Square Enix "hoped for more" from Final Fantasy 16 sales, expensed all costs in FY24 Q1 so future sales will all be profits

[Phantom Thief]

David Gibson on Twitter (transcribed below):


Square Enix - couple of things going on 1) FF16 3m units the company said was inline but had hoped for more 2) They fully expensed the cost of FF16 in 1Q so future sales are all profits 3) they wrote-off/expensed titles that were in development as they refocus on AAA. 4) the 1Q ¥3bn profit compared to consensus of ¥12.7bn, so suddenly their ¥55bn OP guidance for the year doesn't look so conservative versus consensus at ¥61bn and 5) Focused strategy - less mid sized, more larger AAA console games, company said will take several years to impact. 6) FF14 Dawntail expansion release in summer 2024 is later than most expected. 7) FF Ever Crisis on mobile could have upside for the company, it is in pre-registration.

 

[Damage2]

It makes sense to go all in the BIG games, most of its mid sized games like Harvestella, FF Origin flopped, just Octopath 2 sold well.

 

[The Tribal Chief]

I said weeks ago, a good result for FFXVI would be at the minimum 3.3M+ and ideally more than that if we're looking for actual growth. That would be a good sign.

How it performed is basically "fine". Meaning it's not good even if it's not bad, but depending on how things go, it's probably more likely to end up bad for the brand due to how the sales legs on FF games tend to be, and with how far away the next new entry will be.

It's like a death by one thousand cuts. That's basically what Final Fantasy is going through right now.

 

[Tbone5189]

It makes sense to go all in the BIG games, most of its mid sized games like Harvestella, FF Origin flopped, just Octopath 2 sold well.

Maybe they should make the final fantasy game that's been so obvious to make imo for years now that could sell 10mil copies

Spoiler

Yes I'm talking about SMRPG2

Edit: I think they can still make good mid size games, especially with HD2D games

 

[mariodk18]

So despite all the talk from YP, the company's actual expectations were 3-4 million it seems, with 4 million being the high end that 15 achieved (roughly on PS4 only). At this point, the biggest curiosity to me is not necessarily what direction 17 will take, but what platforms it will launch on.

 

[Flightlessfancies]

Wondering if we're going to start seeing more exclusivity deals for the mid-size stuff again. So less Diofield, Star Ocean, Voice of Cards type things and rolling back to having Nintendo publish things like DQ spinoffs and 2DHD games in the future again while they continue to cut deals with Sony on the more expensive games.

I enjoy their mid-sized games even if they're mostly 7-ish type games. But it's still a bit disappointing they'd rather put some of those on the chopping block instead of their NFT shit or expanding things like Ever Crisis to include console releases.

 

[Wockio]

Focused strategy - less mid sized, more larger AAA console games, company said will take several years to impact

So they're betting on a less diverse lineup while their biggest franchise becomes more irrelevant by the day.
Idk chief I think this ain't it.

 

[storres]

It makes sense to go all in the BIG games, most of its mid sized games like Harvestella, FF Origin flopped, just Octopath 2 sold well.

Forspoken, Marvel's Avengers and GotG all underperformed to flopped. Their problem is a bigger one than just smaller games.

 

[ILikeFeet]

if they keep focusing on exclusivity deals in the wake of focusing more on AAA games, then they're making a mistake

 

[RailWays]

Expected, considering initial numbers.

On one hand, I think aiming for a character action game audience was definitely not as viable of a strategy as an open world action game would've been. On the other, the sales probably would've been better if they had geared the games release to multiple platforms day-and-date.

 

[Kouriozan]

And their mobile games are getting mismanaged right now, FFBE and WoTV global is not in a good spot right now, one is getting ultra rushed to almost merge with the Japanese version, the other is skipping a lot of content and having generally disappointing events, despite being its anniversary

 

[Thiefcoal]

I have no idea what Square was on last year releasing so many AA games to die (Star Ocean, Valkyrie, Diofield).

 

[BassForever]

I have no idea what Square was on last year releasing so many AA games to die (Star Ocean, Valkyrie, Diofield).

I still haven't picked up Triangle Strategy, and I'm sitting on both Tactics Ogre Reborn and Harvestella while slowly working my way through Octopath Traveler 2.

 

[nayu]

I really enjoyed their recent push towards a huge diverse catalog of mid-tier releases, but I think it all felt a bit too scattered - some stuff suffered from being under marketed /under budget. It felt like they were trying to find another NieR Automata moment, but it never came.

