f13.net

Sounds like there's a bit of an upheaval in not just EA's camp, but also Square Enix, citing a general lack of sales and a huge deficit as the cause.


I hope I'm wrong when I fear that this might be the first step towards them turning EA/Ubisoft/etc customer hostile.

It's not the end of SE just yet, but all publishers are getting squeezed hard by escalating development costs and players waiting until titles go on sale to buy them because they've got so many other options.

I will miss our publisher overlords when they are gone.

Are you sure we can't just blame this on Final Fantasy having been a giant tumor on the neck of Squeenix for at least the past half decade?

This.  FF is what made Square what it is, and original, story deep stuffs helped Enix.  All this new age shit and the loss of those that made them great, compounded by the drive to make money the penultimate goal above and even at the cost of alp else, hurt.

They say it was "weak sales" but that's horseshit. The 3 titles they are talking about were Sleeping Dogs (1.7 million units), Hitman: Absolution (3.6 million units) and Tomb Raider (3.4 million units). I blogged about how fucked up that is. Yes, the CEO should have been fired but not for weak sales. He should have been fired out of a cannon for having games that sold that well and yet the company still lost MILLIONS.

Better idea: blame it on Square having no clue what made FF so successful after the original people behind it quit the company.

We're in a gaming bubble. The industry grew so fast it outpaced even the 3million sales these games are getting and we're in the midst of a burst.

Square Enix claimed to have shipped 6.2 million copies of Final Fantasy XIII (http://release.square-enix.com/na/2011/09/20_01.html) back in 2011, which was its last proper FF game.

The Final Fantasy XIV disaster must have cost them a fair bit and I don't know how well the spin-off to XIII, Final Fantasy XIII-2, sold (although they are making a second spin off, Lightning Returns: Final Fantasy XIII, so the first one can't have done too badly). However the core franchise is still attracting people's money.

Yeah, I'm sure FFXIV cost them quite a bit. They also announced Final Fantasy Versus XIII way back in 2006 and still don't have anything other than a couple CG trailers to show for it (the rumor now is that it's being turned into FF 15 and is the game they're going to announce for PS4).  Sleeping Dogs should have probably netted them some decent money considering they picked it up after Activision dropped it, and it was mostly done at that point.

Very true. That's why we're due for the next set of restructurings and takeovers. I wouldn't be surprised to see Activision in buyers position for certain studios because they are flush with cash flow on their statements, while other gaming companies are bleeding out.

I was about to say that this probably means S-E is going to lean more on SEE (S-E Europe), then I see the story has been updated to say the following:


There's a lot I could say about this stuff if not for NDAs and also not wanting to be a gossipy ass.

Squeenix can't go all EA / Ubisoft untill I get Kingdome Hearts 3 and it doesn't suck.  Once that happens, all bets are off however.

Yeah, they could release it in 2015 and have it tie in with the Star Wars sequels and Avengers 2  :why_so_serious:

I would much rather Squeenix get the rights to throw Sora and company into half a dozen assorted Pixar Property based Worlds (Sora in Cars?  :drill:  Sora in Toy Story or The Incredibles :awesome_for_real:), but I would settle for Sora teaming up with Ironman and Thor to kick some ass.   Couldn't possibly be any wierder then seeing Sora and co in the Pirates of the Carribean setting.

Lightsaber keyblades.

(http://2.bp.blogspot.com/_SbNMZENaBJ8/S4BOIIa7x7I/AAAAAAAAAAM/dESNMehkTWA/S660/Keyblade_Lightsabers_by_spex70.jpg)

Alright what deviantart account did that come from?

Sora/Mickey.com

This is so funny it's just sad.

http://www.siliconera.com/2013/04/08/square-enix-detail-where-their-losses-are-coming-from/

So the same 'We need 4 million sold copies to break even' managers from EA also work at SE. I hope that entire industry goes bust, but I am too pessimistic to think anything will change for the better.

That does take into account rental places and used games?

I know my buddy rents all his games, and I do recall he posted about Tomb Raider recently.

Oho ho ho, metacritic again.

