Square Enix restructuring as Tomb Raider and Hitman sales fall short

Developer and publisher Square Enix has changed its positive predictions for the financial year from a healthy profit to a crippling loss, and announced plans to bring in reforms and restructuring. Sleeping Dogs, Hitman Absolution, Tomb Raider all failed to meet high sales expectations. The company had forecast a net profit of around $37 million for the fiscal year, which ends March 31, but has now revised that to be a whopping $138 million loss. Ouch.

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Developer and publisher Square Enix has changed its positive predictions for the current financial year from a healthy profit to a crippling loss, and announced plans to bring in expensive reforms and restructuring. Sleeping Dogs, Hitman Absolution, and Tomb Raider all failed to meet high sales expectations. The company had forecast a net profit of around $37 million for the fiscal year, which ends March 31, but has now revised that to be a whopping $138 million loss. Ouch.

In the announcement [pdf], it said actual sales "substantially fall below" its predictions, "primarily due to slow sales of major console game titles in North American and European markets."

In an accompanying presentation, Squeenix said that sales of Sleeping Dogs, which it picked up after Activision dropped it, Hitman Absolution, and the new Tomb Raider all fell short of expectations, "despite the high critical acclaim."

Excluding digital sales, the three games are currently predicted to sell 1.75 million, 3.6 million, and 3.4 million copies respectively by the end of March. Evidently, that's just not enough. North American sales are singled out as particularly low, compared to expectations.

Square Enix resolved, "In view of the rapidly changing environment of the game businesses, the Company has decided to implement major reforms and restructuring in its development policy, organizational structure, some business models, and others."

This process is expected to cost ten billion yen, or around $105 million dollars, which accounts for a huge chunk of this year's new projected loss.

Company president Yoichi Wada is to bow out, with his replacement yet undecided. How exactly reforms will affect games in development and future games remains to be seen.

From The Chatty

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    March 26, 2013 6:00 AM

    Alice O'Connor posted a new article, Square Enix restructuring as Tomb Raider and Hitman sales fall short.

    Developer and publisher Square Enix has changed its positive predictions for the financial year from a healthy profit to a crippling loss, and announced plans to bring in reforms and restructuring. Sleeping Dogs, Hitman Absolution, Tomb Raider all failed to meet high sales expectations. The company had forecast a net profit of around $37 million for the fiscal year, which ends March 31, but has now revised that to be a whopping $138 million loss. Ouch.

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      March 26, 2013 6:05 AM

      Shame because all of those games are great. Better than Simcity also.

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        March 26, 2013 6:42 AM

        I don't know, I was fairly disappointed with Hitman: Absolution. It was a good game, but not such a good hitman. Taking huge point losses for not playing it like Metal Gear Solid really killed the feel.

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        March 26, 2013 6:46 AM

        How do you compare games like Hitman and SimCity?

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          March 26, 2013 7:33 AM

          Sales. And if they keep up that way we will soon see Call of Sim City.

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      March 26, 2013 6:06 AM

      How did Tomb Raider fall short of expectations? The sales have been VERY high, can you provide insight on this?

      I mean the game has sold over a million in roughly one week, if that's disappointing well...I hope I produce a "disappointing" video game someday :)

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        March 26, 2013 6:07 AM

        However it is a shame that Sleeping Dogs didn't fare better. It really is a great game, goes to show some of the best video games are also overlooked (system shock 1/2 come to mind!)

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        March 26, 2013 7:00 AM

        They were expecting more. Shrug. That's about it.

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        March 26, 2013 7:21 AM

        It might have fallen off sharply. They may have gotten a million sales but that only translates to about $35 million in grosses but that is probably only half of what they spent when you take into account dev costs and marketing. Heck Tomb Raider is on the amazon gold box deal of the day as I type this.

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          March 26, 2013 7:27 AM

          Actually I'd say one random winner's post below gives a better idea of why TR is below expectations.

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        March 26, 2013 7:37 AM

        Sometimes I think expectations are set by someone going "I hope we sell 10 million."

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          March 26, 2013 9:21 AM

          That's exactly what happened with Dead Space 3; Frank Gibeau mentioned EA wanting that game to sell 5 million. There are some serious problems with publisher expectation management, budget bloat, and project management.

          Consider that Metal Gear Rising: Revengeance sold 300K in Japan, and was labeled a success. Persona 4 Arena sold something under 200K (I forget whether that was US or US + Japan), and was also an amazing success. It is very possible to make great games on a low budget. It's hard, but it's possible.

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            March 26, 2013 4:22 PM

            That is just unfortunate, with Dead Space 3. Now visceral is no more due to EA's bloated expectations... I know people will talk smack about DS3 because it's EA, but I really enjoyed the game. Too bad EA canned the developer one week after release.