I wonder if they'll take a note from Capcom's playbook: focusing on a few major AAA projects from established IPs, only rarely investing on new IPs while producing a modest amount of AA content (probably based on existing IPs as well).

 

[RDragon]

I still haven't picked up Triangle Strategy, and I'm sitting on both Tactics Ogre Reborn and Harvestella while slowly working my way through Octopath Traveler 2.

You have to try Triangle eventually. Personally one of my favorite games this generation. Haven't gotten to Octopath 2 yet. May have to wait for Christmas.

 

[Aime]

AAA bomba like Marvel,Forspoken or many HD game(fake AAA) likes Star Ocean,Valkyrie,Babylon,FF:O,Left Alive etc.(and Foamstars ?)

How they can sell FF16 more when their's plan was conflict themselve.

>They need many and new young audiences.
By Exclusive PS5
People want RPG element like FF14 but change to DMC/Nier style.
Rate M because want to be GoT

 

[meatbag]

I don’t really understand the renewed focus on AAA games, since most of their AAA efforts weren’t exactly huge successes, either. I feel like they’d still be better off pitching more mid-tier games to the market.

 

[Limabean01]

tbh i’m not sure this is the right lessons to learn, they definitely would have lost a lot more money on their AAA flops than their AA ones, and the latter at least has some success here and there. what have been their AAA successes in recent times?? is ffxvi the closest thing, despite seemingly not generating profit until it’s 2nd quarter?

 

[AruanaRiva]

This may sounds harsh comment from me but. I see this scapegoat going to AA games miles away.

They have run out of excuses at this point.

In the past they can blame that on Eidos title. Then Sleeping Dogs. Then games developed by devs outside their main company like Platinum or Aetem Inc.

Now after losing all those scapegoats. They can't of course blame that their biggest AAA being their money pit is their big problem right?

Then time to throw AA division under the bus this time. They can't blame their mobile div thats has been floundering their performance and face severe competition from all other mobile devs.

Can't blame the golden goose MMO division because thats their literal biggest money maker.

Can't blame the biggest AAA division as thats their prestige face of company division much.

So AA div. Your time for some guilottine lol.

 

[RDragon]

I don’t really understand the renewed focus on AAA games, since most of their AAA efforts weren’t exactly huge successes, either. I feel like they’d still be better off pitching more mid-tier games to the market.

I think it's overall better to slow down on the AA games output since in 2022 we got so many AA games from Square that most here can't remember half of them.

 

[Pavolink]

I still need to buy Octopath 2, Bravely 2 and Crisis Core.

Sad to hear mid size games are not going to be a big focus.

 

[mariodk18]

Out: According to analysts who attended Square Enix's earnings call, President Kiryu said FF16 sales didn't meet the high end of the company's expectations and PS5's installment base was a limiting factor.

Source: Bloomberg via Vlad Savov and Takashi Mochizuki
archived link to full article

 

[Pavolink]

So, if the 3m is in line and not the high end of the expectations, were those sales the low end of expectations?

 

[RDragon]

So, if the 3m is in line and not the high end of the expectations, were those sales the low end of expectations?

Probably in the middle. Like, "We can sell 3 million, but we're hoping for 4 million. At worst, we can probably do 2.5 million".

Given how infamous Square is for overestimating their sells, they appeared to be pretty reasonable with FF16.

 

[Pooroomoo]

To be honest the ideal would be if Asano and his team moved to Nintendo. Square doesn't seem to want these games any more, marketing these games seems beyond their abilities, and hardly any players except Nintendo ones seem to be interested in his games. One less headache for SE, more Asano games for those who care, win win.

Also, finally they said something, it was getting tiring to hear the narrative that SE were very happy with ffxvi sales when they actually never said that.

 

[rainbowblight]

SE is such a mess these days. I honestly have no hope they'll ever get their shit together and return to their glory days of the 16-bit and 32-bit eras.

Also, I can't help but laugh that their reaction to everything that's gone on in the last two years is to re-dedicate themselves to AAA games. Like that's gone sooooooo well for them in recent times...

 

[RDragon]

SE is such a mess these days. I honestly have no hope they'll ever get their shit together and return to their glory days of the 16-bit and 32-bit eras.