I'm sure the issue with Sleeping Dog has nothing to do with it being so completely under the radar that we only heard about it when it went on steam sale and even then most of us only bought it because f13uans were saying good things. That game was one of the best in the open world genre (arguably the best), the poor sales had nothing to do with the game itself.

This is why I'm concerned about the Thief franchise, not because of the devs, they seem legit. But suits concerned with metacritic and probably only able to understand Thief as a niche of Hitman.

You won't have to hope. It's happening now. There are several companies that are already going bankrupt and haven't figured it out yet. EA is going to post a loss annually when they release their reports (they FYE 3-31-13). Last year they barely posted income and they had a gross margin of 60%. Over 98.5% of EA's gross profit went to overhead expenses (selling, general, admin and R&D). Do you realize how financially bananas that is?

Microsoft, as another example, only pays 40% of their gross proft as overhead. So compare, 40% v. 98.5%, which one is a viable business model?

Damn pirates. :mob:

Sleeping Dogs would have sold a lot better if they'd kept it named True Crime: Hong Kong; SquareEnix suddenly releasing a GTA-clone is not an automatic purchase for anyone. Even with that and other poor marketing decisions, it still came closest of the three to hitting the sales goal they wanted.

I didn't even realize it was supposed to be from that series!

You know whats hilarious? Gamersgate is running a STALKER promotion this week and here is some of the tagline

(Yes this is talking about a games download service that is not the most holy straight from the anus of God, STEAM. Please don't faint or brand your monitor when I post the link)

http://www.gamersgate.com/DD-STALKERCOP/stalker-call-of-pripyat


So, 2 million copies sold is called a runaway international success, but the same 2 million is toted as a massive failure only what, 5 years later? In the middle of an international recession? Insanity. If I had shifted 2 million copies at 50 bucks a pop I'd be ass deep in hookers and blow, not lamenting the horrible choices of gamers for having the terrible taste not to buy my product ENOUGH.

Its a bit like the massive inflation in the cost of making movies though. I remember seeing an interview with Spielberg where he said that 5 years before he made "Empire of the Sun" it would have cost maybe 5 million, but when he actually made it it cost 35 million. Its gotten worse since. Its that ludicrous cost spiral that seems to have infected the gaming industry as well, only the gaming industry does not have the market penetration or revenue that films have.

I guess its also a function of the modern drive for quarterly profits rather than sustainability that is killing modern business.

Creative people usually make shitty business people. It's almost, but not totally, a mutually exclusive set of skills.

While I don't disagree with that (having been a creative who's lack of business skills put me out of a career in music); it seems that business people also make shitty business people.

I submit the final sentence of Sir T's last post; and add that people running companies seem to be increasingly about how they can cash out rather than building a strong business that puts out a good product at a reasonable price for a decent profit. But mostly the stock market's ravenous maw and utter disconnect.

Unfortunately, we are talking about publishers who are actually business people and not creative people at all. The devs might be going bankrupt because they make shitty business people, but the business people in the publisher side at Square and EA seem to be complete and utter fucking tits.

It's an overgeneralization that top people are in the pump and dump business in the market. The problem is that's more rampant in the tech sector, which is in many cases the sector many here have a large experience in through working or investing. The reason is that people who are actually good at managing businesses get hired by real firms with actual structures, services, and products, not intangible properties subject to entertainment whims.

I think you'll see in product based firms unrelated to intangible assets, the idea of creating fake bubbles for the stockholders is not a concern. Companies like 3M, Coke, Colgate, Dr Pepper, Family Dollar, Ford, General Mills, Hormel, Mattel, Pepsi, Sherwin Williams, UPS, Walmart, and Waste Management.

Well first it was just a crime game set in Hong Kong, then Activision (who was the publisher at the time) decided to make it a reboot of the True Crime series. Dev time/costs were too much though, so Activision dropped it; Square Enix bought the game but not the rights to TC so they had to rename it.

This just in, different games cost different amounts of money to produce.

This just in, they aren't losing money on the operational costs to create the games, smartass. It's an overhead issue, and it's ridiculous.

Does that overhead include marketing?

Yes.

Judging from the admission of failure in estimating sales sounds like they need to dump the marketing department. Isn't that one of marketing's primary functions; estimating sales projections?

