SE sold "Eidos Montreal/Crystal Dynamics" because they thought their games would cannibalize sales of the rest of the company (!?)

[TheRealTalker]

That is right because the idea is to set up western studios partially owned by Square Enix so that Square Enix doesn't have to fully fund western titles

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Is it? To me it sounds like they are now allocating resources to their Japanese games but the rise of AAA development costs and resources means they have to be somewhat fluid and flexible and so having other invest in partial stakes for said studios adds revenue for said development costs.

This to me is more so about studios they own now then some theoretical future which wasn't mentioned in the thread.

 

[mugurumakensei]

Is it? To me it sounds like they are now allocating resources to their Japanese games but the rise of AAA development costs and resources means they have to be somewhat fluid and flexible and so having other invest in partial stakes for said studios adds revenue for said development costs.

This to me is more so about studios they own now then some theoretical future which wasn't mentioned in the thread.

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No the thread explicitly calls out their us and European studios as the ones impacted by the capital restructuring not the Japan studios. They also again mentioned they were interested in buying new western studios post Eidos sale not even a week later. Again, square Enix only owns western IP (Just Cause, Outriders, and Life is strange) at this point and not studios.

 

[TheRealTalker]

No the thread explicitly calls out their us and European studios as the ones impacted by the capital restructuring not the Japan studios. They also again mentioned they were interested in buying new western studios post Eidos sale not even a week later

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Yeah Phase 1 was dealing with their western studios, phase 2 is being more fluid with some their studios funding and equity

not studios they have yet to own (even though post doing such and if said plan works, they likely will get the same treatment)

anyway let's agree to disagree I guess

 

[FF Seraphim]

So am I understanding this correctly?
1. Western Studios were costing SE too much and not making sales that they wanted
2. SE sells says Western Studios so they can focus funding on Japanese Studio
3. Focus on Japanese Studio has SE releasing so many god damn games.

 

[HerotheChosen]

There are plenty of companies that make baffling decisions.. but I think Square takes the cake for me as the number one in that department.

 

[mugurumakensei]

Yeah Phase 1 was dealing with their western studios, phase 2 is being more fluid with some their studios funding and equity

not studios they have yet to own (even though post doing such and if said plan works, they likely will get the same treatment)

anyway let's agree to disagree I guess

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Also in the thread

Looking to expand amount and diversity of studios

will also look to explore to expand the studio portfolio

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Mostly western studios impacted by phase 2

6) Phase 2 – Biggest impact is on EU/US studios around large titles

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[TheBrightestSun]

To me it sounds like them talking about giving more money to their Japan studios now that they sold their EU/US/NA studios.

View: https://twitter.com/gibbogame/status/1555397706373140480

They won't have to funnel a ton of said money into AAA Western made games.

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They basically do not want to spend money on owning the western developers.

 

[mugurumakensei]

They basically do not want to spend money on owning the western developers.

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But they are willing to share costs (JV) to reap benefits or buy shares (equity) in other companies

 

[JuniperAndSage]

So am I understanding this correctly?
1. Western Studios were costing SE too much and not making sales that they wanted
2. SE sells says Western Studios so they can focus funding on Japanese Studio
3. Focus on Japanese Studio has SE releasing so many god damn games.

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Pretty much. Not sure why people find this so baffling.

 

[TheRealTalker]

Also in the thread

Looking to expand amount and diversity of studios


Mostly western studios impacted by phase 2

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They basically do not want to spend money on owning the western developers.

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Re-read it again and you're probably right that this extends to their western studios as well but a key takeaway is "will also", which means in additions to for me at least.

Then there is fact that "will also" is preceded by " Some studios will remain 100% while others will change" which to me signals what they own currently.

If not then the was no reason to separate the two and add an additional clause.

Followed by eventually the biggest impact eventually being western studios which will allow them to focus more on the Japanese stuff.

So to me it also includes the Japanese studios or a small few or small percentage of it. Like with Luminous who is costly with AAA games but also risky with a non traditional Square I.P but instead a new one.

