Square Enix Will Learn From Avengers Failure and Continue To Invest In AAA Games and New IPs
Square Enix had recently held an earnings call with investors answering some questions on their recent loss faced after the lackluster launch of Marvel’s Avengers.
The company disclosed its financial results for the third quarter which saw the launch of games including Marvel’s Avengers. In the earnings call, the company president and CEO, Yosuke Matsuda shared some comments on their financial outlook.
Investors were interested in learning more about the failure of Marvel’s Avengers. In the first half of 2020, Square Enix had to write-down 11 billion yen due to the losses associated with Marvel’s Avengers. They failed to recoup the development and marketing costs with the game due to the lackluster sales.
“Absent factors associated with “Marvel’s Avengers,” the sub-segment would have been in the black. In addition to the amortization of that game’s development costs, another significant factor associated with the title was the fact that we undertook a major advertising campaign at the time of its launch to make up for delays in our marketing efforts resulting from the COVID-19 pandemic., ” said Matsuda.
Going forward, Matsuda hopes that they are able to grow and expand the sales of Marvel’s Avengers. “There is a certain amount of development costs still to be amortized in 3Q, but we want to recoup it by growing our sales going forward.” Adding to that, Matsuda said: “Our intention is first and foremost to work to expand sales in order to improve its profitability.”
Investors were concerned with the HD games sub-segment which was highly volatile, however, according to Matsuda, they are aiming to get recurring revenue from MMO and Smartphones games to offset the volatility of their HD games segment.
“We think of the totality of the Digital Entertainment segment rather than of the HD Games sub-segment in isolation. By this, I mean that we consider our ability to offset the volatility in HD games with stable recurring income from sources such as MMO and smartphone games. We therefore undertake our HD game development efforts with the expectation that there will be a certain level of volatility. However, it naturally goes without saying that we also intend to improve profitability within the HD Games sub-segment by promoting digital sales and other measures.”
According to Matsuda, Square Enix will learn from their failure with Marvel’s Avengers. “We intend to leverage the lessons we learned from this experience in future game development efforts.” The company is also planning to continue to invest in its major AAA games and new IPs. “We have been working to shore up our base of stable recurring earnings so that we will be able to continue to invest in the development of major AAA titles and in the creation of new IP.”
Marvel’s Avengers is available now for PS4, Xbox One, and PC. It is currently on sale on all platforms with the price by half and can be purchased either digitally or through physical retailers like Amazon.