It actually seems like Squeenix has a bloated SGA salary structure. Almost a quarter of their revenues go to overhead salaries, benefits, and "other". In a business where you actually develop and product a product, it seems ridiculous you spend that much on overhead with their sales structure.

I blame WoW. WoW was an anomaly. But it caused executives massive money boners.

And you know how guys are with money boners -- they stop thinking rationally and begin taking giant, stupid risks. They begin to believe shit like "bare minimum, we will move 4 million copies" or "We will have a million users at launch, and it we don't need to load test the servers". Because money boners, like real boners, bring the stupid out.

And executives and marketing people are cocky optimists by nature. They are Type A people who firmly believe they are always in charge, always the smartest guy in the room, and that they can never, ever fail. So add money boners, and you get triple distilled stupid.

Now, sure, triple-A games cost a shit-ton to make which means you need to sell a lot more copies. But let's face it -- they only get a shit-ton budget because of money boners out the back end.

it all boils down to unrealistic expectations.

I mean, yeah, there's probably a whole lot of business-side stuff that can be done better -- but in the end, it's money boners. These people see World of Warcraft or even Angry Birds, and believe that's the new normal. And so they develop thinking that's something that can realistically be attained, as opposed to being a solid game that hit fluke circumstances and went crazy.

Which is, you know, pretty much WoW and Angry Birds and any other top-selling game. It's a solid, fun game -- that due to one unusual circumstance or crazy coincidence or lucky timing managed to hit some wave and get catapulted from 'solid seller' to 'WTF'.

oh my. I just spent 5 minutes snickering and imagining these genius-managers taking over a drug cartel and...running it into the ground...

'We need to stop selling crack...we are losing money on it!"   :grin: :uhrr: :grin:

This just in: I know roughly a million times more about the particulars of this subject than you or anyone else in this thread. It's not an overhead issue.

Tomb Raider cost a lot more than Stalker to produce. That's not taking overhead into account, just the cost of developing the game. What is a success in sales for Stalker is not a success in sales for Tomb Raider.

The idea that 2 million in sales should be a hit for any game is ridiculous. For some games 2 million in sales is success beyond wildest expectations, for some games 2 million in sales in abject failure. This is a familiar concept - for a comedy spoof that cost 8 million to make 30 million at the BO is a good hit, not so much for Avatar. 2 million in sales wouldn't even cover the marketing costs of some games.


A lot of things that can get stuck in "other" are not really overhead in the sense that you are thinking, and a lot of salaries not tied to particular games can be tied to things like aborted projects.

The idea that 2 million in sales should be a failure is ridiculous.

If that happens, it means you completely fucked up your projections, fucked up your budgets, and in general have no idea how run a business.

Think about this, you have $100-120 million coming in for revenue, and your operations are so bloated that your break even point on producing entertainment can't consider that enough? We're not talking about a span of 20 years and reforming expectations. We're talking about a game comparison in the market 5 years ago.

If you spent enough on development and marketing such that 2 million in sales doesn't cover those costs 2 million in sales is obviously a failure.

There's no magic absolute sales number that is a success in any context. Why is it that 2 million in sales should be enough for anyone? Because that number sounds big and impressive?

The Avengers made 1.5 billion at the global box office. That's 150 million tickets sold. 150 is a lot more than 2, and I'm pretty sure 2 would be considered a massive failure in that context.


Why would you compare Stalker to Tomb Raider? Would you compare The Avengers to Burt Wonderstone? 2 million in sales is great for Stalker, would be pretty good for Sleeping Dogs, would be poor for Tomb Raider and awful for Madden or COD. Games that cost more to make need to sell more - what about this is hard to grasp?

Also 2 million in sales is not 100-120 million in revenue. Not that the number really matters as what matters is the cost of development and marketing relative to that number, but if you think 2 million copies sold amounts to $120 million in revenue you have a fundamental misunderstanding of how video game sales works.

If you spent enough on development and marketing such that 2 million in sales doesn't cover those costs 2 million in sales is obviously a failure.

There's no magic absolute sales number that is a success in any context. Why is it that 2 million in sales should be enough for anyone? Because that number sounds big and impressive?

