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Square Enix is outsourcing some of its largest studios. The publisher announced that it is selling Crystal Dynamics and Eidos to European megapublisher Embracer Group for $300 million. The deal allows Square to get these less profitable teams off its books. This is especially important during a costly reload period for Crystal Dynamics and Eidos, according to Niko Partners analyst Daniel Ahmad.
“Square Enix western studios have underperformed on triple-A games based on proprietary IP and recently licensed IP like Marvel,” Ahmad told GamesBeat. “With high operating costs and a minimum window of two years before we see the next triple-A releases from the studios, it’s likely that Embracer Group will take on more than just the $300 million asking price in the near term. Embracer will look to tap into the talent pool and intellectual property of these studios to generate long-term returns.”
But what’s next for Square Enix? In a note to investors, the publisher repeated what Ahmad had said. Eliminating Crystal Dynamics and Eidos will free up resources for more profitable projects. But Square also claims it will track “blockchain, AI, and the cloud” instead. Again, the company believes these areas can optimize its net income.
“Square Enix plans to use the proceeds to streamline its games business and invest in both its core development teams in Japan and future trend areas such as cloud, AI and blockchain,” Ahmad said. “Square Enix is still experimenting with blockchain and this was cited as an additional focus over the long term.”
Of course, it’s possible this is just big talk from Square. Blockchain is trending among investors, and perhaps the publisher’s leadership wants to capture some of that excitement. But dr Serkan Toto, consultant at Kantan Games in Tokyo, believes Square Enix is taking its interest in emerging technology seriously.
“I think they’re going to invest really heavily in the blockchain and metaverse space. Your President has now announced this step often enough,” said Toto.
Square Enix President Yosuke Matsuda announced in a New Year’s letter to fans and investors that the company is looking into blockchain and NFTs.
“Let’s hope they focus more on high-quality games made in Japan that can be exported to the rest of the world,” Toto said.
However, Square Enix’s Japanese effort hasn’t turned out to be much better than what they did at Crystal Dynamics or Eidos. These teams and partnerships have produced critically planned products such as Balan Wonderworld, The Quiet Man, Left Alive, and Babylon’s Fall.
But maybe Square Enix can invest in quality again now that it’s not dividing its focus as much.
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