Support NeoGAF

[adamsapple]

Former Square Enix exec on why Final Fantasy sales don’t meet expectations and chances of recouping insane AAA budgets | Game World Observer

Former Square Enix executive Jacob Navok has shared his thoughts on less-than-expected sales of the latest Final Fantasy games. He also tried to explain why people mistakenly think that the Japanese publisher is simply setting unrealistic goals for its products.

gameworldobserver.com

Long chain, well worth the read.

 

[bitbydeath]

I’m still of the opinion that games (like a lot of things) are pricing themselves out of existence.

They would make more sales and in turn more money if they lowered the cost of buying games.

 

[hybrid_birth]

Unless people buy more FF, it really could be the final fantasy.

 

[Revolutionary]

Unless people buy more FF, it really could be the final fantasy.

 

[March Climber]

I’m still of the opinion that games (like a lot of things) are pricing themselves out of existence.

They would make more sales and in turn more money if they lowered the cost of buying games.

Which makes all of the "Tons of devs are using AI to help streamline development and lower costs" articles make complete sense.

It's also why Unreal has been working their asses off and releasing new versions faster than they ever have before because they're trying to help streamline game development too.

They want to keep the quality but lower the costs.

 

[bitbydeath]

Which makes all of the "Tons of devs are using AI to help streamline development and lower costs" articles make complete sense.

It's also why Unreal has been working their asses off and releasing new versions faster than they ever have before because they're trying to help streamline game development too.

They want to keep the quality but lower the costs.

Software isn’t physical, it doesn’t cost more to sell two items as opposed to one item.

They could price games at $40, and sell 2x-5x times as many copies, earning millions more dollars in the process.

 

[adamsapple]

They could price games at $40, and sell 2x-5x times as many copies, earning millions more dollars in the process.

This is making a very generous assumption that lowering MSRP to $40 will actually lead to 2x sales.

 

[March Climber]

Software isn’t physical, it doesn’t cost more to sell two items as opposed to one item.

They could price games at $40, and sell 2x-5x times as many copies, earning millions more dollars in the process.

I agree with this, but unfortunately there are still games coming out as physical, and FF16/FF7R are two of them.

Pricing digital 20 dollars below would just drive a stake into the heart of physical much faster. And the physical fans won't like that lol.

These devs are boxed into a corner.

 

[Punished Miku]

A lot of people said this for years and got nothing but shit for it on here.

 

[bitbydeath]

This is making a very generous assumption that lowering MSRP to $40 will actually lead to 2x sales.

That was low-balling it.
Helldivers 2 for example wouldn’t have sold over 10M copies at the $70 price point.

It would have likely been closer to 1-2M because the $70 price point doesn’t allow for whim purchases.

 

[James Sawyer Ford]

What a completely stupid and false thing to say:

“Navok noted that if a game costs $100 million to make over five years, it has to beat what the company could have returned investing a similar amount in the stock market over the same period. “For the 5 years prior to Feb 2024, the stock market averaged a rate of return of 14.5%. Investing that $100m in the stock market would net you a return of $201m, so this is our ROI baseline,” he explained.”

 

[Gp1]

"Sales expectations generally come from a need to cover the cost of development plus return on
investment."

WTF, so your expectations are unrealistic high because someone allocated an unrealistic high budget based on unrealistic sales prediction?
What came first the egg or the chicken?

So your solution is reduce the fucking cost or reduce what you expect on ROE, because your game sales expectations are wrong.

 

[hybrid_birth]

I’m still of the opinion that games (like a lot of things) are pricing themselves out of existence.

They would make more sales and in turn more money if they lowered the cost of buying games.

Governments would be doing business a huge favor (and themselves with tax money) by raising wages with inflation.

If people have more money then they will spend more of it. On video games, etc.

But no. Government makes a wage that even with working full time, people can't afford any apartment to live at.

It's happening in New York. People working minimum wage can't afford any apartment in the whole city.

I'm disabled and unable to work. But this pisses me off.

 

[Doom85]

Software isn’t physical, it doesn’t cost more to sell two items as opposed to one item.

They could price games at $40, and sell 2x-5x times as many copies, earning millions more dollars in the process.

That makes no sense. If the price is an issue for an individual consumer, they’ll likely just grab it when it’s on sale for around $40. So why lower the price for the launch release, that just means they’re making even less profit. And as was said before me, some games only attract so large an audience regardless of price.

unfortunately there are still games coming out as physical

“unfortunately“?

