      • ocelot113 says:

        I’ve never been more satisfied with a game than I was with Ogre Battle 64. I’ve been waiting for that sequel since I beat it on the N64.

  19. rockman29 says:

    Squaresoft died when they let Hironobu go. Hironobu lost them millions on Spirits Within, but he was also the future where Final Fantasy could maintain it’s supremacy among mainstream JRPGs.

    They never should have let him go, but now they are paying the price. Final Fantasy is an empty shell without it’s leader. Sale are gradually dwindling because Final Fantasy lacks any sense of wonderment or imagination. Even Nobuo and Amano are participating so little in Final Fantasy now that they are basically non-factors.

    Final Fantasy VII was the first and the last of any games I have played, especially JRPGs, where the first stage of the game is to commit a despicable act of terrorism. Without so much posery or fanfare. That’s what it was. That’s never going to happen again.

    Final Fantasy was a series for a generation I was glad to be a part of. I’m just sad it’s over. Now Square-Enix just seems destined to limp to third place finishes for the rest of it’s existence.

    P.S. I was happy to go to a Final Fantasy concert in Toronto courtesy Arnie Roth and Nobuo. It was well worth the money I spent. I just wish it contributed to the success of the Final Fantasy games I know will never happen without Nobuo and the original teams. Without him there is no dream team to make another Chrono game either.

    • Jenks says:

      “Final Fantasy VII was the first and the last of any games I have played, especially JRPGs, where the first stage of the game is to commit a despicable act of terrorism. Without so much posery or fanfare. That’s what it was. That’s never going to happen again.”

      Modern Warfare 2 No Russian level? I don’t play CoD games so I’m not sure if that was the first stage or not.

      • rockman29 says:

        I did say without posery or fanfare. Final Fantasy just let its actions speak for itself. That opening to a game is as unique and memorable as ever, because it just was… without so much flash or celebration.

        But my main point was that whatever has replaced Squaresoft will never do that again. And that is the shame.

  20. Kadayi says:

    1.5 million on a new IP isn’t terrible overall, plus Sleepy Dawgz was a fun game. I think hitting skyrim numbers was always going to be difficult, but it’s a title that generally people have warmed to.

  21. paddymaxson says:

    It’s a bit of a shame because Square/Square-Enix made loads of cash when all they did was make crp RPGs and then re-release them endlessly. Now they actually publish a bunch of brilliant franchises, some of them either with original ideas or at least interesting refinements of old ideas and they’re losing money.

    What kind of world do we live in where Deus Ex and Sleeping Dogs are making lower profits than re-releasing final fantasy 3 on every platform imaginable?

    (Edit: i realise Deus Ex probably has little impact on this as it’s a game from over a year ago).

    • Emeraude says:

      You’re making it sound like PS1 era Square wasn’t taking bets and trying to expand their catalog. They released some really ambitious and different games (Sōkaigi, Racing Lagoon…) some of them incredibly good too (Bushido Blade, Ein Hander, Tobal 2…)

  22. Subject 706 says:

    “they’re now banking on MMOs to “establish its profit base”” – Probably won’t end well…

  23. Suits says:

    That’s sad, I very much appreciate their games.