I don't think for example Business Units will be involved in selling shares.

 

[SoneaB]

I don't see why this is so shocking. I loved some of the games those studios put out. But if the return was not wort the investment they put in then why keep investing? Critical acclaim is great but they made very expensive games that didn't always sell that well given how much they cost to make and market. The money is probably better spent elsewhere for them.

 

[mugurumakensei]

Re-read it again and you're probably right that this extends to their western studios as well but a key takeaway is "will also", which means in additions to for me at least.

Then there is fact that "will also" is preceded by " Some studios will remain 100% while others will change" which to me signals what they own currently.

If not then the was no reason to separate the two and add an additional clause.

Followed by eventually the biggest impact eventually being western studios which will allow them to focus more on the Japanese stuff.

So to me it also includes the Japanese studios or a small few or small percentage of it. Like with Luminous who is costly with AAA games but also risky with a non traditional Square I.P but instead a new one.

I don't think for example Business Units will be involved in selling shares.

Click to shrink...

My key take aways are

1. This doesn't read like Square Enix is open to selling themselves.
2. Square Enix still has an interest in western development. They do not have the appetite for the risk and costs and lost opportunities for their core teams in JP due to the budget allocations.
3. Square Enix is willing to have subsidiaries and small segments of the company be joint ventures. Square Enix is also open to owning shares in companies.
4. Going forward, this will also be the basis of M&A when Square Enix buys new studios or invests in studios.

It's mostly all good news since the Eidos sale. Eidos will probably be better off, and Square Enix's JP studios are better off with budget not being preallocated to long western projects. The unique western projects born out of Square Enix will grow in number but at a cost and commitment more maintainable from SE's point of view.

 

[Yeona]

So am I understanding this correctly?
1. Western Studios were costing SE too much and not making sales that they wanted
2. SE sells says Western Studios so they can focus funding on Japanese Studio
3. Focus on Japanese Studio has SE releasing so many god damn games.

Click to shrink...

Yeah. I mean, it's plenty clear what they meant. The cost of development of those studios was too high, their ventures almost always barely broke even, and that kind of upkeep was negating a lot of their other domestic ventures' success.

If you have Final Fantasy XIV's level of success, and you're also spending 200 million to develop a Tomb Raider game, which will barely break even after sales, then you just have less 200 million than you would otherwise and there's no point in making more Tomb Raider games. They acquired those western studios like 13 years ago. They gave them every chance under the sun, and it unfortunately didn't work. It's time to part ways.

Pretty much. Not sure why people find this so baffling.

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I'll keep harping on about this: People use SE like the industry's punching bag. It's been especially vicious in the past few years; Naoki Yoshida even had to tell people to please stop treating Square's developers like shit online. Even news outlets have gotten comfortable doing that because SE's notoriously passive about things.

 

[CorpseLight]

They are slimming down for an acquisition.

 

[Alienous]

I do think I understand Square Enix's outlook on this.

It has to sting having the most successful MMO since World of Warcraft, and seeing Final Fantasy 7 return to great critical acclaim and commercial success, then having that success reduced by underperforming Marvel titles.

You probably look at Marvel's Avengers and think the money spent on that is better spent on FFXIV server capacity.

EA has been successful, so seemingly the economics of closing studios outright makes sense, and I think that's probably how SE saw Crystal Dynamics and Eidos Montreal. If you're ready to write off a studio completely taking 1/3rd of a billion dollars to jettison them also makes sense.

 

[Fisty]

Maybe they mean that SE was losing money on CD and Eidos games, basically that they were eating the Japan division's profits. That's the only thing that makes sense

 

[mugurumakensei]

Maybe they mean that SE was losing money on CD and Eidos games, basically that they were eating the Japan division's profits. That's the only thing that makes sense

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They weren't losing money but a lot of the budgetary pool had to be allocated to Eidos due to their AAA titles

 

[JaseC64]

Biggest one I know is Life is Strange and its current developer

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If they sell the IP, that would be a loss for a potential new owner.

 

[Mung]

Obviously a misunderstanding/misinterpretation or mis something. Above explanations make sense.