Also, I can't help but laugh that their reaction to everything that's gone on in the last two years is to re-dedicate themselves to AAA games. Like that's gone sooooooo well for them in recent times...

As someone pointed out, it worked for Capcom. They don’t make many smaller titles anymore, focused their big IPs, and they’ve been making banked.

 

[Damage2]

To be honest the ideal would be if Asano and his team moved to Nintendo. Square doesn't seem to want these games any more, marketing these games seems beyond their abilities, and hardly any players except Nintendo ones seem to be interested in his games. One less headache for SE, more Asano games for those who care, win win.

Also, finally they said something, it was getting tiring to hear the narrative that SE were very happy with ffxvi sales when they actually never said that.

Square released several new Asano Team games in the last years like Octopath 2, Live A Live and Triangle Strategy, and all of them done well for the kind of games they are.

There is a upper limit for the sale of these kind of games, no matter if its multi or exclusive and show up in 1000 Nintendo Directs, Nintendo its not going to make Octopath 3 sell 5 millions, they couldnt do it with Xenoblade 3 and thats much easier to sell.

They are probably going to keep releasing Asano games, they sell well and DQIII-HD its going to be really big in Japan

 

[TheRealTalker]

Double downing on AAA. Possibly means less outsourced games too.

 

[Phantom Thief]

As far as the AA games comment goes, they mention wanting a more focused strategy. I think AA games like the Team Asano games, Star Ocean, FF and DQ spin offs, these will all continue to exist. It's stuff like the extreme avalanche of mid budget games we saw from Square in the last few years, most of which literally released with no warning and often very close to one another, and had no coherent marketing, messaging, or even platform strategy, those are the ones that will probably get the axe.

The stuff that is actually popular and does well? That's not going anywhere.

 

[MegaXZero]

There is a upper limit for the sale of these kind of games, no matter if its multi or exclusive and show up in 1000 Nintendo Directs, Nintendo its not going to make Octopath 3 sell 5 millions, they couldnt do it with Xenoblade 3 and thats much easier to sell.

Xenoblade 3 has outsold Octopath 2 despite their predecessors being in the reverse situation and octopath 2 being multiplat meant it would reach a larger audience. Instead it contracted heavily due to SE’s pure incompetence at marketing.

 

[Phantom Thief]

Gibson has deleted original tweets and said this now:

Hope was not the right word. Sorry. The results were in the range of their expectations, feel the penetration of PS5 performance was quite good. (as they said before when announcing the 3m number).

 

[Mr. Moon]

Perhaps it's simply because they'd rather be the rockstars making impressive AAA games, than the people that make their bread and butter on modestly budgeted, within-their-means, can run on Weaker Nintendo Hardware projects.

To this day, I honestly believe Bravely Default lost the FF branding not to give it space, but to keep the idea that "new FF" isn't something you can see on that kind of platform, with that kind of gameplay.

 

[Damage2]

Xenoblade 3 has outsold Octopath 2 despite their predecessors being in the reverse situation and octopath 2 being multiplat meant it would reach a larger audience. Instead it contracted heavily due to SE’s pure incompetence at marketing.

But in the end Xenoblade 3 it wont ever reach the level of sales of the first Octopath just in the Switch(3M).

Octopath 2 selling well or not(it did well it just took longer to reach 1M) its not the marketing fault (it showed up in Nintendo Directs, a demo well received) but because people are not that impressed and interested in HD-2D games anymore , there a lot of HD-2D games in the market and its not the "new shiny thing" anymore. The first Octopath it was one of the first big RPGs for the Switch, it showed up in the Switch Reveal, these things helped a lot.

 

[Kiria]

But in the end Xenoblade 3 it wont ever reach the level of sales of the first Octopath just in the Switch(3M).

Octopath 2 selling well or not(it did well it just took longer to reach 1M) its not the marketing fault (it showed up in Nintendo Directs, a demo well received) but because people are not that impressed and interested in HD-2D games anymore , there a lot of HD-2D games in the market and its not the "new shiny thing" anymore. The first Octopath it was one of the first big RPGs for the Switch, it showed up in the Switch Reveal, these things helped a lot.

Uh it is marketings fault lol time and time again Square Enix marketing team for both Japan and West can't do their job properly

 

[MegaXZero]

Gibson has deleted original tweets and said this now:

Hope was not the right word. Sorry. The results were in the range of their expectations, feel the penetration of PS5 performance was quite good. (as they said before when announcing the 3m number).

