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 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.
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.
This is why capitalism ruins everything. So it's not even about making art that is profitable, it's about beating out other investment opportunities that someone could have chosen, even if it meant the art didn't get made.
That is so ass-backwards.
Investment should be about wanting to grow a company whose products you believe in, both to see returns when those products perform well, but also to enjoy the future products.
Someone whose attitude is "I don't care about your products at all, I just care about cash ROI" will turn around and short your stock and disparage you, if they think it'll net them more money. In other words, they won't actually look out for the best interests of the company, and will always be looking out for opportunities to plunder the business for more profit.
And this is supposed to create a healthy market for goods? Please.
"The free market makes goods compete to see what customers prefer." Apparently not.
Apparently it creates a situation where the products can be profitable and amazing and well-loved, but a bunch of wealthy assholes who don't care about the products at all can decide the company isn't up to their standards, and punish or kill it.
There was another post here on Beehaw about housing costs, where someone noted that "voting with your wallet" doesn't work because wealthy people can "out-vote" you, on a level that even collectively you can't compete with, and this really illustrates their point well.
Late edit:
I think it bears saying that under this model of ROI calculation, depending on how well other industries are doing, it is entirely possible that no video game could feasibly outperform the market for a given timeframe... so should the whole games industry just fucking shut down in that case?
This is basically why the largest studio in my county shut down last year. It was considered "insufficiently profitable" by the parent company. Not unprofitable. It was turning a profit and had produced some highly regarded games, including an award winner. It was also a company that treated its employees well, including offering highly flexible working hours and having a dog-friendly office. I'd been eyeing them up because I'd hoped to work there when I got my degree. But nope, they're gone now because they weren't making enough money.
I believe society as a whole should stop idolising the wealthy, and start seeing their inability to be satisfied with having enough money for a comfortable life as the dysfunction it is. Never being satisfied no matter how much money you have should be seen as a problem, not something to aspire to.
Right?! I freaked on the same paragraph. Most depressing thing ever said about game dev. These suits would rather fire everyone and play stonks all day if it earned a dime more. I'm so mad for the massive creative force being crushed by this broken system.
I feel like corporations are inherently evil. The owners have no actual liability for the harm they do, and their highest calling is profits. I don't know how to encourage investment without the stock market, but I do know if you play a little game called "what is the end result," you'll quickly see a dystopian future where everyone is slaves except in name.
We'd better look into the French solution long before it gets to that point.
I don’t know how to encourage investment without the stock market
I invest in stuff that's not stocks all the time. When I give money to someone so that they will hopefully create a cool new product in the future (e.g. a video), I'm not paying for an individual product, I'm investing in them as a creator in hopes for future ROI. That's Patreon.
We treat the addiction to wealth accrual different from any other addiction, in that we laud it, but make no mistake that it is addictive. Watching numbers in your account go up gives you a rush, just as sure as watching numbers in a video game.
When other addictions cause harm, we push people to get treatment, or at very least condemn the addiction. When someone is addicted to the accrual of wealth, even to the detriment of others, we call them, 'genius', 'savvy', 'visionary', or 'shrewd'.
There is no value considered in providing stable income to the team members. No value considered in artists honing their craft. Even if the games only had marginal profits in and of themselves, considering the cost of big budget games, there is still huge value in creating and maintaining a large IP.
I fucking hate everything about this.
I think it highlights how perverse the stock market itself is. It doesn't really seem like it functions much as a way for riskier ventures to raise capital outside of a bank, but a giant casino that gives the illusion of not being a zero sum game.
It's hypothetically possible for a company to make more money in the stock market by investing in themselves than by creating anything (see Tesla). And if all companies could behave this way and somehow knew what the stock market would do for 5 years, I'd wager a TON of companies wouldn't meet it, invest in the stock market, drive up the "value," more don't meet it, etc. etc. until no one is making anything, and everyone is happy with their paper fortunes and try to sell.
It's such a destructive mindset, and it seems to me like indie games are hopefully on the cusp of re-demonstrating to the rest of the industry why it is so.
Art/luxury products depend on catering to subjective tastes to turn a profit. You need to speak to someone's perspective or interests, and are competing for their disposable income against all other forms of entertainment. Thus the wider the targeted audience, the harder it is to outcompete the rest of the market on "consumer interest" (no idea if that's the proper use of the term but it sounds correct for the context), the harder it is to even turn a profit.
Simultaneously, these corporations want an ever-greater magnitude of profit (aka growth). So they decide to target the widest audience possible, while investing as much capital as they can.
That's already an unstable balance of priorities. As soon as you start conceiving yourself as competing with almost every single other market on the basis of shareholder speculation, in terms of ROI, it's doomed.
