As Square Enix posts a swing to significant losses for the last fiscal year, the company has blamed the "increasingly competitive and oligopolistic" console game markets in North America and Europe, saying that the space is too highly-influenced by a small number of companies.
Square Enix says its consumer game releases for the last fiscal year greatly underperformed. Sleeping Dogs managed sales of 1.75 million worldwide, Tomb Raider sold 3.4 million copies, and Hitman: Absolution sold 3.6 million units.
In comparison, its smartphone and browser games found success in both the Japanese and the Korean market. Social titles like Sengoku Ixa, Kaku-San-Sei Million Arthur and Final Fantasy Brigade are continously contributing profits, said the company.
It wasn't just Square Enix's console games business that took a nose-dive, as its arcade game machines sector also saw a notable swing to operating losses from healthy profits year-over-year.
As a result of the current restructuring efforts, Square Enix has recorded "extraordinary loss" in a bid to turn its business around, as reported previously.
For the fiscal year ended March 31, 2013, Square Enix's digital entertainment sector posted revenue of 89.5 billion yen ($880.1 million), up 24.5 percent year-over-year, and operating income of 44 million yen ($433,000), down a notable 99.7 percent year-over-year.
Overall, the company recorded revenue of 148.0 billion yen ($1.5 billion), up 15.7 percent year-over-year, and losses of 13.7 billion yen ($134.9 million), compared to profits of 6.1 billion yen ($59.6 million) year-over-year.
While I think Square Enix's assessment of the situation is sound, I don't think such trends were rapid or invisible. It seems like there was ample time and public knowledge for even amateur observers of the space to see the relevant trends and to come up with suggestions for how to adapt proactively. Adapting *reactively*, after a loss, seems to indicate either poor management, business intelligence, or a company that has become so mired in bureaucracy that it takes forever to change course. Clearly all of the major companies are having similar difficulties adapting, I'm not singling out Square here. The upside is that this makes room for new companies to fill the void created when older companies fail to meet consumer demand.
ol·i·gop·o·ly - A market condition in which sellers are so few that the actions of any one of them will materially affect price and have a measurable impact on competitors.
I think this has nothing to do with the Western Titles and everything to do with the terrible performance and lack of delivery on their Japanese developed titles. Obviously Tomb Raider and Hitman: Absolution were both profitable titles by themselves but they couldn't save the sinking Japanese development ship that is Square.
Obviously Hitman, Tomb Raider and Sleeping Dogs weren't profitable games. Square Enix made these games in particular responsible for their loss. All these games underperformed massively. With development costs high as they are today, sales for a game have to be ridiculous high to generate a profit.
Would be interesting to see what their loss amount would look like if they hadn't had 40% tax subsidy helping to keep their megalithic studio going in Montreal.
Sources:
http://www.eurogamer.net/articles/2013-04-09-square-enix-thought-t omb-raider-cou
ld-sell-nearly-double-its-3-4-million-first-month-sales
http://gamespot.com/news/tomb-raider-needs-to-sell-at-least-5m-to- be-a-success-s
ays-analyst-6406034