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Businesses Entertainment Games

Square-Enix Sees Profits Sink 73

Posted by Zonk from the out-of-mana dept.
Gamespot reports that RPG maker Square-Enix reported an almost 70% decline in net profit for most of last year. From the article: "Square Enix attributed most of its financial difficulties to its primary business--games. The company had a profitable nine months, releasing a number of hits: Kingdom Hearts II, which shipped 1.1 million units in Japan since its release in December; Romancing SaGa for the PS2, which shipped 500,000 units (Japan: 450,000, USA: 50,000); and Dragon Quest VIII, which shipped 430,000 units in North America. However, the numbers couldn't match those of the previous year, when Dragon Quest VIII shipped 3 million units in its first three days of release in Japan. The segment's sales fell 43.3 percent to 21.2 billion yen ($180 million), and its operating income plunged 95.1 percent to 974 million yen ($8.28 million)."
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Square-Enix Sees Profits Sink More

Square-Enix Sees Profits Sink

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  • Normal Year is a Headline? (Score:5, Insightful)

    by Larkvi ( 243818 ) on Tuesday January 31, 2006 @01:19PM (#14608734)
    I have never really understood why it is news that a company that has had a profitable year wasn't as profitable as a previous blockbuster year. Last year, with greater profits, was news; this year just seems normal. Would anyone have a headline saying "Square-Enix has nice, but unexceptional, year"?

    • Re:Normal Year is a Headline? (Score:5, Informative)

      by mlyle ( 148697 ) on Tuesday January 31, 2006 @02:23PM (#14609439)
      This is because the ideal value of an equity is the value of the company's future cash flows. The dividend-discount valuation models that are used assume a given rate of growth for a certain amount of time before stagnation, and those future cash flows are discounted by a standard 'cost of capital'. A decline in profit indicates that the company may be near the stagnation point, and the value of those future dividends is called greatly into question.

      A profitable year isn't enough. Capital markets demand of a growth stock ever-more profitable years. There is room for companies that are stable and not growing much, but they tend to not be valued at a very high multiple over their yearly earnings.
      • Comment removed based on user account deletion
        • Gee.. that's funny. DQ8 got released in both major markets... and that was beating out FFXII on Famistu for most wanted for a while. KH2 got released in Japan at the tail end of the year as well in Japan. Same with Advent Children.

          If FFXII is going to make up for all three of these big releases, it's gonna take a metric ton of sales.

          • If FFXII is going to make up for all three of these big releases, it's gonna take a metric ton of sales.

            Just include a hundred-page manual in every box, and it won't take many to achieve this; or just make the box from lead to "prevent espionage before publication" - it will get publicity too ;).

      • This is because the ideal value of an equity is the value of the company's future cash flows. The dividend-discount valuation models that are used assume a given rate of growth for a certain amount of time before stagnation, and those future cash flows are discounted by a standard 'cost of capital'. A decline in profit indicates that the company may be near the stagnation point, and the value of those future dividends is called greatly into question.

        A profitable year isn't enough. Capital markets demand of
        • Stock prices are based on predictions of a company's future profits. Any failure to meet the expectations of the market is severely punished. If you produced a hit last year, they will expect you to produce a bigger hit every year.
          • Stock prices are based on predictions of a company's future profits. Any failure to meet the expectations of the market is severely punished. If you produced a hit last year, they will expect you to produce a bigger hit every year.

            Why does a company care what its stock price is? When you've made a profit
            you've made a profit. Having a low stock price isn't going to take that
            away from you.
            • The investors care, and they can vote out the management if they are sufficiently pissed off. Top-level executives are usually given very generous grants and options on the company's stock. In many companies, the employees own a substantial amount of the company's stock through participation in 401K plans.

              That's the USA. Things probably are done differently in Japanese companies.

  • Damn them. (Score:2, Interesting)

    by Kesch ( 943326 )
    First they tried to entice me to buy Dragon Quest VIII with the FFXII demo. Now they are guilting me into buying it.

  • Can someone convince me why I should / should not buy this game? I like DW I, II, and III, and I was a huge fan of USFFIII and FFIX.