 

[Portugeezer]

What a completely stupid and false thing to say:

“Navok noted that if a game costs $100 million to make over five years, it has to beat what the company could have returned investing a similar amount in the stock market over the same period. “For the 5 years prior to Feb 2024, the stock market averaged a rate of return of 14.5%. Investing that $100m in the stock market would net you a return of $201m, so this is our ROI baseline,” he explained.”

He makes it seem like free money, just invest $100m get $200m but ignores that there are no guarantees.

 

[bitbydeath]

Governments would be doing business a huge favor (and themselves with tax money) by raising wages with inflation.

If people have more money then they will spend more of it. On video games, etc.

But no. Government makes a wage that even with working full time, people can't afford any apartment to live at.

It's happening in New York. People working minimum wage can't afford any apartment in the whole city.

I'm disabled and unable to work. But this pisses me off.

Slightly off-topic but Sony has recently called this out when it comes to movie prices as well.
Cinema is dying because they are pricing themselves out of business.

 

[bitbydeath]

That makes no sense. If the price is an issue for an individual consumer, they’ll likely just grab it when it’s on sale for around $40. So why lower the price for the launch release, that just means they’re making even less profit. And as was said before me, some games only attract so large an audience regardless of price.

Launching at $40 is different to waiting for a sale at $40.

How often has it gotten to that price and your like, well I waited this long -

A. I’m no longer interested
B. I may as well wait for $20 or lower.

 

[hybrid_birth]

Slightly off-topic but Sony has recently called this out when it comes to movie prices as well.
Cinema is dying because they are pricing themselves out of business.

I believe it. It was a ghost town at the last theater I went to. Popcorn and drinks cost us $50. Ontop of the ticket prices.

 

[March Climber]

That makes no sense. If the price is an issue for an individual consumer, they’ll likely just grab it when it’s on sale for around $40. So why lower the price for the launch release, that just means they’re making even less profit. And as was said before me, some games only attract so large an audience regardless of price.

He's saying it because these companies don't determine their future moves by lifetime sales. They instead determine them within a generous 6-9 months max. At worst, 1 week to 1 month. If something bombs in that first month, there's a higher likelihood you won't be seeing it again or for a very very long time, even if it sold well on lifetime.

Edit: And before anyone pulls up that rare game that got a sequel as a counterpoint, my point is that it's the situation itself that would not be the norm in the first place.

“unfortunately“?

I know you're joking lol, but I meant unfortunately because they are boxed into the corner of always launching at full price or launching at a lower price with a ton of DLC, which invalidates a disc. It's a damned if you do damned if you don't.

 

[Doom85]

How often has it gotten to that price and your like, well I waited this long -

A. I’m no longer interested
B. I may as well wait for $20 or lower.

Look, you can be honest here. You just want games to be $40 purely for your own benefit regardless if that would cause some games to fail to make a profit.

 

[bitbydeath]

Look, you can be honest here. You just want games to be $40 purely for your own benefit regardless if that would cause some games to fail to make a profit.

I know I would buy a ton more games at $40, it doesn’t even have to be $40 but the current $70 is not sustainable.

 

[James Sawyer Ford]

He makes it seem like free money, just invest $100m get $200m but ignores that there are no guarantees.

Yep. And 14% returns over a short time period is not only higher than average, but completely speculative.

That 14% annualized market return in a few years is nothing but noise and highly correlated to the macro economy and Fed policy more then it does with any company fundamentals

 

[Doom85]

He's saying it because these companies don't determine their future moves by lifetime sales. They instead determine them within a generous 6-9 months max. At worst, 1 week to 1 month. If something bombs in that first month, there's a higher likelihood you won't be seeing it again or for a very very long time, even if it sold well on lifetime.

Yes, but by cutting the price by almost half, those sales expectations go WAY up. And not even established IPs necessarily can just attract enough new buyers to justify that. This just seems like an unnecessary gamble that has no reason for it to happen other than, “nah come on, those buyers will show up, trust us!”

I know I would buy a ton more games at $40, it doesn’t even have to be $40 but the current $70 is not sustainable.

I am honestly shocked it took games as long as it did to reach $70. $60 was the standard launch MSRP in the US for a long, LONG time. Anyone who thought that was going to last forever was kidding themselves.

 

[Crayon]

I don't know if FF fans are being born faster than they're dying.

