Marvel’s Avengers Did Not Recoup Development Costs Two Months After Launch

Marvel’s Avengers

Square Enix president Yosuke Matsude has stated Marvel’s Avengers did not recoup its development costs in the two months since launch.

IGN report that Square Enix have updated their Financial Results for FY2021Q2 Outline of Results Briefing; with new comments by Matsude. On page three of the pdf (dated November 6th), Matsude states the game had not managed to offset the cost of development, but had high hopes future content would help increase sales.

“The HD Games sub-segment posted an operating loss as initial sales of ‘Marvel’s Avengers’ were lower than we had expected and unable to completely offset the amortization of the game’s development costs. In the second half of the fiscal year (‘2H’), we hope to make up for slow initial sales by offering ample additional content to grow our sales.”

The game received middling scores from critics, and harsh scorn from players [123]. Our own review stated “at its highest highs, Avengers is generic.” This was furthered hindered my microtransactions, rarely having enough in-game money to buy want you want (tempting you to buy more), and an out of place loot and leveling system.

Developer Crystal Dynamics had stated they were confident in Windows PC players returning despite dwindling active-player numbers; to the due to new upcoming content and improvements.

We previously reported how Square Enix made a reported $61.23 million USD loss in their last quarter from HD games; with the only notable game in that period being Marvel’s Avengers; launched September 4th.

At the time David Gibson, co-founder of Astris Advisory Japan KK, tweeted that Square made a ¥6.5 billion JPY loss on HD games that quarter; “driven” by Marvel’s Avengers. He also proposes the game sold 60% of estimated sales goals, and had development costs of $170 million USD to $190 million USD.

During the Q & A segment of the Outline of Results Briefing, one investor stated his estimate that the loss could be as high as ¥7 billion JPY (estimated $66.64 million USD), and that blaming it purely on development costs did not add up. The investor asked if other factors contributed to the loss, and if the HD Games sub-segment would have been profitable if the game had met development costs.

Matsude responded that there would have been no loss if the game had met the “absent factors.” Along with the game’s development costs, he attributed the loss to a major advertising campaign during the game’s launch to compensate from a lack of advertising due to the COVID-19 pandemic. Even so, there are still more development costs set for quarter three.

Q: I estimate that the HD Games sub-segment booked an operating loss of around ¥7 billion in 2Q. Would the subsegment have turned a profit if sales of ‘Marvel’s Avengers’ had covered the amortization of its development costs? The loss seems too great to be explained solely by costs associated with that title outweighing its sales in 2Q. Are there any other factors we should assume contributed to the operating loss? Also, should we assume that there is still a fair amount of that title’s development costs to be amortized in 3Q?

A: Absent factors associated with “Marvel’s Avengers,” the sub-segment would have been in the black. In addition to the amortization of that game’s development costs, another significant factor associated with the title was the fact that we undertook a major advertising campaign at the time of its launch to make up for delays in our marketing efforts resulting from the COVID-19 pandemic. There is a certain amount of development costs still to be amortized in 3Q, but we want to recoup it by growing our sales going forward.

Q: What do you expect the profitability of ‘Marvel’s Avengers’ to look like in 3Q?

A: Our intention is first and foremost to work to expand sales in order to improve its profitability.”

Replying to other investor’s queries, Matsude stated that they intend to learn from the experience for future game’s development, and that the “volatility” of HD games sales would be offset by more stable income from MMO and smartphone games.
such as MMO and smartphone games.

Marvel’s Avengers is available for Windows PC (via Steam), PlayStation 4, Xbox One, Google Stadia; and will launch Holiday 2020 for PlayStation 5, and Xbox Series X.

Image: Marvel’s Avengers official website

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Ryan was a former Niche Gamer contributor.

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