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        March 26, 2013 7:39 AM

        Yeah, everybody was talking about it and it got good reviews. Lots of people on my lists playing it.

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        March 26, 2013 7:54 AM

        Doesn't even show on Steam's top sellers.

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        March 26, 2013 4:01 PM

        1 million copies isn't great for a top tier title thats been in development for 4 or 5 years by a massive team.

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      March 26, 2013 6:13 AM

      that's quite a swing, holy shit

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      March 26, 2013 6:33 AM

      ouchie idd. all three of those games are solid titles i want to see more of. :( how come the predictions were so far off? gutted tbh.

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      March 26, 2013 6:34 AM

      Wait...I don't understand. Didn't Tomb Raider come out like three weeks ago? It's already sold over 3 million and they're calling it a failure? And that's excluding digital sales! i bought my copy on PSN; so did a couple of friends. I thought my brain hiccuped and I read the headline wrong because everyone I know who plays games, has played Tomb Raider.

      I agree that we need more details on what exactly is going on at Square Enix.

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        March 26, 2013 7:15 AM

        I'm guessing it's the combined sales of Tombraider and Hitman, since hitman did so poorly Tombraider had a lot of ground to cover.

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      March 26, 2013 6:37 AM

      I started Sleeping Dogs the other day. What a killer game. It looks and plays really great, shame it didn't do well. Marketing failure? I didn't see much about it.

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        March 26, 2013 6:52 AM

        yeah, I didn't know much about this game outside of Shack chatter. It was free on PSN+ and I played through it last week, fantastic game, solid (if predictable) story, nice setting executed beautifully. It would be a shame if there isn't a followup - it took a lot from GTA4, including the bad stuff, and honed it into something so much better.

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        March 26, 2013 4:38 PM

        IMO the name is a bit of a fail, just not evocative enough.

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      March 26, 2013 6:53 AM

      Complete speculation, but the difference is about $175 million ($138 + $37), divide that by, say, $60 for the cost of a game = they wanted to sell maybe 3 more million copies?

      On another note, Tomb Raider was the first new game I paid full price for since Uncharted 3 came out and we got the collector's edition, but I usually wait for sales.

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        March 26, 2013 7:05 AM

        according to the post, they were expecting to 3.4mil copies by the end of march apparently. the whole thing doesn't make sense as to how they miss by over $170mil citing poor sales on just 3 titles. sounds more like mismanagement than poor sales.

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          March 26, 2013 7:43 AM

          ding ding ding ding. blame the gamers, blame the games, blame anything else other than your poor management.

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          March 26, 2013 7:53 AM

          Square Enix is probably one of the most poorly managed major developers there is. I just don't understand it.

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        March 26, 2013 7:13 AM

        Absolution is already hitting sub $20. It's going to be much harder for that game to make a dent.

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        March 26, 2013 8:49 AM

        And they only get like 2/3 of the money from a sale don't they?

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          March 26, 2013 8:52 AM

          they certainly don't turn $60 per copy into pure profit so yeah, that would be a significant underestimation if the majority of the losses were the results of missed sales projections.

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      March 26, 2013 7:14 AM

      What a pity. Those were all generally games that looked great to me. I plan to pick up Tomb Raider after I clear out a bit of backlog. Got Sleeping dogs at launch and loved it.

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      March 26, 2013 7:26 AM

      Another nail in the coffin.
      Get ready for a fucking console crash.
      Today's "gamers" are a pathetic lot.
      Tomb Raider, Hitman and Sleeping Dogs are all great games.
      Cliffy B, spoke about this, he is expecting another console crash. Every day I am more convinced of this.

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        March 26, 2013 8:02 AM

        I'm not sure if gamers are a "pathetic lot" today. I'm wondering if the market is just getting saturated. I want all three of those games, but I haven't had the time to play even half the games I own. So for me it's just not something I can justify. If I don't have time to play it, and I have a huge backlog of games that I don't have time to play... it makes it hard to spend $60 on something that just sits on a shelf. Console crash? I welcome it in some ways... as long as I don't lose my job. :) Also I think in large part the cost of development is just getting to be too much, we need to find better ways to make games with great graphics... the pipeline is too convoluted and requires a great deal of time and effort, which means capital expended. If a game costs $100 million to make then you can almost surely figure on not making that money back. A new console generation could cause a short-term bump in games sales, but more hardware power also means more cost for development on the art side. You can only outsource so much... Long term I wonder if the trajectory of the industry is tenable.

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          March 26, 2013 1:58 PM

          Pretty much how I feel as well. Seems every week there's a new game that wants my $60 dollars. While I want all these games. It's getting harder to justify $60 dollars for something that will sit in a backlog for a while. So now I just wait for most games to go on sale before picking them up.

