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Square Enix Reports "Extraordinary Loss" - President Resigns

This sparse document (Adobe Acrobat format) announces the resignation of Yoichi Wada from his post as president of Square Enix. This follows the revelation that the Japanese publisher anticipates an "extraordinary loss" in its next financial reporting noted in a statement (Adobe Acrobat format) with revised financial forecasts. VG247 summarizes the bad news from the revision, noting that this includes lowering the company's projected sales slightly, but involves a giant increase in losses, saying the company's previously projected 3.5 billion net income loss is now anticipated to be closer to 13 billion ($138 million USD). Word is the revision is due to slow sales of major console titles, a sluggish arcade market, and the addition of approximately 10 billion in restructuring efforts, saying: "In view of the rapidly changing environment of the game businesses, the Company has decided to implement major reforms and restructuring in its development policy, organizational structure, some business models, and others."

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63. Re: Square Enix Reports Mar 28, 2013, 14:40 Verno
 
Jerykk wrote on Mar 28, 2013, 05:06:
I'm pretty sure the "expected sales" figures were just that; expectations. Apparently the actual figures didn't meet those expectations. Not too surprising, considering how quickly Sleeping Dogs and Hitman dropped in price. I think Hitman went on sale for 50% off in less than a month after release.

Expecting 5m+ units out of every title isn't realistic was the point though, it almost feels like scapegoating. Those titles performed fairly well all things considered, this is a transitional period for consoles.

They could probably avoid huge losses by buckling down on their projects on the JPN side of the company, a few are years in length with no end in sight. Shutting down FF14 entirely is not a bad idea either, it's just throwing good money after bad. Sub MMOs are done unless you have something no one else does.
 
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62. Re: Square Enix Reports Mar 28, 2013, 05:06 Jerykk
 
Verno wrote on Mar 27, 2013, 12:53:
From their financial presentation:

http://i.imgur.com/KOYYb2j.jpg

What a load of shit. Weak sales in NA and EU? Sounds like they're just scapegoating NA for the issues the JPN side of the company has been putting the entire company through. FFXIII Versus is a bottomless money pit. FF14 relaunch will bomb spectacularly, sub mmos are mostly dead and you can't relaunch a failed MMO and expect huge success. I would be amazed if it moved half as many units as the first release. Tomb Raider and Hitman performed really well for what they were, 3+m is nothing to sneeze at. Sleeping Dogs underperformed but that's to be expected for an IP reboot.

I'm pretty sure the "expected sales" figures were just that; expectations. Apparently the actual figures didn't meet those expectations. Not too surprising, considering how quickly Sleeping Dogs and Hitman dropped in price. I think Hitman went on sale for 50% off in less than a month after release.
 
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61. Re: Square Enix Reports Mar 27, 2013, 12:53 Verno
 
From their financial presentation:

http://i.imgur.com/KOYYb2j.jpg

What a load of shit. Weak sales in NA and EU? Sounds like they're just scapegoating NA for the issues the JPN side of the company has been putting the entire company through. FFXIII Versus is a bottomless money pit. FF14 relaunch will bomb spectacularly, sub mmos are mostly dead and you can't relaunch a failed MMO and expect huge success. I would be amazed if it moved half as many units as the first release. Tomb Raider and Hitman performed really well for what they were, 3+m is nothing to sneeze at. Sleeping Dogs underperformed but that's to be expected for an IP reboot.
 
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60. Re: Square Enix Reports Mar 26, 2013, 19:58 Mordecai Walfish
 
Lorcin wrote on Mar 26, 2013, 11:07:
I'm playing Ni No Kuni at the moment and it's way better then any JRPG Square have put out since FFIX.

This.

I don't have faith in Square to create memorable and/or groundbreaking JRPG's anymore. At least there are other companies that still know how to create these experiences.



edit:
Redmask wrote on Mar 26, 2013, 16:53:
His resignation was announced to the press in a 20 minute long, unskippable cutscene.

LOL!

This comment was edited on Mar 26, 2013, 20:05.
 
