Square Enix sold studios as Tomb Raider cannibalized other sales

Square Enix executives, in their first quarterly earnings call since selling off the Tomb Raider and Deus Ex franchises and the studios that make them, explained the move to investors on Friday.

The reasoning of the editor, according to analyst David Gibsonis that its western studios and their products might have cannibalized sales from the rest of the group, so selling them “could improve capital efficiency” – basically, making more money relative to what the company spends to earn more money.

Square Enix transferred Eidos, Crystal Dynamics and the IP addresses they owned to Embracer Group in early May. The two studios are the latest high-profile acquisition for the Sweden-based publishing conglomerate, which already owns Gearbox Software, Saber Interactive, Plaion (formerly Koch Media) and Deep Silver, as well as comic book publisher Dark Horse and the table game maker. Asmodeus.

The sell-off followed a long stretch where Square Enix’s western operations would release a AAA game and headquarters would lament its sell-off performance on the next call with investors. wonderGuardians of the Galaxya critical success developed by Eidos, “exceeded our initial expectations,” said Square Enix’s Yosuke Matsuda in February.

Before that, Eidos Marvel’s Avengers was “disappointing,” the company said in its 2021 annual report; on a quarterly call in 2019, Matsuda said Shadow of the Tomb Raider “got off to a weak start” after selling 4.12 million units in the previous four months. Matsuda also blamed Shadow of the Tomb Raider and just cause 4 (developed by non-Square studio Enix Avalanche) for a “disappointing quarter”.

Early 2017, apparently Deus Ex: Humanity Dividedit is sales weren’t enough to save this franchise from a hiatus, despite favorable reviews and a positive community response. And while it doesn’t own the studio that made its second stab in a live game, 2021 RidersSquare Enix nevertheless told People Can Fly a year ago not to expect royalty payments, and the studio confirmed it was not profitable for 2021 despite selling between 2 and 3 million ‘units.

Square Enix told investors that following the $300 million sale of Crystal Dynamics and Eidos, the company have $1.4 billion in cash and no debt. Gibson, the analyst, said the sale of the studio was the “first phase” of a plan to get back on track; “Phase two” will “fund expanded investments in games” without having to sell studios or stakes to competitors.

Square Enix’s latest quarterly report, released on Friday, said sales and operating profit were down 16 and 17 percent from the same quarter last year, and while sales of its HD games category continued to decline, its MMO unit grew on the back of increasing paid subscribers. numbers” for Final Fantasy 14, Year after year.