Square Enix replaces CEO, RIP Square Enix?

[tgr]

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.

Square Enix President and CEO Yoichi Wada is resigning, according to a recent statement from the company.

Wada will be replaced by current representative director Yosuke Matsuda, making this one of the company's first major steps toward "management reform." The decision will be subject to a resolution during the company's general meeting of shareholders this June, then later by a resolution from its board of directors.

This follows the publisher's release of consolidated results forecast which revealed its expectations of an "extraordinary loss" in the fiscal year ending March 31, 2013. Square Enix announced today its plans to begin major restructuring throughout, which is expected to result in a loss of roughly 10 billion yen (or just over $105 million) for the fiscal year ending March 31, 2013.

Polygon has contacted Square Enix and will update this post when further information is made available.

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

[UnSub]

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.

[Goreschach]

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?

[luckton]

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.

[HaemishM]

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.

[Simond]

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?

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

[Lakov_Sanite]

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.

[palmer_eldritch]

Square Enix claimed to have shipped 6.2 million copies of Final Fantasy XIII 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.

[Velorath]

Square Enix claimed to have shipped 6.2 million copies of Final Fantasy XIII 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.

[Paelos]

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.

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.

[Margalis]

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:

Square Enix has announced Phil Rogers will be nominated as a director candidate. This will be subject to resolutions held by the company's annual general meeting of shareholders in late June of this year. Rogers was previously CEO of Eidos, which was purchased by Square Enix in 2009.

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

[SurfD]

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.

[Velorath]

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 

[SurfD]

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  

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?    Sora in Toy Story or The Incredibles ), 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.

[Lakov_Sanite]

Lightsaber keyblades.

[luckton]

Lightsaber keyblades.

[Fabricated]

Alright what deviantart account did that come from?

[Lakov_Sanite]

Sora/Mickey.com

[Outlawedprod]

This is so funny it's just sad.

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

As previously reported, despite high sales, all three games sold below expectations in North America and Europe. Wada shares:

“Let’s talk about Sleeping Dogs: we were looking at selling roughly 2~2.5 million units in the EUR/NA market based on its game content, genre and Metacritic scores. In the same way, game quality and Metacritic scores led us to believe that Hitman had potential to sell 4.5~5 million units and 5~6 million units for Tomb Raider in EUR/NA and Japanese markets combined.

“Of course, we want to hedge risk in budgeting these units directly into the forecast, therefore we base the forecast on 80-90% of the total sales potential of each title. However, it is disappointing that our results fell below these marks.”

For reference, Sleeping Dogs has moved 1.75 million copies, Hitman Absolution 3.6 million and Tomb Raider 3.4 million.

Wada says that Square Enix’s revenue model is outdated and that the company’s selling capacity has been “far weaker than we ever imagined” in North America and Europe. As a result, Square Enix are incurring an extraordinary loss in an “effort to sort out items not achieving expected revenue levels, through scrapping those items and terminating production”.

[calapine]

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.

[01101010]

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.

[Sky]

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.

[Paelos]

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.

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?

[tgr]

Damn pirates.

[Rendakor]

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.

[Sky]

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

[Sir T]

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

With over 2 million copies sold, the new episode of the most internationally successful S.T.A.L.K.E.R. series seamlessly connects to the first part of the Shadow of Chernobyl

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.

[Paelos]

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

[Sky]

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.

[HaemishM]

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

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.

[Paelos]

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.

[Rendakor]

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

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.

[Margalis]

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.

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

[Paelos]

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.

[bhodi]

Does that overhead include marketing?