    • Re:Dragon Quest 8 (Score:3, Interesting)

      by Tickenest ( 544722 )
      Well, I won't get all fanboy on you, but I really have no complaints about Dragon Quest VIII. I won't say it's the perfect game, but it has no major flaws as far as I can tell and is just fun. There is lots to do outside of the main quest, the game itself is beautiful. I'll admit that I've always been a fan of the DQ/DW games (even played both SNES version with translation patches), but I really can't find fault with this one. Some people might think that gold is in too short a supply, but I think it ju
      • Some people might think that gold is in too short a supply, but I think it just forces more strategic choices instead of "buy the most super awesome equipment for everyone ever at each town" way of thinking.

        Actually I think the short supply of gold is to get the player using / thinking about using the Alchemy Pot.

        As far as Gold - if you want a lot of it fast, go to Neos and stomp on Gold Golems. You'll get around 700 gold for each one you defeat.

        DQ8 is a fantastic game, by the way. No complaints at al

        • I do have one complaint: typical random encounters are often not nearly interactive enough. They encourage the whole "everybody just fight" syndrome that the final fantasy games turned into an epidemic. Of course, that's par for the course for about 98% of rpgs.

          I may be overly sensitive to this one just because I recently completed both the Digital Devil Saga games, which truly forced the player to think about their actions in every encounter. They're both really excellent games, and I'd recommend them t
        • I think you're right about the connection between the Alchemy Pot and the gold supply (I made a few dancing mails recently for a tidy profit), but I almost consider going to Neos for the goldmen cheating. Almost. I mean, it's not cheating because they're there and you're supposed to beat them and take their gold. Still, I find it a bit more interesting to make my money more organically (monsters, alchemy, finding it) but I don't begrudge anyone who would spend an extended period of time in Neos, and I'll
    • I thought it was incredibly boring (boring battle system, boring plot, etc), but if you liked the NES Dragon Warrior games and are ready for a similar experience (but with nicer graphics) then you'll probably like DQ8.
    • I would say you have already convinced yourself. This game is definitely a throw-back to old-school RPGs. Anyone who is even thinking about picking up DQVIII for this reason should just go get it.
    • From your self-described gaming background, then yes, you should get the game.

      I have it and am loving it. It's definately not for everyone though, since it's an "old-school" Japanese RPG. You may actually have to spend some time levelling up, and you may actually die a few times during the course of the game. While the story/plot are pretty cliche (as are all old school J-RPGs), it's still very well done and the voice acting is surprisingly good.

      Those who love more open RPGs like KotOR, Morrowind, Baldur's
    • If you liked the past DW games, then you'll like DQ8, cause it's basically the same thing. Sure, the graphics are much prettier and the story is a lot better, but in essense the gameplay comes down to the same thing it always was. This game will involve some grinding for levels and gold, but that shouldn't be surprising given that all the games were like that. It's not an interactive movie like a modern FF game, but that, to me, makes it more fun in many respects.

      • I agree completely with the Interactive Movie comment. I hate this new focus on making games as pretty as possible, while completely obliterating any soul they had. FF-III still is a great game.

        ~Will
      • As a side benefit, unlike DW7, the prerendered movies actually look good. I cringed everytime DW7 broke into 3D prerendered movies, because they were almost always unneeded, and Enix didn't have the budget to make them look good.
    • The early Dragon Warrior games were some of my favorites too. So for me, DW8 has been great. Very nostalgic and just what I've been looking for lately.
    • While some other comments may or may not have convinced you wether you should buy DQ8, I will tell you that a friend of mine disapeared from the map a short while ago. Fearing that he was hurt dead or worse I finally got to talk to him. He popped up only to spend enough time to tell me that he bought a new PS2 and DQ8. Then promptly ceased to take any calls, or emails.

      He is a FF nut and I swear he has played every Square game produced. Did that help?

      • Ugh.