 

[Unknown Soldier]

That was an amazing thread. I don't think a lot of people with short attention spans or low IQ's will get through it, but if you do it's pretty enlightening about how the business of making games is these days

 

[Unknown Soldier]

I don't know if FF fans are being born faster than they're dying.

The problem isn't that new gamers aren't being born, the problem is the new gamers only play Fortnite, Roblox, Minecraft, Genshin Impact, etc.

They aren't playing FF and Square Enix and also other traditional AAA console/PC game makers have a serious problem because of this

 

[bitbydeath]

I am honestly shocked it took games as long as it did to reach $70. $60 was the standard launch MSRP in the US for a long, LONG time. Anyone who thought that was going to last forever was kidding themselves.

Doesn’t make it the right move. Just means less people will buy their games. $40 is worth more than $0.

 

[LordCBH]

I still remember when they said the Tomb Raider reboot didn’t meet expectations when it sold a fuck ton. I think Square is just bad at setting expectations.

 

[feynoob]

"Sales expectations generally come from a need to cover the cost of development plus return on
investment."

WTF, so your expectations are unrealistic high because someone allocated an unrealistic high budget based on unrealistic sales prediction?
What came first the egg or the chicken?

So your solution is reduce the fucking cost or reduce what you expect on ROE, because your games your sales expectations are wrong.

You cant reduce ROE. Because you need the game to be profitable.

The actual problem is the budget of the game is balooning too much. We arent in a 100m budget these days.

Ghost of tusushima had around 100m budget. The sequal budget will now be higher than that, due to high salary, increase of marketing cost and the technology used to make the game. The higher the dev count, the more money you will have to spend.

 

[balls of snow]

The only relevent slide.


Thanks Gaas.

 

[Puscifer]

This is making a very generous assumption that lowering MSRP to $40 will actually lead to 2x sales.

And as we've seen every industry understands the race to the bottom that happens when you lower the price of a premium product.

 

[feynoob]

That was an amazing thread. I don't think a lot of people with short attention spans or low IQ's will get through it, but if you do it's pretty enlightening about how the business of making games is these days

When people are busy with their brand loyalty system, they wont understand these stuff.

 

[tusharngf]

Capcom made record profits by staying multiplatform lol

 

[ByWatterson]

Governments would be doing business a huge favor (and themselves with tax money) by raising wages with inflation.

LOL

 

[Unknown Soldier]

This is making a very generous assumption that lowering MSRP to $40 will actually lead to 2x sales.

The reality is that game prices need to and will go up. This is why the latest Assassin's Creed is $130 for the "Everything Included" Edition

People piss away hundreds and thousands of dollars on the live service games, revenue from buy-to-play games absolutely needs to catch up and raising prices is pretty much the only option left. It's going to happen one way or another

 

[hybrid_birth]

LOL

it is so funny to you. Yet your not the one struggling to make ends meet on $7 an hour.

 

[Crayon]

The problem isn't that new gamers aren't being born, the problem is the new gamers only play Fortnite, Roblox, Minecraft, Genshin Impact, etc.

They aren't playing FF and Square Enix and also other traditional AAA console/PC game makers have a serious problem because of this

That's what I'm saying. The kids are coming up on different stuff. They heyday of FF when anyone off the street knew about and wanted it was 6-10.

 

[Raven117]

What a completely stupid and false thing to say:

“Navok noted that if a game costs $100 million to make over five years, it has to beat what the company could have returned investing a similar amount in the stock market over the same period. “For the 5 years prior to Feb 2024, the stock market averaged a rate of return of 14.5%. Investing that $100m in the stock market would net you a return of $201m, so this is our ROI baseline,” he explained.”

Tell me you don’t know anything about project management and finance without telling me you don’t know anything about project management or finance.

 

[Hero_Select]

A lot of the points he brings up are sound and I don't necessarily disagree with him but..

There's a lot of ways these companies can cut costs by maybe just not making dumb choices and chasing trends.

The amount of money companies spend on marketing now is insane. You really don't need an A list celebrity in your commercial or worse.. streaming your game when they've clearly never picked up a controller. You don't need to pay Ninja to play a game on stream for you, his audience won't care in most cases.

You don't need Superbowl ads, you don't need time square ads. You definitely don't need tv ads. Noone watches tv anymore.

Idk. I presented it as fact but I really don't know.

