Square Enix sold studios over concerns that Tomb Raider was cannibalizing other sales

Square Enix executives explained the decision to investors Friday in their first quarterly earnings call since selling the Tomb Raider and Deus Ex franchises and the studios that produce them.

The reasoning of the editor, according to analyst David Gibsonis that its Western studios and their products may have cannibalized the rest of the group’s sales, so the sale “could improve capital efficiency” — basically making more money relative to what the company spends to make more money .

Square Enix outsourced Eidos, Crystal Dynamics and their IPs to Embracer Group in early May. The two studios are the latest big-name acquisitions 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 tabletop game maker Asmodee.

The sell-off followed a long period in which Square Enix’s Western stores released a AAA game and the next time the headquarters called investors bad-mouthed about their sales performance. Wonder‘s Guardians of the Galaxya critical success, developed by Eidos, “fell short of our initial expectations,” Square Enix’s Yosuke Matsuda said in February.

Before Eidos’ Marvel’s Avengers was “disappointing,” the company said in its 2021 annual report; in a quarterly 2019 call, Matsuda said Shadow of the Tomb Raider “Weak start” after 4.12 million units sold in the previous four months. Matsuda also accused Shadow of the Tomb Raider and Cause 4 only (developed by non-Square Enix studio Avalanche) for a “disappointing quarter.”

Apparently early 2017 Deus Ex: Humanity Divided‘s Despite positive reviews and positive community response, sales were not enough to save this franchise from hiatus. And while it doesn’t own the studio, it has made its second attempt at a live service game in 2021 pioneerNevertheless, Square Enix told People Can Fly a year ago that it does not expect royalties, and the studio confirmed that it is not profitable for 2021, despite selling between 2 and 3 million units.

Square Enix told investors it will do so after the $300 million sale of Crystal Dynamics and Eidos Have $1.4 billion in cash and no debt. Gibson, the analyst, said the studio sale is “phase one” of a plan to get back on track; “Phase two” will “fund expanded game investments” without having to sell studios or stakes in them to competitors.

Square Enix’s latest quarterly report, released on Friday, said its revenue and operating income fell 16 and 17 percent from the year-ago quarters, and while sales of its HD games category continued to decline, its MMO unit rose thanks to the increase “Paying Subscriber”. Pay for final fantasy 14, Year for year.