        I brought the game and it doesn't play on my PS2. Which SUCKS. I spent 2 months convincing myself that I wanted this game and it was worth $50. And now, I need to spend another $150 on it. I mean, I could buy a used one, but... hell, I've got a used one that works "pretty good". It's old and it's clogged with dust and the front bezel is popped off, so I'm sure it's just worn out, but. Damn.
    • The ONLY minor gripes I have with the game are the load times after fights and the slow text speed (which is not adjustable). The story is pretty good, so sometimes the fights/slow scrolling text get in the way when I really just want to keep going with the story. Other than those piddly issues that really don't matter, I'd say it's well worth the $50 that I spent on it at a time that I probably shouldn't have :p

  • Did you play final fantasy x2? (Score:4, Insightful)

    by queen of everything ( 695105 ) on Tuesday January 31, 2006 @01:24PM (#14608786)

    I haven't bought a square game since Final Fantasy X2, so I have contributed to their decline I guess. But did you play it? I have played Final Fantasy games for as long as I can remember and I loved FFX. FFX2 was SO lame! Dance fighting with different outfits? I'm a girl and I don't even think that is fun. Hopefully their newer games are better, I haven't gotten into an RPG in a while (I tend to play them a little too much once I start) so I don't know. But if any of them are like FFX2, then I understand why they aren't making as much money!

    • Yeah, Final Fantasy Barbie was a major mis-step. Another thing that can't be helping is the fact that you can't play Final Fantasy XI on current PS2s.
    • I played X-2 for about 10-12 hours before moving on to something else. I'm a guy though, so maybe it's just because I liked to watch Yuna and Rikku and whatshername in their sexy costumes. Actually, I think that's it. Hmm... actually, that's why I played Dead or Alive 2 Ultimate as well, cute girls in sexy costumes, fighting.

    • I've played StarOcean: Till the End of Time and Front Mission 4. Both kicked FFX-2's ASS.
    • to be fair, the dance-fighting was limited to a single dress sphere. once you dressed all the girls as dark knights, they were nicely hardcore (imo).
    • Man, they let it go and shot themselves in the foot. One of the greatest things in FF-X was Blitzball, and they screwed it up in FF-X2 No play, just stare and see how you lose. BLAH.

      I for one would welcome a 100%-Blitzball from them. You could play single, teams, or "adventure mode" a-la FF-X, where you'd fight the monsters to gain blitzball abilities or recruit new players.

      Perhaps we should mail them and tell them about it?
    • Yeah, I played X-2, and am ashamed enough to say that I did beat it. But I agree that it wasn't very good, and certainly paled in comparison to many of the other FF games.

      I think the only reason why Square released X-2 in the first place, was that they needed another FF-game for those unwilling to dive into their FFXI MMO. (Me, for example) So X-2 was the bone they threw at us.

      I'm looking forward to FFXII. The short demo I played (included with every copy of DQVIII, which is a must-have for Squeenix fans),
    • I'm a Square fan and the only PS2 game of theirs I've bothered buying is Final Fantasy Online which I stopped playing after a few months because it simply wasn't fun. Part of it is my limited time these days but I think another part is that their PS2 games just haven't seemed as appealing as their older games. To much emphasis on graphics and not enough on story, characters, and gameplay.

      I hope for the PS3 they do something really fantastic. They should be able to create a huge and exciting world with that
  • SE releases DQVIII arguably THE most anticipated console game in years and then is unable to maintain the high profits enjoyed by the games initial launch? Gee, wow. I didn't see that coming.

    • Wait, so you're saying that DragonQuest VIII was enough to bump their profits over 300%?

      A 70% decline (well, 67.7%) isn't a minor bump in the road, it's more of a large hole. Their profits dropped more than two-thirds. If one video game is capable of giving them that large a boost in profits, they have some serious problems.

      • Background info. (Score:3, Informative)

        by bmajik ( 96670 )
        from Wikipedia

        The series is extremely popular in Japan. Following the release of Dragon Quest III in 1988, the Japanese Diet requested that Enix only release new installments of the Dragon Quest series on Sundays or holidays, to prevent children from skipping school to wait in line for the latest Dragon Quest title.


        Dragon Quest is such a cultural phenomenon in Japan that there are live-action ballets, musical concerts, and audio CDs based on the Dragon Quest universe.[3] The London Philharmonic Orchestra ha

        • Re:Background info. (Score:3, Insightful)

          by _xeno_ ( 155264 )

          I'd buy that IF Square-Enix were a small game manufactorer. They aren't. They're a large game manufactorer. If one game, regardless of how popular, is enough to bump their profits by 300% for one year, they've got some serious issues.

