Play news Square Enix sells Eidos and Crystal Dynamics, is that good news?
On Monday, May 2, Square Enix announced that they had sold Eidos and Crystal Dynamics for $ 300 million to Embracer Group. When the surprise is over and the warm reactions of internet users have dropped, is this decision such good news for the Japanese publisher?
- Cloud, AI, blockchain: Square Enix’s new projects
- A sale for administrative reasons?
When Square Enix bought Eidos in 2009, the company bought Crystal Dynamics and IO Interactive at the same time. After more than a decade of trying to find itself a place in the competitive world of Western AAA games, the Japanese publisher finally decides to cut costs and sell the studios it has left behind.after IO Interactive became independent in 2017. While many were moved by the amount of this transaction, $ 300 million for three studios, which has 1,100 employees and a catalog of more than 50 licenses, others have expressed their misunderstanding of the logic behind this financial movement, without hesitation in saying that the group gave up too soon.
Cloud, AI, blockchain: Square Enix’s new projects
To justify this sale, Square Enix explains in its press release that the transaction amount will be used to invest in artificial intelligence (AI), the cloud as well as in the blockchain. A statement that is hardly surprising when we remember the happy New Year wishes for 2022 from the President of Square Enix, Yosuke Matsuda, in which he had rightly indicated that the group sought to develop in its sectors. Words that had created controversy since the latter had distinguished between players who “play for fun” and those who “play for contribution”. With this second formula, the president of Square Enix specifies that he designates users who invest in a game to “make it more exciting” and who can receive “a tangible benefit for their creative efforts” thanks to tokens based on blockchain, ie. . to say … NFTs. Play to make money.
If Square Enix wants to focus on artificial intelligence, the cloud and blockchain, it’s also because the company had already in May 2020 identified that these three technologies were potential growth handles., to the point of pushing for the creation of the Square Enix AI & Arts Alchemy subsidiary in the spring of 2020, which specializes in AI, as the name suggests. As for the cloud, we remember that Square Enix used this technology for several games on the Switch, including Guardians of the Galaxy, but also for the Kingdom Hearts series. A choice that upset more than one, because if we can understand that Nintendo’s hybrid console does not have the resources to run Kingdom Hearts III, we had a hard time imagining that titles like Kingdom Hearts, Kingdom Hearts II appeared on PS2 or Kingdom Hearts: Birth of Sleep on PSP is not able to work built into the Switch. Moreover, if the result of the latter is correct in the cloud, hard to say the same for the third episode of KH who suffers from too much understanding according to. DigitalFoundry.
Given the reactions of players on social networks regarding NFTs, it is surprising to see Square Enix continue in this direction. However, many studies have already withdrawn at this point, such as Team 17 (Worms series), GSC Game World (STALKER 2: The Heart of Chornobyl) and especially Ubisoft with its Quartz platform, which has not failed to win the hearts of the public . Still, some of the publisher’s already well-established big games have announced that they will not be offering non-fungible tokens. This is especially true of Final Fantasy XIV, the group’s flagship MMORPG, which represents one of its main sources of revenue thanks to its monthly subscription.
A sale for administrative reasons?
In addition to these official reasons described by Square Enix in its press release, an unexpected actor has spoken in recent days to discuss another reason that could have led to this sale. For once, it is a very well-informed source, as it is Yoichi Wada, former CEO of Square Enix between 2000 and 2013, who played an important role in the acquisition of Eidos in 2009, but who also left the company after disappointing sales of Tomb Raider (2013). That is, at his expense Facebookhe explains that he does not understand the maneuver behind this transaction, that it is not interesting from an economic point of view, unless it is to reduce administrative costs and production costs that exploded; the last seven, eight years.
In light of this information, the sale of Eidos, Crystal Dynamics and Square Enix Montreal to Embracer Group is becoming much clearer. With a mass of more than 1100 employees and several places where one can house them, it is obvious that all this represents a significant cost, especially for a company that has a total of 5500 employees. Dismissal with these structures means significantly less spending for Square Enix, especially on projects that have not always been successful in terms of sales over the past decade.. For these reasons, we better understand why the Japanese publisher wanted to part with its structures and licenses for an amount that is so low in appearance, $ 300 million.
With such large units in terms of pay, the commercial failure of a AAA game weighs even more on the publisher’s performance. For this reason, Square Enix has recently become more and more accustomed to developing titles externally or co-developing with another studio to minimize losses in the event of poor sales.. TRIANGLE STRATEGY, Babylon’s Fall, Stranger of Paradise Final Fantasy Origin, Valkyrie Elysium, Star Ocean: The Divine Force … examples are legion this year. In the case of poor commercial reception, the impact on the group’s finances is thus less significant, because most of these titles benefit from a budget on an AA game, ie less than fifty million dollars. Finally, only the major projects that serve as standard carriers such as Final Fantasy XVI, Forspoken, Final Fantasy VII Remake Part 2, Dragon Quest XII or Kingdom Hearts IV are developed internally by the various branches called Creative Business Units. As for mobile games, the publisher’s main source of revenue, these are both produced in the company and by external studios.
With the acquisition of Eidos, Crystal Dynamics and Square Enix Montreal, Square Enix wants to use the proceeds from the sale to continue investing in potentially profitable sectors such as the cloud, artificial intelligence and blockchain. Moreover, this transaction also appears to have been motivated by a desire to reduce production costs, which have exploded in recent years and have become difficult to pay due to unsatisfactory sales figures. Finally, in addition to its investments in new technologies, Square Enix therefore seems to focus on Japan through three main types of production: AAA games developed internally based on strong licenses that act as standard carriers, titles for the AA budget made externally to minimize losses and mobile games designed for maximum profitability, which depends on both their video games and manga franchise. Now we just have to wait for Final Fantasy XVI to show the end of its nose and whether the rumors of a takeover of Sony are finally proven.
By XsandJournalist jeuxvideo.com