Analyst: games costing $100 million need 5-10 million sales to succeed

Wednesday, 27 March 2013 11:21 GMT By Dave Cook

Square-Enix posted a grim financial revision yesterday, which caused president Yoichi Wada to stand down. The company then called Tomb Raider a failure, despite selling 3.4 million units in just four weeks. Numbers like these are often not enough to cover triple-a development costs, one analyst has said.

In a statement sent to GI.biz, long time industry analyst Billy Pidgeon predicted Wada’s departure would help remedy Square’s situation, and stressed that single-player IP is a contributing factor in the company’s financial woes.

Said Pidgeon, “The AAA market is extremely competitive. Most of Square Enix’s franchises are single player games, which are less popular than multiplayer. Square Enix has been a leader in that sector, but now faces stronger competition from multiple publishers, both large and small, including Bethesda, Capcom, Xseed, Atlus and Level 5.

“Square Enix’s franchises are well established and require ever-higher production budgets to match and surpass past performance. The latest Hitman and Tomb Raider sold in the three million unit range and got Metacritic ratings above 8.

“Those numbers would rate as successful for JRPGs that earn more from vendors as exclusives and have manageable budgets. But for games with development budgets approaching $100 million to be truly profitable, ratings have to be above 8.5 and sales need to be in the five to ten million unit range.”

Meanwhile however, Pidgeon did state that Square’s approach to free-to-play, digital and mobile titles is improving significantly, and will bring additional revenue into the company.

This is a prevalent issue, as the development cost of triple-a console games reaches astronomical levels. Making that money back is becoming harder all the time. What do you make of the situation?

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