Square Enix reveals net loss for 2013 fiscal year, major games released were “financially unsatisfactory”

Square Enix announced in their 2013 annual report that the company’s three major game releases this past fiscal year – Tomb Raider, Hitman: Absolution, and Sleeping Dogs – did not reach their target financial goals, and as such were considered major contributors to the company’s decrease in profits (totaling over $100 million USD).  This is the first net loss Square Enix has seen since Square Co. and Enix Corp. merged in 2003.

Yosuke Matsuda, President and Representative Director of Square Enix, does note that these games were successes “from a game development perspective,” due to the critical acclaim they received from media outlets, but he thinks that the failure of the games to reach their targeted sales was due to an increase in competition in disc distribution channels.  With an increase in blockbuster titles being released by studios, it is proving difficult to convince retailers to move satisfactory amounts of physical media without offering costly incentives to keep their games in stock.  In order to increase profits for the next fiscal year, Matsuda proposes to increase their presence in the market by developing games for more platforms, expanding game development to both cloud gaming as well as the increasingly popular microconsoles.  He also thinks that the idea of developing games with the intent for them to be worldwide successes may not be entirely feasible, as “customer preferences vary from region to region, and other factors such as lifestyle, income status, and infrastructure are vastly different throughout the world.”  With that in mind, the company will move forward with a diverse portfolio to cater games to each region they serve.

What do you think?  Is it a smart move to attempt to diversify games to meet the needs of different regions while simultaneously attempting to move to other platforms that don’t quite yet have an established niche in the market?  Or could this move spell trouble in the future for the company?  The major leaps forward in technology that are happening are daunting for every company in the market, and they will need to make smart managerial decisions to keep in line with those advances.  Hopefully this will prove fruitful not only for the companies, but the gamers and other consumers of their products as well.