Nintendo sure does look to be in a really good place right now though. Of course it affects them too but not having to worry about going to Iceland to take up close pictures of rocks and dirt because your game needs to look like the best thing ever as a selling point must be nice.

 

[Doom85]

Doesn’t make it the right move. Just means less people will buy their games. $40 is worth more than $0.

So they should just pretend inflation isn’t a thing? What sense does it make that everything goes up in price but video games just stay the same? Or in your opinion, actually lower far more? Do you know how the economy works? When the demand is high, cost is high. The video game industry has become massive in the last few decades, they would be defying all business sense to universally slash all their prices by almost half right now.

And no, I’m sorry, I don’t believe sales will just practically double if the price launches at $40. You can be that overly optimistic about it if you want to, but don’t be shocked if people, including the game companies themselves, might need some actual hard evidence before swallowing such a pill.

 

[feynoob]

The reality is that game prices need to and will go up. This is why the latest Assassin's Creed is $130 for the "Everything Included" Edition

People piss away hundreds and thousands of dollars on the live service games, revenue from buy-to-play games absolutely needs to catch up and raising prices is pretty much the only option left. It's going to happen one way or another

The real reality is those games go on sale after half a year.

This is mirage costing 24.99 on epic sales.

https://store.epicgames.com/en-US/p/assassins-creed-mirage

Avatar frontier of pandora

https://store.epicgames.com/en-US/p/avatar-frontiers-of-pandora

 

[feynoob]

What a completely stupid and false thing to say:

“Navok noted that if a game costs $100 million to make over five years, it has to beat what the company could have returned investing a similar amount in the stock market over the same period. “For the 5 years prior to Feb 2024, the stock market averaged a rate of return of 14.5%. Investing that $100m in the stock market would net you a return of $201m, so this is our ROI baseline,” he explained.”

Suit people are doing business these days. Just look at how Sony is trying to make their stock look good.

The reality is that those invesment would help the company in other ways. So they have to get that money back and more.

 

[bitbydeath]

So they should just pretend inflation isn’t a thing? What sense does it make that everything goes up in price but video games just stay the same? Or in your opinion, actually lower far more? Do you know how the economy works? When the demand is high, cost is high. The video game industry has become massive in the last few decades, they would be defying all business sense to universally slash all their prices by almost half right now.

And no, I’m sorry, I don’t believe sales will just practically double if the price launches at $40. You can be that overly optimistic about it if you want to, but don’t be shocked if people, including the game companies themselves, might need some actual hard evidence before swallowing such a pill.

Everything shouldn’t go up in price.
I posted earlier about this already having been called out for movies, and by Sony no less. A day wouldn’t go by without someone mentioning the current state of housing.

You can only bend something so far before it breaks.

 

[James Sawyer Ford]

Tell me you don’t know anything about project management and finance without telling me you don’t know anything about project management or finance.

Tell me you don’t know anything about project management finance while pretending to claim to know anything about project management finance.

Each company has different ROI measures; different industry sector mix, different project risks, anticipated growth rates, and different long term goals.

Setting the hurdle rate based on some metric like ex-post 20/20 hindsight clarity of an arbitrary period of a total market return that was not guaranteed ex-ante is absolutely stupid and lacking any sort of nuance

 

[Pejo]

That's a lot of text to say "They predicted wrong in 2015".

 

[ByWatterson]

it is so funny to you. Yet your not the one struggling to make ends meet on $7 an hour.

This describes literally 141,000 people in the United States.

 

[Barakov]

I agree with this, but unfortunately there are still games coming out as physical, and FF16/FF7R are two of them.

Pricing digital 20 dollars below would just drive a stake into the heart of physical much faster. And the physical fans won't like that lol.

These devs are boxed into a corner.

 

[Doom85]

Everything shouldn’t go up in price.
I posted earlier about this already having been called out for movies, and by Sony no less. A day wouldn’t go by without someone mentioning the current state of housing.

You can only bend something so far before it breaks.

Theater tickets have gone up in price far more and more frequently than video games getting a $10 increase after a massive length of the $60 era. Not a good comparison.

 

[bitbydeath]

Theater tickets have gone up in price far more and more frequently than video games getting a $10 increase after a massive length of the $60 era. Not a good comparison.

It’s the same principle, higher cost = less consumers.

 

[Doom85]

It’s the same principle, higher cost = less consumers.

Nintendo, Sony, Capcom, etc. all have sales showing this clearly isn’t the case.