SQUARE ENIX - Financial Speculation

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SQUARE ENIX - Financial speculation
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By Blazed1979 2013-06-29 02:45:44
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SE Q1 2013 Report - source


2013 - Market Q1 Performance

Their financial report for Q1 2013 is all doom and gloom, but the sales targets are even more interesting since we know they are already in the state of projected losses, and unlike the Financial report, demonstrates how close they are to panic. (Also Namco is taking SE to court for backing out of contractual obligations and commitments with Bandai)

2013 Sales Targets = 75,000,000 sales total!!!!
That is across all 2013 releases of course. But still, to have those kind of sale targets and still be projecting losses for the fiscal year...what does break even look like? 100,000,000 sales?!

Back to their financial report, they expected to make a huge amount of money off of tomb raider, sleeping dogs, and hitman absolution. They expected Tomb Raider alone to make USD $ 300,000,000 in sales to BREAK EVEN!

1. Q1 Projected Losses - 3.5 Billion Yen
- Actual Losses - 13.5 Billion Yen (USD $13,107,5100)

2. Q2 Projected Losses - 7 Billion Yen.
- Actual Losses - due July 9th 2013

3. Tomb Raider Reboot
- Game development + Marketing Costs: $USD 300,000,000
- Expected sales: 6-7 Million within first Month
- Expected Annual sales (2013): 11 Million
- Actual Sales as of June 13th: 4.1 Million
Sales value in $:360,000,000
Net: 120,000,000 (only a third of the sales is SE's revenue)
Loss: 180,000,000 as of June 2013!

(to put the above in contrast, compare to major recent upsets in company executive leadership due to below)

4. Sleeping Dogs & Hitman Absolution reason for EX-CEO's resignation/termination

- Sleeping dogs expected sales: 3.5 Million (minimum)
- Sleeping dogs actual sales: 1.7 Million


5. FFXIV & FFXV

Square ENIX has spent more than 600,000,000 on developing FFXIII or now known as FFXV.

FFXIV 1.0 cost the company a whopping 400,000,000 USD in development and marketing costs. It is said they went over budget in 2011 to increase marketing costs due to dismal subscription and sales rates. So that 400,000,000 USD isn't the real number. Probably more like 450,000,000 USD.

I don't have any info on how much they've pumped into FFXIV 2.0 but we know its hidden somewhere in their financial reports game development section.


FFXI
As of end of Q1 2013, FFXI revenue had decreased 9%.


In short:
If FFXIV succeeds but FFXV sucks, they're doomed.
If FFXV succeeds but FFXIV sucks, they're doomed.
Unless both titles perform as well as SE projects, they're doomed.
They actually mention this in their report:
"I believe that this situation is not a one‐time event for the
fiscal year ended March 2013, but is a structural issue within
the packaged product sales model. As a result, I believe itis
difficult to guarantee an appropriate return on our
investments within the revenue model of purely packaged
software.
It is important to consider how to change business models in
light of rigidity from the perspective of pricing, and I believe
that the transformation to online titles and the diversification
of profit opportunities is the key"


I guess that is a nice thing to read for FFXI players, only a few years too late. If SE had realized this earlier and pumped more development into its flagship online title... who knows where they would be now..

Instead they milked the hell out of FFVII with spin offs and spin offs of spin offs and are now repeating the same mistake with a much less valued franchise - FFXIII- lightning.


Given SE's track record of not being able to predict f_ck all, all bets are on SE not surviving 2013.

That might actually be good news for FF fans. There are a few companies out there with large enough funds to buy Square Soft.

My prediction:
In 2014 SE will sell off its Square Soft assets and divisions to consolidate its liabilities. FF franchise is too big to loose, SE isn't.


EDIT: Have to get it in here - FFXIII-VERSUS
This is the first game in history to be announced as flagship title for a new generation console (PS3) and take so long to develop that it is now a flagship title for the next gen console, PS4. just ridiculous.
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By Bismarck.Aselin 2013-06-29 03:17:34
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Also, they lost $134 million USD last fiscal year, with layoffs in both their North America and European offices.

http://www.joystiq.com/2013/05/13/square-enix-posts-134m-fiscal-net-loss-projects-profit-for-com/

However, SE is projecting they will be profitable for the following year, hopefully. FFXIV has to succeed in order for that MMO to continue.