The Avengers made 1.5 billion at the global box office. That's 150 million tickets sold. 150 is a lot more than 2, and I'm pretty sure 2 would be considered a massive failure in that context.
[/quote]

His point is that if you look at the games market and spend too much in developing a game that 2 million in sales doesn't even break even, then you ran your development studio like shit and can't run a business properly.

Most games (especially single player games) don't sell that much more than 2-3 million, the ones that do are outliers, and budgeting for an outlier is terrible business.

5m in sales puts you on a list of best selling games of all time.

If you can't make 2m work, your margin for error is pretty damn slim, and that's terrible business.

Only if its 5M exclusively on the current generation of shit consoles. Across all platforms (assuming a multiplatform game), 5M doesn't even tick the box required to hit an actual list like that.

It's a $16B a year industry, so the pie can get divided up however many ways. Let's say 400 games got released across all platforms in 2012.

If they all sold the same, that would mean the average was $40M in sales. So if a product can't make 3x the average in the market and make money? That's a cause for concern.

The games did not sell as well as expected. Either expectations were too high or the games were poorly promoted, or both. That SE screwed up is a total non-point - no shit. That's why this thread exists at all.

The statement I took issue with was this:


2 million copies sold is a runaway success for Stalker and a failure for other games because those other games are not Stalker and don't have Stalker's budget. There's no magic sales number that is great for any game. 2 million sales of the next COD would cause a total re-org at Activision. 2 million sales of the next WayForward game would get someone a big promotion.

2 million in sales is still a big success for Stalker-style games. Just not for "AAA" titles.

If using ATVI as an example, they could have sold ~24m fewer units last year and still broken even. (They made almost $1.5B in profits)

That's the point, they have a realistic handle on their model. Their margins make sense.

I understand your point that for every product 2m wouldn't make money. That to me says if you set your sights on targets that high, and you fell so far off target that you hit a failure point at $100M in revenue, then something in your business was horribly wrong.

The blurb didn't say "Its sold 2 million which with our development costs and the cut taken by the Bosses Mum..." It said "IT SOLD 2 MILLION BEAT THAT BIATCH!"

And seriously what were the huuuuge development costs on Tomb Raider going to anyway, making sure her hair swishes right?

:grin:

TRESSFX HAIR: A NEW FRONTIER OF REALISM IN PC GAMING (http://blogs.amd.com/play/tressfx/)

That's absolutely hilarious.  :awesome_for_real:

Activision is the most successful publisher right now, mostly because through luck or savvy they've had a string of mega-hits. Anyone's margins are going to look good under those conditions. I'm not sure what that says about their model - their model is to bank on mega-hits, which is that same model every publisher uses these days. The difference is they actually produce those mega-hits regularly. There's very little difference in high-level strategy - it's like the difference between Disney releasing The Avengers and Universal releasing Battleship.


Most AAA games can reasonably expect to sell more than 2 million copies. Tomb Raider and Hitman both sold substantially more than that. Imagine if Skylanders and COD both made $100M in revenue - heads would roll and that 1.5B in profit would be wiped out. If you capped all of Activision's releases at $100M in revenue Activision would be failing as badly as anyone else.

The strength of Activision is not that they would still do fine if they made at most $100M a game, the strength of Activision is that some of their games make MUCH MORE than that. At $100M a game Activision would be fucked. That wouldn't even pay for the marketing of COD.

Let me say that again: $100M in sales of COD would not pay for the marketing of COD let alone the cost of developing the game or any company overhead.

Edit: Most publishers have the same strategy, the difference with Activision is execution. Sales are very top heavy and everyone wants to be in the 1%. If you want an example of a publisher with a different strategy you want to look at someone like Atlus.

The simple fact is this: If 2m was a failure for any game, you probably budgeted for that game to sell about 5-6m copies. So, in essence that company was so far off target they missed their sales projections by 60%. They totally fucked up their sales projections, and that killed their bottom line. That means the business did a bad job.

If a company knows they are going to sell 2m units, and they still can't turn a profit on that known projection? That means their cost structure is wildly out of control and mismanaged. That means the business did a bad job.