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59. Re: Square Enix Reports Mar 26, 2013, 19:48 Kedyn
 
With publishers losing so much money so often, I think it's a sign that the entire system is broken, except for the "sure things" like the obligatory Madden or COD sequel. Maybe someone will figure out soon how video games need to be made today rather than follow the formula of how video games were made 5 years ago when the economy was better.  
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58. Re: Square Enix Reports Mar 26, 2013, 17:35 Beamer
 
SimplyMonk wrote on Mar 26, 2013, 14:26:
Beamer wrote on Mar 26, 2013, 13:45:
I don't get it. Are you trying to say Square Enix is a healthy company reporting a loss to pay less in taxes, laying off their CEO to make it look more accurate, and lost a third of their value on the stock market because, hey, why not?

Correct me if I'm wrong, but I think he is only saying that a loss of this size when they vast majority of the expenses are on restructuring doesn't necessarily mean that Square-Enix is in dire straits and doomed for bankruptcy. They can handle and most likely counted on this drop in stock price before they made the decision to restructure and are looking to recoup losses after them. Which also means that SQENIX could be a good buy if they restructure well.

At least that is how I interpreted the news and Creston's comments. Which is also the reason for my confusion on the President's resignation as this looks like a calculated plan rather than just bad decisions being made.

So you are correct... no company WANTS to be in this situation, but unless this repeats for multiple fiscals it really isn't that bad and just how publicly traded companies work. To answer my own confusion, maybe the President resigned to lessen the impact of the restructure costs and give the market a larger sign that things are changing for the better and their entire outlook from President down is changing for the better.

<shrug>

No, I agree. This doesn't mean Square Enix is circling the drain. They lost money in 2011. They will probably lose money in 2013. They have been successful every other year, have grown revenue, and have a good deal of liquidity. As I mentioned, 13 billion yen isn't a big deal when you have 110 billion in liquidity.

But that does not mean they didn't actually lose money. That doesn't mean they're pulling the wool over anyone's eyes, laughing their way to the bank. Companies can, and often do, lose money in quarters. Even in years. It's often not a big deal. Take a company like Bungie. Bungie is deep in the red right now. They're burning through cash with next to no income. Other times large companies make a huge expenditure, like perhaps building a new factory, or some huge R&D project. Other times it is more of a "fake" loss, where they make a huge write-off in one quarter.

But video game publishers, right now, are often losing real money.
 
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57. Re: Square Enix Reports Mar 26, 2013, 17:23 Beamer
 
Agent.X7 wrote on Mar 26, 2013, 15:16:
Beamer wrote on Mar 26, 2013, 13:33:
Creston wrote on Mar 26, 2013, 13:24:
Agent.X7 wrote on Mar 26, 2013, 13:22:
You need to know accounting to understand what we mean when we say we are operating at a loss. On paper, our expenses are more than our profits. However, if I was really losing $7 to 11K per month, I wouldn't still be here.

What? That's crazy!

I don't know what it is about this board, but people seem to love claiming that losses are losses and what you describe is absolutely impossible, no matter what every CPA in the US says.

Rolleyes

Creston

And, again, Creston confuses the operations of a small, private business with a large, public company.

Some people kept claiming THQ was losing money on paper. Then it ran out of money and went out of business.

Whoopsies!

Here's a good indicator: if your CEO gets shown the door, you probably actually lost money. If you're running a business that doesn't really have anything to depreciate yet you're showing a huge loss, you probably are losing money.

If you are running a business that has nothing to depreciate, you are doing it wrong.

My point being, Square Enix doesn't build a $100 million dollar factory that it then depreciates over the next 5 years.
 
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56. Re: Square Enix Reports Mar 26, 2013, 17:14 Bubicus
 
There is a strong correlation between the poor performance of SquareTaitoEnix and the last release of a Bubble Bobble game. Just saying.  
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55. Re: Square Enix Reports Mar 26, 2013, 17:12 Kedyn
 
Redmask wrote on Mar 26, 2013, 16:53:
His resignation was announced to the press in a 20 minute long, unskippable cutscene.

Nice. Immersive and compelling.
 