I'm no economics expert, but having spent so much on two, three franchises, having mostly spin-offs, and reporting a fiscal loss doesn't bold well in my opinion with the company. At least one or two of the franchises (FFXV, Kingdowm Hearts III, or FFXIV) needs to succeed in the following fiscal year.
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By Blazed1979 2013-06-29 03:24:23
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Bismarck.Aselin said: »
Also, they lost $134 million USD last fiscal year, with layoffs in both their North America and European offices.

http://www.joystiq.com/2013/05/13/square-enix-posts-134m-fiscal-net-loss-projects-profit-for-com/

However, SE is projecting they will be profitable for the following year, hopefully. FFXIV has to succeed in order for that MMO to continue.

I'm no economics expert, but having spent so much on two, three franchises, having mostly spin-offs, and reporting a fiscal loss doesn't bold well in my opinion with the company. At least one or two of the franchises (FFXV, Kingdowm Hearts III, or FFXIV) needs to succeed in the following fiscal year.

Completely forgot about their overseas major operations.
They're even more exposed as a result.
I'm not an expert in finance either, but I am in Marketing. The fact that their strategy with FFXIV has moved from Marketing to PR to me demonstrates how tight their budget is.

PR is great for building loyalty and customer retention. But it isn't nearly as effective as marketing in gaining new customers or penetrating new markets and growing or increasing the size of your target market.
The focus on PR means they are in survival mode or at least a strong indicator to such.
By volkom 2013-06-29 03:42:10
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I wouldn't be worried about it. SE has millions in assets that they can rely on if things go bad.
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By Bismarck.Aselin 2013-06-29 03:58:13
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Blazed1979 said: »
Bismarck.Aselin said: »
Also, they lost $134 million USD last fiscal year, with layoffs in both their North America and European offices.

http://www.joystiq.com/2013/05/13/square-enix-posts-134m-fiscal-net-loss-projects-profit-for-com/

However, SE is projecting they will be profitable for the following year, hopefully. FFXIV has to succeed in order for that MMO to continue.

I'm no economics expert, but having spent so much on two, three franchises, having mostly spin-offs, and reporting a fiscal loss doesn't bold well in my opinion with the company. At least one or two of the franchises (FFXV, Kingdowm Hearts III, or FFXIV) needs to succeed in the following fiscal year.

Completely forgot about their overseas major operations.
They're even more exposed as a result.
I'm not an expert in finance either, but I am in Marketing. The fact that their strategy with FFXIV has moved from Marketing to PR to me demonstrates how tight their budget is.

PR is great for building loyalty and customer retention. But it isn't nearly as effective as marketing in gaining new customers or penetrating new markets and growing or increasing the size of your target market.
The focus on PR means they are in survival mode or at least a strong indicator to such.

PR is only half the equation, they need marketing. But, if they do not have the budget for that, then there's no way they'll be able to meet any projections through new customers.

Look at how much RIFT Online banner ads we have on FFXIAH. And, the World of Warcraft ads on TV and on websites. FFXI? FFXIV? Mostly Gil selling websites that are advertised online. Even a niche MMO such as EVE Online gets ad banners online.

It also seems, to me, that they'll be promoting heavily FFXV in the coming year given PS4 and Xbox One are being released this Holiday season. It would help FFXIV a lot if they push more marketing for that or they'll only get a core set of players that have been in both the ARR beta tests, word-of-mouth, and former/current FFXI players. As you mentioned above, they've spent so much on FFXIV's development in v1.0. Who knows how much more they've spent for v2.0 ARR... As I said in a previous post, they need to meet projected number of players in the first two quarters at least for FFXIV's re-release starting the end of August to begin paying for server costs and developers that worked on it. My estimates doesn't take into account anything else they spent for it's complete re-haul.