You're not just shooting yourself in the foot, you're trying to do a Paul Muad'hib Atreides except because this is reality, not sci-fi, instead of drinking the Water of Life you mixed 10 grams of ketamine, 5 tabs of acid, and a fistful of meth into a blue Gatorade and chugged it in one go. All you end up doing is vibrating in place so hard you begin to slough off flesh and erratically disintegrate, like some sort of sad eldritch horror.
God do I hate corpos sick with capitalism.
To continue the Dune analogy, they really could use some ecology-derived thinking: specialize and find your niche (or help it emerge), and give back to the rest of the ecosystem so that it continues to flourish with you. Monoculture has a negative correlation between scale and sustainability, let alone ROI.
Ofcourse video games have to compete with everything else people can spend their money on. That is how you ensure people's skills are being utilized where they are needed/wanted. And yeah, it is conceivable that the video game industry would have to shut down at some point in response to developments happening in society. Other forms of entertainment becoming more preferred. Or things going sideways so the focus becomes meeting more basic needs. That kind of flexibility is a good thing.
If you have people investing millions of dollars into something, it isn't art but business. There are plenty of people out there making art for arts sake, but you obviously won't get the same level of professionalism and scale. This includes forms of arts and products that are no longer industries built around (artisanal bookbinding and whatnot).
This misses the point in so many ways, I'm not sure where to start... but here goes:
That is how you ensure people’s skills are being utilized where they are needed/wanted.
Except that that's the opposite of what happened here; their skills were wanted by many people, to the point of profitability and sustainability, but other people, who didn't care about the skills or how they were utilized, decided that whatever the product was, it wasn't good enough. Their skills were literally not part of the consideration here at all.
And yeah, it is conceivable that the video game industry would have to shut down at some point in response to developments happening in society. Other forms of entertainment becoming more preferred. Or things going sideways so the focus becomes meeting more basic needs. That kind of flexibility is a good thing.
Except that's not what we're talking about either. Once again, this was not a situation where the actual demand for the product was not present due to media evolution, or product quality, or lack of consumer discretionary spending; the demand was present. The product was both in-demand and in fact profitable.
That kind of flexibility is a good thing.
This was not flexibility, this was- again- the opposite of that; a rigid metric that did not consider anything beyond cash growth, despite the fact that products are the point of a company. Without products, the company will not generate any profit. Without companies generating profit, the market as a whole will not grow. Without market growth, there is no ability to invest elsewhere (or at least, at a level to measure against).
That's why this (and all the other hyper-growth-minded investment planning) is so short-sighted; sustainability ensures continued operation, which enables future profits. Demanding unsustainable growth ensures collapse, which precludes future profits. And eventually people who have been burned by this will start cutting investors out of the equation anyways, which also precludes profits (for investors).
The whole, "I could have put my money elsewhere in the market and made more" as a justification to demand unsustainable growth is also form of gaslighting by investors; as you note, if they knew where to put their money instead to make more, they would have done so. They invested in a given company because they hoped it would outperform other companies, and they should have to suffer that loss personally just as they would enjoy above-market profits personally. This is just another attempt at "socialized losses and personalized gains", by trying to make themselves out to have been engaging in something other than gambling (which is exactly what investing in a company whose products you don't care about is).
If you have people investing millions of dollars into something, it isn’t art but business.
No, it is both if it is a business that creates art. Without the art (product), it would not have a business.
Art is just a product. Like any product, it can be produced for profit, for personal use, for communal use, or for any other reason. But without goods and services being produced, no money will be exchanged. The goods and services are a precondition to business, not the other way around.
So game companies have several ways to increase the ROI for their products: decrease costs, increase price, or increase audience size. As it is hard for single-player titles to signficiantly icnrease the number of players, Novak believes that publishers will continue to charge more for their games. The new $70 base price already seems too much for many customers, so companies try to come up with tricky monetization methods, including various deluxe editions priced at $100 or even higher.
Absolute imbeciles. We're living in an era where customers have less and less purchasing power, where people can - and should - make more precise decisions when buying products, with wide availability of other options that aren't AAAA titles, so what are execs thinking of? Charge more, obviously.
It is unrealistic to invest 150 millions in a game and expect a profit because you're disconnected from your customer base. And you have the bare minimum of self awareness to consider that investing less and expecting less growth is an option, but choose instead to ignore it and push ahead with infinite growth. The development schedule of your average AAAA title is already almost as long as a console generation, there's nothing that can be done if suits are staring at this wall and choosing to bash their head against it, rather than try alternative options.
It's the golden age of indie games. I've got dozens of games on my steam library made by a team of between 1 and 12 people that I bought for $20 or less. Those guys are doing great, and doing great work. I rarely ever even give a second glance to big AAA releases anymore, with a couple specific exceptions.