During Square Enix's conference call to discuss its financial results for the quarter, it was reported by analyst David Gibson that the publisher intends to sell off stakes from its various western developers. The Japanese publisher's aim is to refocus on its Japanese developers and titles, a strategy it's already begun to implement with the sale of developers Eidos and Crystal Dynamics.
Square Enix sold off both studios earlier in the year, along with Square Enix Montreal, to Embracer Group for $300 million. Following that sale, it said the money would be used to establish or acquire new studios, and invest in fields such as blockchain and AI.
According to Gibson's translation of the quarterly investor call, the next step is for Square Enix to review the western studios it still owns and decide whether or not other companies will be allowed to buy stake in those developers. "Some studios will remain 100% while others will change," wrote Gibson. With those changes, Square Enix can "allocate resources mainly to Japanese titles."
Gibson theorized that buyers interested in the Square Enix studios could include Tencent and Sony, the latter of whom was rumored earlier in the year to be acquiring the publisher. He also noted that Square Enix currently has $1.4 billion in cash and zero debt following the Eidos/Crystal Dynamics sale, and has more than enough money to expand without selling stakes in its studios.
That resource allocation is said to be part of the reason Square Enix sold off its three western studios. During the call, Square Enix is said to have alleged that its recent western games "cannibalized" sales and resources from other games in development.
6) Phase 2 – Biggest impact is on EU/US studios around large titles, will be able to allocate resources mainly to Japan titles.— David Gibson (@gibbogame) August 5, 2022
Square Enix seems to be abandoning focus on western players
The relationship between Square Enix and its western studios has been said to be contentious for many years.
Eidos founder Stephane D'Astos, who left the studio in 2013, recently expressed the belief that the Final Fantasy publisher has always lacked faith in its western studios. Previously, titles such as Crystal Dynamics' 2013 Tomb Raider reboot were deemed by Square as "disappointments" following weak initial sales, only to hit improved sales milestones down the road.
Similarly and more recently, company president Yosuke Matsuda said both releases of 2020's Marvel's Avengers and 2021's Marvel's Guardians of the Galaxy also failed to meet the publisher's respective sales expectations.
In late 2021, Outriders developer People Can Fly alleged that because the game failed to be profitable, the developer had yet to receive its royalties from Square Enix.
Though it plans to sell off its remaining western studios, Square Enix said in May after the Embracer sale that it would continue to publish the western IPs of Deck Nine's Life is Strange, People Can Fly's Outriders, and Avalanche Studios' Just Cause.