If they spent $400 mil. for v1.0 and maybe $100 mil for v2.0 to redevelop it, and if they only get 500,000 players steady, they should be able to pay off the redevelopment costs in around a year to a year and half after launch. That's assuming at $12.99 per month per account.

And, FFXV looks like it's going to separate itself from other FF games given that it's more action-oriented like Kingdom Hearts. To a lot of diehard or traditional FF fans, that may not sit well with them. However, to a lot of North American players who aren't fond of JRPGs may be more attracted to it, given there is probably a larger market for action-oriented games here than in Japan. But, it's too early to tell. I know that a lot of JRPGs aren't that popular here given we don't even get some of the rarer or exclusive releases from Japan. But with games like Witcher and Elder Scrolls and the like get more attention and garner more sales here in the US, FFXV may succeed.

As for Kingdom Hearts III, that's a long way to go... I don't even want to speculate on that. That's like trying to wait for Half-Life 3 right now.
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By volkom 2013-06-29 04:36:09
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not sure if you can throw jrpgs and open world rpgs into the same category...they'll probably advertise more around fall. So the people who aren't aware of upcoming games will be prepared for holiday season instead of advertising like 6 months out...
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By Sylph.Mirvana 2013-06-29 06:31:46
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Step 1. Reign in the budgets. (And maybe some salaries if needed.)

Step 2. Bring your sales expectations down from "Everything will sell CoD-numbers of copies" to something reasonable like say 1.5m.

Step 3. Don't let your dev teams fleece you out of money by releasing half-assed work like 1.0.

Step 4. Stop dumping millions of dollars into pet projects like sequels to games that people thought sucked. (Seriously just abandon XIII already...)

Step 5. Don't develop predatory, PR-nightmare non-game cash-grabs like All The Bravest.

Step 6. Cut down on the number of ongoing projects.

Step 7. Advertise your games online somewhere besides your own damn websites.

Step 8. ???

Step 9. Profit.
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By Cerberus.Tidis 2013-06-29 07:12:05
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Sylph.Mirvana said: »
Step 4. Stop dumping millions of dollars into pet projects like sequels to games that people thought sucked. (Seriously just abandon XIII already...)
Except I liked XIII-2 and pretty sure quite a lot of other people did, OK XIII wasn't great but they really improved on it in the sequel.
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By Starrman 2013-06-29 08:22:58
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It would be ironic if Final Fantasy is the reason it goes under this time around.
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By Quiznor 2013-06-29 08:33:05
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volkom said: »
I wouldn't be worried about it. SE has millions in assets that they can rely on if things go bad.



They always said they were saving it for the last ditch effort. Final Fantasy 1 style
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By Leviathan.Draylo 2013-06-29 08:46:10
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Cue the armchair CEO's.
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By Lakshmi.Cledant 2013-06-29 09:01:14
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i wonder if they already reported microtrans sales revenues, such as google play/ app store games like ff series .ect
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By Lakshmi.Sparthosx 2013-06-29 09:34:29
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400 million dollars to develop FFXIV 1.0?! Are the servers on Mars?

It cost 200m to develop SWTOR.
60-100m to develop WoW.
FFXI cost 24m to develop. That's the number being thrown around but it seems awfully low.

Yikes, the costs for XIV must run over half a billion USD. They best get working on that cash shop ASAP.
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By Bismarck.Snprphnx 2013-06-29 09:34:59
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Quiznor said: »
volkom said: »
I wouldn't be worried about it. SE has millions in assets that they can rely on if things go bad.



They always said they were saving it for the last ditch effort. Final Fantasy 1 style

Why, when they are remaking FFX/FFX-2 in HD!!!
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By angrykitty 2013-06-29 09:44:24
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I feel bad for all those workers (general laborers, programmers) at SE. Obviously this news is not good to them, there's probably a lot of pressure on them from the higher up. Not to mention... any corporation that takes a dump, the people up top walk away with billions while everyone else at the bottom struggles to make ends meet. :/
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By Cerberus.Eugene 2013-06-29 09:47:15
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the ffx and x-2 remaster will bring in some cash
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By Bismarck.Snprphnx 2013-06-29 09:48:25
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Cerberus.Eugene said: »
the ffx and x-2 remaster will bring in some cash

Only because FFX was good. I doubt many people will buy it for X-2
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By Lakshmi.Sparthosx 2013-06-29 09:56:47
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SE: Endless remakes and retweaks abound!