          And if you read the article, they're basically down in all sections, not just the section that produced DragonQuest VIII. For a company like Valve, where they don't make a lot of games, a single popular game should bump their profits by 300%. For a company like Square-En

          • That WOULD fit logically if SE didn't have a release strategy of spacing games out every 6 or so months. Don't forget, before (and even now) SquareSoft and Enix merged, they were THE #1 RPG developers in the world. The Ultima series has/had been more or less destroyed, the Elder Scroll series are too few and far between and most other RPG series have either created a niche for themselves ('Tales of' series, Xenosaga series, etc) or flat out died out. SE now more or less has a monopoly on the RPG market.
        • Still seem ridiculous for one game to have that big of an effect on profits? If it does badly, that represents a significant cultural shift for the country of Japan

          Who said the game did poorly? Go back and reread the article & the blurb. While it sold 430,000 units in North America, it sold 3 million units in Japan in the first few days. Gee, I wonder why their income dropped almost in proportion with the difference in total sales of all games?

          They're still profitable. Someday, I'm gonna see if ther
  • I've never had much in the way of Enix/Dragon Quest experience, but I don't believe Dragon Quest has had much of a showing over here in the states before VIII, correct? (If not, I'm probably confusing it with Fire Emblem or something.)

    If so, that would explain for the low sales. Fans of the series in Japan know how the previous games were, and reacted accordingly. Americans, excluding the small fanbase that does imports, don't know squat about it as far as experience, and in this age of sequels, that really
    • Very wrong. Dragon Quest 1-4 were put out over here on the NES under the Dragon Warrior brand. We also got Dragon Quest 7 for the Playstation. The only ones that really got skipped were the SNES ones(5 and 6).

      Fun Fact, IIRC Dragon Warrior 4 holds the distinction of being the largest NES ROM.

      Shrug, it didn't sell well here because most PS2 gamers are nooblets.
      • No, Dragon Warrior 4 is not the largest NES rom. The 1024k version circulating the net is an overdump, the real version is 512k in size.

        As far as largest officially licenced games go, that honor goes to Kirby's Adventure, at 768k. If you count unlicenced US games, Action 52 weighs in at 2048k.

    • Re:Familiarity (Score:1, Insightful)

      by Anonymous Coward
      Americans, excluding the small fanbase that does imports, don't know squat about it as far as experience, and in this age of sequels, that really matters.

      It's worse than that. We remember Dragon Warrior on the NES. We remember being bored to tears by it. We remember the sequels on the NES. We remember wishing we could just die. We also remember Final Fantasy on the NES, and how our will to live returned.

      Everyone remembers the older games, and everyone is reacting accordingly. It's just that there aren't tha
  • The company had a profitable nine months, releasing a number of hits: Kingdom Hearts II, which shipped 1.1 million units in Japan since its release in December; Romancing SaGa for the PS2, which shipped 500,000 units (Japan: 450,000, USA: 50,000); and Dragon Quest VIII, which shipped 430,000 units in North America. However, the numbers couldn't match those of the previous year, when Dragon Quest VIII shipped 3 million units in its first three days of release in Japan. The segment's sales fell 43.3 percent

  • Hopefully not pinning hopes on FFXII (Score:3, Interesting)

    by the_demiurge ( 26115 ) on Tuesday January 31, 2006 @01:35PM (#14608914) Homepage
    My brother got a copy of Dragon Warrior VIII for Christmas, and I had the opportunity to try out the FFXII demo.

    I'm glad I did. The battle system was one of the most boring I've ever played in an RPG. The game practically plays itself. In the 'Boss Battle' in the second mission, I won without giving any orders to my characters at all except for using one ether when I ran out of magic points. Your allies heal themselves and you and there seemed to be little point in casting magic spells yourself except to heal.
    I realize that Final Fantasy has always been a game with changing mechanics and battle systems, but making the battle system as simple as possible is not a step in the right direction.