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      March 26, 2013 7:27 AM

      Oddly enough, the spear through the head cutscene on Conan's show turned me off to ever trying Tomb Raider.

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        March 26, 2013 7:39 AM

        For what it's worth that never happened to me in my play through ...

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          March 26, 2013 8:05 AM

          For me as well.

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            March 26, 2013 1:43 PM

            Same here, but to be fair I'd seen the Conan video so knew to dodge out of the way of that stuff :)

            I actually wish I'd gone into the game knowing nothing about it and having watched no media. Such a great game though - it's one of the few times where I've thought "oh! thats why they reboot stuff!"

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        March 26, 2013 8:24 AM

        That very scene made me consider purchasing a Tomb Raider game for the first time in over a decade.

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        March 26, 2013 1:36 PM

        that was too much.

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      March 26, 2013 7:29 AM

      I'm glad in a way because it'll force serious changes.

      Hitman and Tomb Raider stink of chasing trends and the $ instead of trying to make a great game, especially Tomb Raider.

      Square should go back to RPG's.

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        March 26, 2013 7:54 AM

        Tomb Raider is amazing, and it's not like these are Square-developed games.

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          March 26, 2013 8:03 AM

          In creative input no, but financially yes.

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        March 26, 2013 8:07 AM

        Is this a troll?

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        March 26, 2013 9:16 AM

        Tomb Raider was excellent. Some minor issues, yes, but still a blast.

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        March 26, 2013 1:14 PM

        You clearly don't know wtf

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        March 26, 2013 1:43 PM

        If chasing trends gets you games like Tombraider - I'm all fucking onboard!

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        March 26, 2013 3:05 PM

        No this is bad. If anything it would make companies take even less risks and we will move even further away from the types of games you allude to.

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        March 26, 2013 3:26 PM

        Yes, Square-Enix should ignore that whole Eidos company they spend tons of money on to diversify their portfolio and focus on their money losing 5-7 year production RPGs.

        Why am I responding to a troll?

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      March 26, 2013 8:01 AM

      This is pretty surprising, I really loved Tomb Raider and it seems to be selling well.

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      March 26, 2013 8:07 AM

      WTF really? I don't understand this? Both games are amazing and must own titles both are easily in my top.

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        March 26, 2013 2:31 PM

        I loved Tomb Raider. I need to go back to Hitman, but I'm in a section that I believe I've screwed up and need to do some back tracking (or just kill everyone, but that's just sloppy).

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          March 26, 2013 4:02 PM

          Same, I juts re installed well am re installing everything since I paved my rig, re started TR and am re playing Hitman which I freaking love.

          The hate for Hitman is total bull shit and fabricated by some haters it never should of got the negative hate from a few misfits out there.

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      March 26, 2013 8:17 AM

      The new Lara Croft game sucked. This wasn't Tomb Raider.
      Hitman was a good game compared to the other Hitman games however...

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        March 26, 2013 8:46 AM

        Punctuation is important. The sentence you typed, means you think the new Hitman is better than the old Hitman games, which is ofcourse absurd.

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          March 26, 2013 3:46 PM

          He also claimed that the new TR sucked, calling shenanigans.

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      March 26, 2013 8:34 AM

      If you think this is foreshadowing some bad trends now, just wait until publishers like Square see the sales numbers for Walking Dead: Survival Instinct. The fact that a game that looks like it was made on a 99¢ Store budget is likely to outsell any of these titles should make you want to bang your head on a table.

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        March 26, 2013 2:06 PM

        It's nothing new for a movie / tv tie in game to sell well despite being a piece of shit.

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      March 26, 2013 8:42 AM

      Sounds like Square Enix is blaming the devs they own for their problems but leaving out the failures of their internal development studios which have been a mess for years. How many copies did Final Fantasy 14 sell compared to Tomb Raider? These games have kept Square Enix afloat but now their taking the blame for not working miracles and selling ten million copies. Their expectations can not have been any higher than their sales turned out unless they were just simply engaging in wishful thinking. Crystal Dynamics has already said sales were higher than they expected so it just seems they are getting scapegoated for the failures of the home office.

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      March 26, 2013 8:50 AM

      I can't believe hitman sold more than sleeping dogs.

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      March 26, 2013 8:58 AM

      Tomb Raider's credits rolling for something like 20 minutes. I often wonder how with 500+ people to pay, any of these things make money

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        March 26, 2013 6:07 PM

        Very few do. The Call of Duty, Battlefield, and Fifas of the world make the rest of the AAA industry possible. A lot of high production critical darlings do not make their development/marketing costs back or if they do only barely and after significant time.