Seriously SE, you have tons of dead IPs. Things like Vagrant Story, Chrono and Tactics Ogre remain on ice for w/e reason. Innovate. Create sequels. Give people what they want while trying to appeal to the new generation of gamers.

Cranking out FFIV for the umpteenth time aint gonna cut it.
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By fonewear 2013-06-29 10:01:37
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It is the same thing with the film industry not only do we have to have tons of sequels but they have to be in 3D also. Stop making damn sequels and come up with original ideas for once.
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By Bismarck.Faelar 2013-06-29 10:18:21
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Bismarck.Snprphnx said: »
Cerberus.Eugene said: »
the ffx and x-2 remaster will bring in some cash

Only because FFX was good. I doubt many people will buy it for X-2

I am! I have FFX but not X-2! I actually enjoyed the game when I had it before.
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By Lakshmi.Cledant 2013-06-29 10:23:04
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where the op gets all this information? it's hard to believe that tomb raider cost is 300,000,000. That's 2 times the budget of elder scrolls: skyrim, it had a lot of reputable artist doing the voice acting and way more stuff than tomb/ almost the same amount as ff14
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By Ragnarok.Alahra 2013-06-29 10:26:00
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Lakshmi.Cledant said: »
where the op gets all this information? it's hard to believe that tomb raider cost is 300,000,000. That's 2 times the budget of elder scrolls: skyrim, it had a lot of reputable artist doing the voice acting and way more stuff than tomb

From what I've understood, part of SE's biggest problem is mismanagement and inefficiency at this point, so I'm not surprised to find that they'd be wasting money on development costs.
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By Cerberus.Senkyuutai 2013-06-29 10:29:37
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FFXV failing is "fine", as in, it has a much bigger margin of error than FFXIV does.

FFXIV is really the key here, thanks to a specific country.
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By Lakshmi.Cledant 2013-06-29 10:38:18
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well.. but still.. 300millions is hard to believe, some websites states that tombraider was actually 100m/cost
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By Quetzalcoatl.Gencay 2013-06-29 10:41:49
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I agree with the movies part that they make to many remakes to. It's one of the reason I won't go see some of the new titles coming out like
Superman -.-

on to games

Heck I still think if they released FF7 for PS3 or now PS4 they could make a lot of money. I mean come on who doesn’t wanna see Tifa on PS3/4?
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By Kalila 2013-06-29 10:45:39
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Quetzalcoatl.Gencay said: »
I mean come on who doesn’t wanna see Tifa on PS3/4?
I don't, I didn't like her as a character at all.
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By Ragnarok.Harpunnik 2013-06-29 10:49:05
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I wouldn't worry about this one bit. No big company seems to be ever doomed anymore. Push the reset button and file bankruptcy.
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By Quetzalcoatl.Katashuro 2013-06-29 10:58:29
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Kalila said: »
Quetzalcoatl.Gencay said: »
I mean come on who doesn’t wanna see Tifa on PS3/4?
I don't, I didn't like her as a character at all.

Because it's all about her personality.
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By Quiznor 2013-06-29 10:59:20
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Kalila said: »
Quetzalcoatl.Gencay said: »
I mean come on who doesn’t wanna see Tifa on PS3/4?
I don't, I didn't like her as a character at all.

I think you missed the joke :x
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By Valefor.Sehachan 2013-06-29 11:00:20
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Kalila said: »
Quetzalcoatl.Gencay said: »
I mean come on who doesn’t wanna see Tifa on PS3/4?
I don't, I didn't like her as a character at all.
I like her...even though she's the example of a woman doormat of an *** who stomps on her heart.
But she's cool!
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