Given we now know there were high end expectations, their stock took a massive hit, and SE are basically panicking with these massive moves, it’s clear that the lower end expectations were not what they were hoping for. Blaming the install base doesn’t really fool anyone given we are talking a 3 million seller on a 40+ million system and legs haven’t really been good.

But in the end Xenoblade 3 it wont ever reach the level of sales of the first Octopath just in the Switch(3M).

Octopath 2 selling well or not(it did well it just took longer to reach 1M) its not the marketing fault (it showed up in Nintendo Directs, a demo well received) but because people are not that impressed and interested in HD-2D games anymore , there a lot of HD-2D games in the market and its not the "new shiny thing" anymore. The first Octopath it was one of the first big RPGs for the Switch, it showed up in the Switch Reveal, these things helped a lot.

I’m not sure why you keep wanting to put down xenoblade 3, but keep in mind its still sold more launch aligned then it’s predecessors while again Octopath 2 has been selling at a glacial pace. It could turn around but it will need wom to save it. We can hope sequels will outdo their prequels, but it’s hard to do. But underperforming the opening like this is incredibly rough. The expectation is higher opening and worse legs. The multiplat part would also usually help this and expand the audience.

The obvious answer is the marketing given the excuse of HD2D fatigue utterly fails when PS didn’t get one until Octopath 2.

 

[Fularu]

Bigger focus on « AAA » means doubling down on the PS5 exclusives strategy with late PC ports or paid for xbox versions.

Less Nintendo Switch games and probably harsher times head till there’s a strategy shift at the head of the company.

 

[HK-47]

To be honest the ideal would be if Asano and his team moved to Nintendo. Square doesn't seem to want these games any more, marketing these games seems beyond their abilities, and hardly any players except Nintendo ones seem to be interested in his games. One less headache for SE, more Asano games for those who care, win win.

Also, finally they said something, it was getting tiring to hear the narrative that SE were very happy with ffxvi sales when they actually never said that.

Why would that be ideal, exactly? Outside of for Nintendo fans of course. Its also not exactly likely the Asano projects would be on the chopping block first.

 

[Pooroomoo]

Why would that be ideal, exactly? Outside of for Nintendo fans of course. Its also not exactly likely the Asano projects would be on the chopping block first.

My assumption was that any and all AA games will be on the chopping block, including Asano games, in which case it would be better to have the Asano games find a new home - and the most fitting new home for those (if the alternative is being chopped) would be Nintendo, since that is where they perform the best. Similar (thought not same) as what happened with Bayonetta - it was better to get new Bayonetta games on Nintendo platforms than no more new Bayonetta games.

 

[HK-47]

My assumption was that any and all AA games will be on the chopping block, including Asano games, in which case it would be better to have the Asano games find a new home - and the best new home for those (if the alternative is being chopped) would be Nintendo. Same as what happened to Bayonetta - it was better to get new Bayonetta games on Nintendo platforms than no more new Bayonetta games.

Why would they blanket go after all AA projects like they are all equal?

 

[Pooroomoo]

Why would they blanket go after all AA projects like they are all equal?

No one can foretell the future, but I fear there is a good chance that what happened with COD (and I think Assassin's Creed) will happen with SE. A focused AAA strategy takes a lot of resources, and I can see SE having to divert more and more of its resources to get these out in a timely manner, which would mean also Asano games ending up on the chopping block and Asano (along with everyone else) getting recruited to work on the AAA games, even if that was not the initial intention.

 

[Marno]

After Forspoken bomb and Final Fantasy XVI not being able to break even yet that's a risky strategy.

It makes sense to go all in the BIG games, most of its mid sized games like Harvestella, FF Origin flopped, just Octopath 2 sold well.

Harvestella only got a small budget, not a medium one, and Square Enix, most likely, made a profit on the game, cannot say the same for their last 2 AAA games. If Harvestella flopped then Final Fantasy XVI flopped harder.

 

[Oregano]

As far as the AA games comment goes, they mention wanting a more focused strategy. I think AA games like the Team Asano games, Star Ocean, FF and DQ spin offs, these will all continue to exist. It's stuff like the extreme avalanche of mid budget games we saw from Square in the last few years, most of which literally released with no warning and often very close to one another, and had no coherent marketing, messaging, or even platform strategy, those are the ones that will probably get the axe.