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54. Re: Square Enix Reports Mar 26, 2013, 16:53 Redmask
 
His resignation was announced to the press in a 20 minute long, unskippable cutscene.  
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53. Re: Square Enix Reports Mar 26, 2013, 16:23 netnerd85
 
wtf_man wrote on Mar 26, 2013, 09:48:
nin wrote on Mar 26, 2013, 09:42:
namely Sleepings Dogs

YEAH! You guys didn't buy enough Sleeping Dogs!!!!!!!!


Because I rather have Watch Dogs.

I'll probably pick up "Teef", though.
Teef aside, Go get Sleeping Dogs! fucking awesome atmosphere, nothing like Mafia 2 but still better than those shit pile GTA games. And better than Saints Row, but Saints Row has no atmosphere, it's just fun and games... and dildos... which is still awesome but yeah

Go buy Sleeping Dogs... best hand to hand combat in a sandbox game?

I should beat it... but the 3 x 5 gig updates a week was shitting me, have they stopped updating the game lol?
 
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52. Re: Square Enix Reports Mar 26, 2013, 16:20 Verno
 
Flatline wrote on Mar 26, 2013, 16:13:
My friend has been playing the newest Final Fantasy MMO now for like 18 months without actually paying for it while they tried to "fix" it, and it still is mediocre. The JRPG genre is utterly stagnant and has had no meaningful developments in easily the last 10 years or so, and in that time the mainstream market has moved on from the cookie-cutter JRPG where mindless grinding and the story are separated by plexiglass, where the plot anyway is that you're some spunky misunderstood 13 year old kid who goes on to save the world when an entire army of trained professional adults could never do it. Along the way you assemble a team of kooky-yet-grim companions who tell you that you can do it and they believe in you.

Hey now, JRPGs aren't all like Final Fantasy (Xenoblade Chronicles, The Last Story and so on all defy many JRPG conventions) and millions of people still like them. Some Japanese companies are evolving too, From Software is a great example of that. Square isn't without redemption here, they just need to adapt to market conditions instead of sitting stagnant for years at a time.

So many of their products languish in development hell and they never have spare teams to devote to any new trends or ideas. They really need oversight and some direction more than anything else, their games have been changing enough over the years as it is, I think if anything they're getting too far away from what people like about them.

This comment was edited on Mar 26, 2013, 16:26.
 
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51. Re: Square Enix Reports Mar 26, 2013, 16:17 Kedyn
 
Kajetan wrote on Mar 26, 2013, 16:14:
Kedyn wrote on Mar 26, 2013, 15:31:
Sounds like you read Ben K.'s junk journalism opinion piece on Penny Arcade about the game and let him form your opinion for you. Bravo.
Consider the possibility of people being able to make their own thoughts and building their own opinions. Just a thought ...

Yeah I doubt that.
 
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50. Re: Square Enix Reports Mar 26, 2013, 16:14 Kajetan
 
Kedyn wrote on Mar 26, 2013, 15:31:
Sounds like you read Ben K.'s junk journalism opinion piece on Penny Arcade about the game and let him form your opinion for you. Bravo.
Consider the possibility of people being able to make their own thoughts and building their own opinions. Just a thought ...
 
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49. Re: Square Enix Reports Mar 26, 2013, 16:13 Flatline
 
SimplyMonk wrote on Mar 26, 2013, 13:20:
I just don't think I understand company executive politics enough. Just from the blurb it sounds like the company was actually looking to beat or at least match forecasts until they decided to do a $100M restructure in order to better fit the current market. Is that reason enough for resignation? You make a costly decision in the companies best interest and have to resign for it?

Is it perhaps that he should of done this change gradually of the last couple of quarters or pushed the costs into the next fiscal?

How many companies go through a 100 million dollar restructuring? That's an obscene amount of money.

Color me as someone not surprised either. When the latest Final Fantasy MMO came out it was... err... shit. And SE's response was "you're American, you don't have the refined tastes of the Japanese, of course you don't like the game." And then the Japanese hated the game. And SE shit themselves.

