Square Enix feared Eidos, and Crystal Dynamics games snipped other sales

Square Enix feared Eidos, and Crystal Dynamics games snipped other sales ...

On Friday, Square Enix executives gave investors their first quarterly earnings call since selling the Tomb Raider and Deus Ex franchises and the studios making them.

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

At the start of May, Square Enix handed over Eidos, Crystal Dynamics, and the IPs they owned to Embracer Group, a Swedish publishing company that 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 and its headquarters would criticize its sales performance in the next meeting with investors. In February, Square Enix CEO Yosuke Matsuda said the game's performance outperformed expectations.

In its 2021 annual report, Eidos Marvels Avengers said the business was disappointing; in a 2019 quarterly interview, Matsuda said Shadow of the Tomb Raider was off to a bad 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 Enix studio Avalanche) for a dismal quarter.

Deus Ex: Mankind Divideds sales were, despite positive reviews and support from the community, insufficient to save the franchise from a hiatus. Despite the fact that it does not own the studio that made their first live-service game, 2021s Outriders, Square Enix assured People Can Fly that it would not pay any royalties until 2021, and the studio admitted that it would not make any profit in 2021.

Square Enix promised investors 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, an analyst, said the studio sale is phase one of a strategy to get back on track; phase two will help expand game investment without having to sell studios or stakes in them to competitors.

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