Outline of Results Briefing by SQUARE ENIX HOLDINGS held on May 13, 2013
http://www.hd.square-enix.com/eng/ne...30527_01en.pdf
page 4 and 5
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In the fiscal year ended March 2013, we released the major titles including "SleepingDogs," "Hitman," and "Tomb Raider." These titles were lauded by the industry from a creative perspective, achieved very high levels of quality, and I believe that we achieved our primary goal of both reinvigorating existing IPs and creating new IPs.
However,from the perspective of profitability,there was tremendous competition from many other strong titles, and with the diverse amount of entertainment options available, customers have become more selective,resulting in this disappointing outcome.
As a result, as explained earlier with respect to the Income
Statement,the 'Provision for Allowance for Sales Returns' and 'Advertising Expenses' increased, and even though development expenses were covered,these titles did not sufficiently contribute to profits. I believe that this situation is not a one‐time event for the fiscal year ended March 2013, but is a structural issue within the packaged product sales model. As a result, I believe it is difficult to guarantee an appropriate return on our investments within the revenue model of purely packaged
software.
In particular, net sales to customers is a critical metric (net sales being the actual number of units sold at the retail level beyond the number of sales to the distribution network), and we have seen significant degradation in results. In the packaged sales business, very strong competition in the
market place has resulted in pricing methods such as price protection (costs incurred to maintain pricing) and back‐end rebates(sales incentives) growing in increased importance, and creating a critical increase in pricing method costs.
Furthermore, in the Western markets, while it was assumed that products could be sold across relatively long‐term horizons, as a glut of major titles came into the market,sales opportunities and periods tightened, and this caused a critical increase in advertisement spend to lift initial shipments.
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page 9
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Of course, we will continue to investin flagship titles that showcase our technological prowess, pursuing high‐end game quality, and which can earn profits on a global basis. Regarding a number of these types of titles, we will share information with everyone atthis year's E3
Our strategy of
selling AAA titles of 10 IPs around the globe has implicitly assumed Hollywood‐style cinematic major games centered on single‐player experiences.Going forward, I think it is necessary to review the definition of "AAA Title," and we need to pursue a new type of blockbuster title, in addition to the
conventional‐type of blockbusters.
We have only just started reforming along the three points I mentioned above,so at this point, I can't speak about specific titles. But we are determined to solidly implement these initiatives.
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