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Documents about Square
Forspoken Might Have Cost Over $100 Million to Make
The production budget for the video game Forspoken is estimated to have exceeded $100 million, a figure that suggests significant financial challenges for publisher Square Enix.
- Square Enix officially labeled Forspoken’s sales as lackluster, identifying the title as a significant downside risk to its full-year revenue.
- Production costs for Forspoken are estimated to be between $75 million and over $100 million, highlighting the high financial stakes of AAA development.
- Following the game's poor market performance, Square Enix dissolved Luminous Productions and integrated its staff into other internal teams.
The Japanese Blockchain Gaming Landscape
The Japanese gaming industry is currently undergoing a significant, albeit experimental, shift toward blockchain integration.
- Major Japanese gaming publishers, including Square Enix, Bandai Namco, GREE, and Capcom, are actively experimenting with blockchain technology despite significant player backlash.
- The Oasys blockchain has emerged as a central hub for Japanese industry efforts, securing $20 million in seed funding and attracting major publishers to act as network validators.
- Oasys utilizes a multi-layered architecture consisting of a Hub Layer (L1) and a Verse Layer (L2) to provide a gaming-specific environment with flexible token design options.
Pokémon Scarlet and Violet Market Performance: Japan November 2022
Pokémon Scarlet and Violet dominated the Japanese video game market in November 2022, securing its position as the month's top-selling title by a significant margin.
- Pokémon Scarlet and Violet sold an estimated 3.1 million boxed units in Japan during November 2022, making it the top-selling game and accounting for 73% of all boxed game sales in the country for the month.
- Pokémon Scarlet and Violet's launch sales in Japan significantly surpassed those of Pokémon: Arceus, which sold approximately 2.1 million units in its first month.
- Nintendo Switch consoles dominated hardware sales in Japan during November 2022, accounting for 93% of all physical copies sold, with the Switch OLED model representing over 50% of units and the Switch Lite seeing a boost to 13.6% of hardware sales.
Video Game Publisher Share Prices Reflect Growing Confidence in the Industry
Publicly traded video game publishers demonstrate significant resilience and growing investor confidence despite broader economic volatility, including inflation, supply chain disruptions, and geopolitical instability.
- Between November 2021 and May 2022, the video game industry outperformed broader market indexes and cryptocurrencies, posting an 11.1% increase in the aggregate share value of 14 tracked companies.
- Japanese publishers, including Sega Sammy Holdings, Bandai Namco, Square Enix, and Capcom, demonstrated strong resilience, with most outperforming the Nikkei 225 index over the 12-month period ending May 2022.
- Sega Sammy Holdings nearly doubled its share price over the year, driven by a 16% revenue increase, a 4x rise in operating income, and the success of the Sonic film franchise.
Embracing the Future
The acquisition of Square Enix’s Western studio network by Embracer Group represents a significant strategic realignment for both entities.
- Embracer Group acquired Square Enix’s Western studio network—including Crystal Dynamics, Eidos Montreal, and Square Enix Montreal—along with IPs like Tomb Raider and Deus Ex for $300 million.
- The acquisition adds over 1,000 development staff to Embracer Group, bringing its total headcount to more than 14,000 employees across 124 studios in over 40 countries.
- Square Enix offloaded these studios to reduce costs, viewing the Western division as a high-expenditure operation that consistently underperformed relative to expectations.
Crouch End
The primary focus of this analysis is the impact of Sony’s mandate requiring developers to provide two-hour game trials for titles priced at $34 or higher on the PlayStation Store.
- Sony is mandating that developers provide at least two hours of trial gameplay for any PlayStation Store title priced at $34 or more, to be made available within three months of launch for at least one year.
- While Sony's PlayStation Store team will handle the creation of these mandatory trials, developers have expressed concerns regarding Sony monetizing their work without sharing the resulting revenue.
- Activision Blizzard shareholders have voted to approve Microsoft’s proposed acquisition of the company, though Wall Street remains skeptical regarding the deal's ultimate success.
A Look at Ten Square Games
Ten Square Games, a Polish mobile game publisher established in 2011, faces significant business challenges following a period of rapid growth.
- Ten Square Games (TSG) has faced significant financial pressure, with its market capitalization declining by 65% year-over-year as of April 2022.
- The company suffers from high revenue concentration, with 73% of its total bookings derived from a single title, Fishing Clash.
- TSG is struggling with stagnant growth and user acquisition (UA) scaling, largely due to the impact of IDFA privacy changes and the niche nature of their fishing and hunting game themes.
Hit Points #114: Ad Astra
The April 2022 analysis examines Microsoft’s strategic pivot toward integrating in-game advertising within the Xbox ecosystem.
- Microsoft is developing an in-game advertising platform for Xbox, primarily targeting free-to-play titles to expand its service-based reach beyond traditional console hardware.
- The initiative aims to attract mobile-style free-to-play games to the Xbox ecosystem, aligning with Microsoft's goal of reaching a broader audience across all devices via Azure.
- Sega is rebooting 'Crazy Taxi' and 'Jet Set Radio' as free-to-play, cross-platform titles modeled after the 'Fortnite' live-service revenue model.
Microsoft Reportedly Paid $5-10 Million to Bring Guardians of the Galaxy to Game Pass
The financial dynamics of Microsoft’s Xbox Game Pass subscription service remain a subject of industry scrutiny, particularly regarding the acquisition costs for third-party titles.
- Microsoft reportedly paid between $5 million and $10 million to bring Eidos Montreal's 'Guardians of the Galaxy' to the Xbox Game Pass subscription service.
- Industry analyst David Gibson estimates this deal equates to approximately $2 per game, significantly lower than the $29 retail price point at the time.
- The estimate is based on 15 years of coverage of Square Enix data and discussions with industry sources, though Microsoft does not officially disclose Game Pass financial terms.
Plus: Eureka, Some New Indie Hits (Finally!)
Mid-March 2022 marked a significant recovery for indie game debuts on Steam following a stagnant February.
- Indie game launches on Steam recovered in mid-March 2022 after a stagnant February, which saw only five games reach 1,000 reviews in their first week compared to twelve in January.
- Core Keeper emerged as a top performer, selling over 100,000 units in its first two days and reaching a peak of 22,000 concurrent users.
- Market success for indie titles is currently driven by genre gaps, strong art direction, and high engagement from the streaming community.
Capital Idea
The current wave of consolidation in the global video game industry, exemplified by Microsoft’s acquisition of Activision Blizzard, is unlikely to extend to the Japanese market.
- Microsoft is unlikely to acquire major Japanese game publishers like Capcom or Square Enix due to Japan's unique business culture and structural barriers to foreign investment.
- Japan ranked last out of 196 countries for foreign direct investment in 2019, trailing even North Korea.
- The 'keiretsu' business model, where Japanese firms maintain deep, cross-industry partnerships and mutual ownership, creates a protective environment that discourages outside acquisition.
Keanu Reeves Skepticism vs Blockchain in the Games Industry
This analysis examines the intersection of celebrity influence, emerging blockchain technologies, and shifting corporate strategies within the global games industry during late 2021.
- Sony now generates two-thirds of its quarterly revenue from digital content, allowing for immediate profitability on PlayStation 5 hardware despite traditional cycle losses.
- Physical software sales in November 2021 fell 12% below estimates, marking a significant decline in traditional retail performance.
- Roblox experienced a 35% year-over-year increase in daily active users to 49.4 million as of November 2021, though bookings per user saw a slight decline.
