Crowdfunding: Large Video Game Publishers Taking Notice

square enix

Over the weekend, Silicon Era published a piece covering an earnings call by big time video game publisher Square Enix. Three recent titles put out by the publisher failed to meet sales targets, including Tomb Raider and Hitman: Absolution. Yosuke Matsuda, who is apparently next in line to be President of Square Enix, shared the following on the call…

“These titles were lauded by the industry from a creative perspective, achieved very high levels of quality, and I believe that we achieved our primary goal of both reinvigorating existing IPs and creating new IPs,” Matsuda says. However, he adds, profits are where the aforementioned games failed to deliver as per expectations. One of the problems was that their actual sales to customers—not shipments to retailers—slowed down too quickly.

Ishaan at Silicon Era explains that Matsuda went on to describe what may be a functional problem for large publishers in the video game space.

This isn’t one-time problem, Matsuda feels. It’s a structural issue with how major, big-budget games are developed. You spend several years working on a game, and don’t see a penny of the profits until it’s been released to consumers. Once it’s out there, it competes with other major hits for the spotlight, and in an age where consumers are becoming increasingly selective, this makes it difficult to guarantee sufficient returns on investment.

This obviously stands at odds with how games have been created via crowdfunding sites like Kickstarter, where market validation is key and helps publishers gauge interest before doing the heavy lifting. Matsuda alluded to Square Enix’s interest in the crowdfunding ecosystem on the call.

That is big buy in from a very big name in video games. Matsuda expressed interest in crowdfunding’s ability to connect gamers to the marketing and development of the games themselves. This, in his estimation, may help mitigate the risk shops liks Square Enix take on when developing monolithic console games.

Part of what these larger shops are battling simply comes down to choice. There are more choices for gamers now than ever thanks in part to the rise of the indie gaming industry and the proliferation of alternative devices like tablets and smartphones. Gamers also have more of a voice today than they ever have before, and this stands to grow over time as is evident from Matsuda’s comments.

With the release of specs for the Xbox One last week, Microsoft also announced the end of their indie game store. Indie game devs will be forced to seek inclusion in Xbox Live Arcade (XBLA), which requires going through a publishing intermediary. This is part of an effort by Microsoft to remove the silos from their own ecosystem. Games will “just be games” and the indie distinction goes away.

In a way, I think this speaks to what is happening in the space as a whole. As Square Enix seeks to be more indie, indie games are becoming more mainstream by the day. It seems the two worlds are striving to meet in the middle. The only wildcard I see remaining is the focus returning to high-end graphics that platforms like the Xbox One are sure to bring back. It wasn’t that long ago when Minecraft took the gaming world by storm, but we also spend 5 or more years with the Xbox 360 and Playstation 3 defining high-end console graphics.

How will the market react to this new round of consoles? Do you think companies like Square Enix will make an effort to reach out to gamers in a more direct way or is this just lip service from executives that are beginning to see the writing on the wall?

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