Crystal Dynamics games cannibalized other sales, while Square Enix feared Eidos

Crystal Dynamics games cannibalized other sales, while Square Enix feared Eidos ...

On Friday, Square Enix executives revealed their decision to investors in their first quarterly earnings call after selling the Tomb Raider and Deus Ex franchises and the studios that created them.

According to analyst David Gibson, the publishers' reasoning is that its Western studios and their products might have been cannibalizing sales from the rest of the group, so selling them off might enhance capital efficiency, basically making more money relative to what the company spends to make more money.

Square Enix sold Eidos, Crystal Dynamics, and the IPs they owned to Embracer Group at the start of May. The two studios are the latest big-name acquisition for the Swedish publishing company, 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 manufacturer Asmodee.

Square Enix's Western operations would publish a AAA game, while the company's headquarters would savor its sales performance in the next meeting with investors. In February, Marvel's Guardians of the Galaxy, an important success developed by Eidos, outperformed our initial expectations, according to Square Enix's Yosuke Matsuda.

Eidos Marvels Avengers was disappointing before the company released its 2021 annual report; Matsuda blamed Shadow of the Tomb Raider and Just Cause 4 for a dismal quarter.

Deus Ex: Mankind Divideds sales were likely to be insufficient to save the franchise from a hiatus, despite positive reviews and supportive feedback from the community. Despite its decision not to expect any royalty payments for 2021s Outriders, Square Enix assured People Can Fly a year ago that it would not make a profit in 2021, despite selling between 2 and 3 million units.

Square Enix has announced that it would have $1.4 billion in cash on hand and no debt following the $300 million sale of Crystal Dynamics and Eidos. Gibson, the analyst, said the studio sale is phase one of a plan to get back on track; phase two will fund further expansion of game investment without having to sell studios or shares to competitors.

Square Enix's latest quarterly report, released Friday, showed sales and operating income declining by 16 and 17 percent compared to the same quarter last year, and while sales of the HD games category continued to decline, its MMO division increased thanks to increased paying subscriber figures for Final Fantasy 14, year on year.