My friend has been playing the newest Final Fantasy MMO now for like 18 months without actually paying for it while they tried to "fix" it, and it still is mediocre. The JRPG genre is utterly stagnant and has had no meaningful developments in easily the last 10 years or so, and in that time the mainstream market has moved on from the cookie-cutter JRPG where mindless grinding and the story are separated by plexiglass, where the plot anyway is that you're some spunky misunderstood 13 year old kid who goes on to save the world when an entire army of trained professional adults could never do it. Along the way you assemble a team of kooky-yet-grim companions who tell you that you can do it and they believe in you.
 
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48. Re: Square Enix Reports Mar 26, 2013, 15:34 nin
 

Holy shit, have you guys seen all the DLC they released for TR today?

 
http://www.nin.com/pub/tension/
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47. Re: Square Enix Reports Mar 26, 2013, 15:31 Kedyn
 
Kajetan wrote on Mar 26, 2013, 11:53:
Wolfox wrote on Mar 26, 2013, 11:08:
Kajetan wrote on Mar 26, 2013, 10:52:
The TR reboot is a failure. Nice!

You're happy that the TR reboot is a commercial "failure"? Why?
I despise SE for their kind of "rape" guerilla marketing they tried on this re-boot. I despise this game for being an action sellout. I despise this game for being an exploitation game, where the main character is presented in cutscenes as a fearful vulnerable girl, and only seconds after this cutscene, the player is killing a whole battalion of enemies with this character. This is cheap and bad story telling. Its an exploitation of the franchise.

I'm sorry that this game offended your delicate sensibilities. How dare a mere *video game* try to do what movies do? Video games aren't true art or expression of emotion and should never try to be ever again! Give me more Buff Action Guy XXXIV: The Reloadeadeningation!

/sarcasm /snark

Sounds like you read Ben K.'s junk journalism opinion piece on Penny Arcade about the game and let him form your opinion for you. Bravo.
 
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46. Re: Square Enix Reports Mar 26, 2013, 15:16 Agent.X7
 
Beamer wrote on Mar 26, 2013, 13:33:
Creston wrote on Mar 26, 2013, 13:24:
Agent.X7 wrote on Mar 26, 2013, 13:22:
You need to know accounting to understand what we mean when we say we are operating at a loss. On paper, our expenses are more than our profits. However, if I was really losing $7 to 11K per month, I wouldn't still be here.

What? That's crazy!

I don't know what it is about this board, but people seem to love claiming that losses are losses and what you describe is absolutely impossible, no matter what every CPA in the US says.

Rolleyes

Creston

And, again, Creston confuses the operations of a small, private business with a large, public company.

Some people kept claiming THQ was losing money on paper. Then it ran out of money and went out of business.

Whoopsies!

Here's a good indicator: if your CEO gets shown the door, you probably actually lost money. If you're running a business that doesn't really have anything to depreciate yet you're showing a huge loss, you probably are losing money.

If you are running a business that has nothing to depreciate, you are doing it wrong.
 
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45. Re: Square Enix Reports Mar 26, 2013, 15:14 Agent.X7
 
Quboid wrote on Mar 26, 2013, 15:02:
If they've lost $100M through write-offs and only $30M net loss, doesn't that suggest that they've been operating at a loss for the last few years and have been hiding that, the opposite of what's being suggested here? Perhaps now they've run out of ways to hide the loss so they're taking it off the books in one big hit, and kicking out the guy who has been making losses for years.

IANAA(ccountant)

Without access to their books and their board, it's pretty much impossible to say. It's not unheard of for the board to ask someone to resign after that person did exactly what the board wanted them to do in the first place. Corporate politics are pretty much just as dirty as government politics. (Especially since a lot of the time they are one in the same...)
 
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44. Re: Square Enix Reports Mar 26, 2013, 15:02 Quboid
 
If they've lost $100M through write-offs and only $30M net loss, doesn't that suggest that they've been operating at a loss for the last few years and have been hiding that, the opposite of what's being suggested here? Perhaps now they've run out of ways to hide the loss so they're taking it off the books in one big hit, and kicking out the guy who has been making losses for years.

IANAA(ccountant)
 
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