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      March 26, 2013 9:27 AM

      Tomb Raider is excellent.

      There was no PC CE for Hitman - for some of us (like me :P) that makes it a 'wait-for-it-to-be-$5-on-steam' game.

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      March 26, 2013 9:29 AM

      Next announcement is that they will be canceling Thief 4 :(

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        March 26, 2013 2:42 PM

        Or least keeping the name as THI4F so they don't have to spend money on the new logos.

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      March 26, 2013 9:33 AM

      So when do they start blaming pc pirating on this?

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      March 26, 2013 10:20 AM

      WTF. Tomb Raider is good shit! :|

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      March 26, 2013 10:35 AM

      I bought Tomb Raider! Don't blame this on me!

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      March 26, 2013 12:39 PM

      I'd like to know, is this net losses of $138 million from just those games only or from all games produced this year?

      I'd like to know because Eidos has produced great titles for Square and it would be absolutely criminal to place the comapny's woes on a studio that's doing more than its own share. In my opinion it's their in-house stuff that is over budgeted and under performing.

      They probably spent a metric ton on revamping Final Fantasy XIV alone and unless Realm Reborn absolutely stellar, they will get probably nothing back from it.

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        March 26, 2013 12:41 PM

        I'd also like to point out a bit that bothers me a lot: Excluding digital sales.

        While I won't say steam sales will make up $138 million, I have to imagine that this almost completely ignores the sales from the PC platform.

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        March 26, 2013 1:32 PM

        A translation of Square Enix said today from corporate speak to plain truth would be, 'While Tomb Raider and our other western developed series are all selling well enough to make healthy profits they cannot both make a profit for themselves and cover the losses of the Final Fantasy series inlcuding 14 which not only lost a ton of money but which is now being rebuilt from scratch to lose more money, Versus 13 which has had years put into it without anything to show for it, and the 13 series which despite not doing well for two games now has a third on its way."

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      March 26, 2013 12:55 PM

      Shouldn't have fucked up that hitman game you dicks. Checkpoint saves fuck right off I'm still mad.

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      March 26, 2013 12:58 PM

      Can we get separate stats for each division?

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      March 26, 2013 12:59 PM

      WOW. well that means some CFO type folks need to explain their projections and balance sheets, for starters. What were the costs involved? Were those higher or lower than expectations? Were there any unforseen costs or delays?

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        March 26, 2013 2:44 PM

        They probably hired and incurred liabilities in line with what their revenue projections. Now that the revenue reality didn't pan out they need to cut costs.

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        March 26, 2013 6:25 PM

        Advertising & upper management probably took a significant chunk of the money.

        The game is awesome. The adverstisments...well
        http://tinyurl.com/ae7jd62

        Main reason why I hope kickstarter flourishes. I'd rather directly support developers than go through a host–parasite relationship.

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      March 26, 2013 1:36 PM

      Unreal.. I thought both Hitman and TR were excellent games.. If this screws up seeing another Tomb Raider, I'll be pissed.

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      March 26, 2013 4:41 PM

      Sad, I'm really hoping for another Sleeping Dogs (Tho they should come up with a better name). Also Tomb Raider rocked, played the crap out of it. Not surprised Hitman tanked, it felt broken. Played 5 hours then never started it up again.

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      March 26, 2013 5:30 PM

      Tomb raider was excellent and I'm playing through sleeping dogs right now and unless it falls off bad its a great game.

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      March 26, 2013 6:48 PM

      I'm guessing the majority of you who think the recent Tomb Raider was excellent weren't big fans of the previous games?

      Seriously, I understand what they were doing, I just didn't find the game fun.

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        March 26, 2013 7:37 PM

        Felt the same way. Could have still been fun if they didn't leave out what made the tomb raider games good in the first place.

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        March 26, 2013 11:01 PM

        Couldn't care less about the previous Tomb Raider games.

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      March 27, 2013 12:10 AM

      Hitman a great game? Yeah right..

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      March 27, 2013 7:55 AM

      I liked Sleeping Dogs but I wish it was more in depth like GTA. It just didnt have much extra content other then the story. Hitman on the other had is garbage. I stealth kill a guy with poison and then i change cloths and they STILL know who I am. I have played all the hitmans and this one is just junk.

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      July 23, 2013 4:56 PM

      The good news on a dark day here is that focus should now shift heavily to the DX franchise, which outdid expectations in sales and was very well received. I like Hitman and I played Tombraider like everyone else, but neither were ever landmark series for me personally like DX has been. I'm really hoping they don't shoot themselves in the foot by screwing up the wonderful formula Thief uses too much, which is worrisome based on their unnecessary takedowns system and early reports on the AI.