The stuff that is actually popular and does well? That's not going anywhere.

I'm not sure about Star Ocean, we'll see how the remake of 2 does but I would bet SO6 was probably their most expensive game last year and didn't give the results to back it up.

 

[Thiefcoal]

No one can foretell the future, but I fear there is a good chance that what happened with COD (and I think Assassin's Creed) will happen with SE. A focused AAA strategy takes a lot of resources, and I can see SE having to divert more and more of its resources to get these out in a timely manner, which would mean also Asano games ending up on the chopping block and Asano (along with everyone else) getting recruited to work on the AAA games, even if that was not the initial intention.

Activision sacrificed everything so they could pump out a yearly CoD. Square has four major franchises that they can only pump out every 5 years or so. It simply doesn't make sense to sacrifice the Team Asano AA games which actually sell relatively well. Team Asano is small so it's not like relegating them to work on the AAA games would make it come out any faster. (Do subcontractors like Artdink even have the chops to work on Square's AAA games)Stuff like Harvestella is what's on the chopping block.

 

[Kanann]

Speaking of 2024, beside DQsomethingHD something, FF7R2, and FFF14 7.0

 

[bladestrikex]

So FFXVI won't even be able to even profit yet until it sells out the remainder of its launch shipment and retailers have to request more stock? At best I'd guess it was a 50/50 split physical shipment vs digital. How little profit do they even expect to make with such weak legs? If it is 50% split that'd mean only 1.5m were shipped, and clearly not all of that has even sold through, plus with its non-existent legs it could take anywhere up to a year or more before it even sells the remainder of that launch shipment, and by that point its price would have already dropped significantly that any potential profits after the point in which it would have sold out its full launch shipment are going to be miniscule compared to what it could have done during its launch period.

If it had already crossed to a new milestone like 4m they would have said so by now. SE saying it didn't hit the high end of their expectations basically mean it did not exceed expectations, which I don't know why people have kept on trying to spin this as a good thing for SE's flagship title that is already down significantly from practically every previous AAA FF.

 

[HK-47]

Activision sacrificed everything so they could pump out a yearly CoD. Square has four major franchises that they can only pump out every 5 years or so. It simply doesn't make sense to sacrifice the Team Asano AA games which actually sell relatively well. Team Asano is small so it's not like relegating them to work on the AAA would make it come out any faster. Stuff like Harvestella is what's on the chopping block.

Activision did, but they also had Blizzard and big dick King.

 

[derby_440]

Gibson has deleted original tweets and said this now:

Hope was not the right word. Sorry. The results were in the range of their expectations, feel the penetration of PS5 performance was quite good. (as they said before when announcing the 3m number).

Need to update the title/OP with this. It did meet SE expectation. Considering FF7r with 100 million PS4 and hype sold/shipped 3.5 million first week. Expecting Ff16 to sell/ship 4 million first week was bit unrealistic. Also it covered all of FF16 budget with with 3 million.

Now more sales on PS5 plus eventual PC release will bring good profit. MS is also paying for the port at some point, thats all profit from here on now.

 

[CeroG1]

I don’t really understand the renewed focus on AAA games, since most of their AAA efforts weren’t exactly huge successes, either. I feel like they’d still be better off pitching more mid-tier games to the market.

This is kind of an Abema situation, they ain't gonna bury the flagships in front of investors, it's reasonable that the lower end side which was already not generating much would be on the chopping blocks

 

[MegaXZero]

Need to update the title/OP with this. It did meet SE expectation. Considering FF7r with 100 million PS4 and hype sold/shipped 3.5 million first week. Expecting Ff16 to sell/ship 4 million first week was bit unrealistic. Also it covered all of FF16 budget with with 3 million.

Now more sales on PS5 plus eventual PC release will bring good profit. MS is also paying for the port at some point, thats all profit from here on now.

FF15 on a similar install base of PS4s did more day 1. Asking for 4 million on a 40 million install base is not too much to ask. And at this point if install base was such an issue they should have delayed it instead of throwing it to the wolves and not meeting the higher expectations that they never mentioned until investors apparently started asking. Legs also aren’t keeping up with explosive hardware growth of peak PS5.

Also nothing in that says they broke even with 3 million. They only did all the costs this quarter, such that from now on FF16 can only gain them cash since they won’t be recording dev costs in subsequent quarters.