EITHER WAY, the business did a bad job because they couldn't make money on 2m in sales.

I was kidding. Motheruck.  :ye_gods:

It's especially bad because Square Enix released a chart of sales for each game in the Tomb Raider franchise a few years back and the last one to sell 5 million was the fourth game back in '99.  Since then the top seller was 3.6 million with most of them closer to 2.

Sidenote: since STALKER is being held up as the example of sales success, it should also be remembered that it emerged from development hell  (http://en.wikipedia.org/wiki/S.T.A.L.K.E.R.:_Shadow_of_Chernobyl#Development_delay.2C_leak_and_release)and was probably only successful because the development costs were lowered by its Ukranian-based studio. Who were shut down in 2011 (http://www.joystiq.com/2011/12/09/rumor-s-t-a-l-k-e-r-developer-gsc-shut-down/).

Also: published by THQ, who were likely responsible for the closure of GSC Game World (STALKER's studio) during one of its purges.

So 2m in sales? Great. At what unit price and what was the development cost?

I'm pretty sure it didn't cost $60 in '99 and the ecomony was a lot better too so they really should have adjusted their numbers a bit.  Plus is that 5mil all time or in the first month? Also:Gamestop, there are a lot of people in the "wait and see" camp for tomb raider and that means a lot of secondary sales the company doesn't get a piece of.

I can still remember a time not so long ago when the 800.000 copies a AAA PC title sold was considered a runaway success. Now people can't even manage to turn a profit on 2 M sales.

While I'm no tgr, I do boggle at the shit companies will throw at pc gamers while we are still perfectly willing to let them recoup 'secondary' profits via stuff like steam sales while at the same time there's a massive chain of stores that only exists due to secondary console sales. Someone should run a study of actual monetary impacts of piracy vs used sales. Of course, we only have numbers for used sales because piracy is mostly a wild fictional guess, monetarily speaking (is my steam sale purchase of Bioshock:Infinite a lost sale? Does my ceiling of $10 mean they lost $50 in profit?).

The problem is gamestop only became a real factor in the current 360/PS3 age when new games started hitting a price cieling people stopped being comfortable with so there hasn't been a reaction, until now. I can guarantee you these companies have run internal studies and know the numbers.  What comes next from sony and microsoft is going to be a direct reaction to used sales, no matter how they do it be it online only or preventing re-sale or something else entirely.

This. Doing back of envelope math and assuming the publisher gives up 60% of the $60 suggested retail to distributors/retailers (which they shouldn't and if they do, they deserve to go out of business), that's still $48 million in revenue. If you are producing games that do not have a subscription fee attached and expect more than those sales numbers, well, you better not be spending more than $48 million on the damn budget because then you are a fucking idiot who deserves to go out of business.

Video games just do not sell 2 million copies every day. 1 million copies ought to be considered a success and if your budgets are such that you can't make money with 1 million in sales, you are doing it wrong with a fundamental misunderstanding of the video game market.

Runic Games has sold at least a million a pop of two different games for 1/3rd of the price of a AAA title and they seem fairly happy with it.

Which is why the next gen of the X-box will have the "wonderful" ALWAYS ON "functionality." Which we have seen work so well every time its been tried.

Well, assuming you believe the rumor 100% (which I do not).

Publishers all hate Gamestop. The problem is that retailers like Wal-Mart have very limited shelf space, carry relatively few titles and do very little promotion. This is part of the reason many publishers are adopting the strategy of releasing a smaller number of higher-profile games, because that model works better with big-box retailers.


I'm not sure that's it. The price of games has remained relatively constant adjusted for inflation, and the top end has come down from the days of stuff like Neo Geo and Phantasy Star 4.

One thing that is interesting, and I'm not sure why this has happened or the order of events, is that the publisher cut of retail copies has gone up over time and everyone else's cut has gone down. The retailer, the platform holder, the shipping companies, etc, all take a smaller slice of the pie than they used to. So the margin for retailers has gotten smaller, which incentivizes used sales.

The problem with inflation in the last 15 years is that people aren't generally making any more money now than they were previously. The whole 1% thing kinda throws off the curve, especially where video game consumers are concerned.