    So maybe the high distribution of DW VIII will contribute to the downturn in sales in more ways than one...
    • I'm glad I did. The battle system was one of the most boring I've ever played in an RPG.

      I love rpgs, but I've started to think the same thing about the battle systems. I recommend buying the slashers (Diablo), thinkers (Ogre, Fire Emblem), or the others (Megaman Battle Network) instead.
    • FFXII worries me. A lot. I lost interest in Square back in the PS1 days because of their increasing trend of filler. FF7 started to feel like they just wanted the game to be longer, and by FF9 it was just painful how much of the game was just useless. FFX and X2 tried to trim off some tedium, but replaced it with more filler.

      They've just stopped making better games with the idea that they should instead make LONGER games. There's less relevant story material in FFX than FFVI had, but FFVI only took 15 hours

  • No surprise (Score:3, Insightful)

    by discoalucardx ( 840212 ) on Tuesday January 31, 2006 @01:36PM (#14608923)
    They haven't had any really good titles for awhile. Radiata Stories wasn't that great, Musashi wasn't that hot either, and I'm at a loss to remember anything else they did. They haven't had any Final Fantasies for awhile, and Dragon Quest isn't exactly a household name in the US, although apparently it did fairly well for itself. I'm guessing their portable offerings made them money though. (like Final Fantasy IV). With Kingdom Hearts II out in America this year, the upcoming Final Fantasy XII (hopefully out here before the end of 2006), and a bigger portable lineup (Children of Mana, FF3 DS, FF5 and 6 GBA remakes), they should probably see a better year.
  • While I know that the Advent Children movie isn't related to game sales, I know a ton of American gamers, and fans of FFVII, that are boycotting Square until they release an English version of the movie.

    A lot of us (I'm one of them) feel jilted because it's taken so long. The Japanese version didn't even have English subtitles (from what I know). I'm sure this isn't exactly hurting them, but this was probably the first time I looked at Square and went "I've given you so much of my time and money, and I only
    • I had been following the Advent Children movie information for quite some time after it was mentioned they were developing it. The AC movie suffered from delay after delay, to the extent of pushing the release back years.

      Personally, I can not comprehend the business decision with the movie. The movie was released in North America online fully subtitled 2 days before the official release date by a fansub group. The actual release date two days later after the leaked and fully fansubbed copy, was sold in J
      • The overall Advent Children fuckup might be the last straw for me. Didn't they say at E3 that it was going to be released on the same day in NA and Japan? And when they were called on it, they released a statement saying that it was not an "official" announcement. And then came the constant pushing back of the release date. From September to November to a Holiday release to where I'm at the point of not giving a shit if it's ever going to be released in the US because my fansub version works fine for me too
    • Had they released Advent Children over here, subbed or dubbed, I personally would have made their numbers at least $30 less disappointing. Oh well, I'll just have to go on digging the fansub...
  • I remember great games back when they were called Squaresoft. Games such as Xenogears, Final Fantasy 6 (AKA 3) Einhander, Front Mission, Secret of Mana, Legend of mana, and even my all time Fav. Chrono trigger. This is back when Square created some of the greatest RPG's ive ever played. But I tell you this. Ever since the name was switched to Square-enix, I have not liked one single game since. I played Kingdom hearts, and was just baffled at how much the game sucked compaired to the others. I have not pu
    • Interestingly enough, Chrono Trigger was made by both Square and Enix. It was their first collaboration long before Square bought out Enix.

      Also, not sure if you ever played or liked the Dragon Warrior series, but Dragon Quest VIII is quite a fun game. Kingdom Hearts is okay, but hasn't held my attention. Star Ocean 3 (another Enix game, from the Tri-Ace division in fact) was a travesty. Star Ocean 2 for the PS1 was much better. And I've been told Front Mission 4 is good, but I'm not all that much for g

    • They were still Squaresoft when Kingdom Hearts was released.
  • Square Enix got rid of their external press department awhile back. Now they have an internal department, which is very unfriendly with the gaming press. Some sites were cut, namely VGRC.net, the best site in the world, and left without review copies for games. This has certainly hurt their profit line in one form or another. I had a chat with Gary the Gaming Gluegun the other day. He was not pleased, either.

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