 

[LiK]

What a strange reason. The studios make games for different audiences and it diversifies their catalog. Makes absolutely no sense.

 

[Iron Eddie]

The games they were making didnt make them much money, if at all. This is what happens when you have too high of expectations (remember when Square said sales didn't meet expectations yet the games sold in the millions?) but the reality is this, far fewer AAA games are being made overall. The development cost/return is not the same as it used to be, likely even with the jacked up price to $70.

I think this is why so many acquisitions are being made, only the big players can seem to afford them anymore outside of maybe Rockstar who makes 1 game every 10 years now.

 

[Kyrios]

Uhhhh...what? This whole saga is so weird.

 

[Kami]

What Western studios do they even have left?

 

[JigglesBunny]

If you read Square's earnings reports post-Tomb Raider, that'd suggest they were actually upset that it wasn't cannibalizing enough.

 

[Fdkn]

The true statement has been explained in the first page but people are still replying to the innacurate tweets

Welp

 

[mojo]

I'll be honest with the way this year and next year are looking for them maybe they should have cut these western studios years ago

 

[boogerbrain51]

Let them be free from SE shackles

 

[Jroc]

It sounds absolutely stupid, but anyone familiar with the legendary Sega Japan vs Sega USA infighting and self-sabotage knows its plausible on some level.

 

[Fat4all]

they sold um cuz they were intimidated by GEX

 

[T0kenAussie]

🧐

View: https://mobile.twitter.com/gibbogame/status/1555397954977943553

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They put all the companies debts in square Europe and sold it off

I knew that east was money doing a bunch of corporate accounting with west

 

[T0kenAussie]

Is it? To me it sounds like they are now allocating resources to their Japanese games but the rise of AAA development costs and resources means they have to be somewhat fluid and flexible and so having other invest in partial stakes for said studios adds revenue for said development costs.

This to me is more so about studios they own now then some theoretical future which wasn't mentioned in the thread.

Click to shrink...

This is my read

All western projects will require partner stakes

They are also open to partner stakes in JP studios if the situation arises / needs

Also seems like new IP might require partner stakes.

Big publishers consolidating behind safe IP really hasn't worked for ABK or Ubisoft at the end of the day so I wonder how this gunshy approach to expansions of ideas and IP to keep evergreen will work. Or is nostalgia and touchstones the most important thing now for these big guys ?

 

[PlanetSmasher]

What a strange reason. The studios make games for different audiences and it diversifies their catalog. Makes absolutely no sense.

Click to shrink...

If it diversifies their catalog but the games aren't making any money and are in fact burning a ton of potential budget that could be allocated to other games, it doesn't make sense to keep them.

 

[Det]

My key take aways are

1. This doesn't read like Square Enix is open to selling themselves.
2. Square Enix still has an interest in western development. They do not have the appetite for the risk and costs and lost opportunities for their core teams in JP due to the budget allocations.
3. Square Enix is willing to have subsidiaries and small segments of the company be joint ventures. Square Enix is also open to owning shares in companies.
4. Going forward, this will also be the basis of M&A when Square Enix buys new studios or invests in studios.

It's mostly all good news since the Eidos sale. Eidos will probably be better off, and Square Enix's JP studios are better off with budget not being preallocated to long western projects. The unique western projects born out of Square Enix will grow in number but at a cost and commitment more maintainable from SE's point of view.

Click to shrink...

Yeah this is my read on it as well. It makes strategic sense.

 

[FrostweaveBandage]

I wonder if it's a bad translation/mistake and they actually meant that the costs ate into sales of the rest of the group and they could increase capital efficiency without them..?

Click to shrink...

This is my interpretation too. The question is whether that thinking is driven primarily by the Avengers flop. Lost 200M on that supposedly.

No doubt the sales of these companies was a fire sale.

 

[Ra]

Stop making threads based on the interpretation of tweets, with no actual source by which the statements can be vetted.

It's time to stop using your time scrolling through Twitter as an excuse to make terribly inaccurate topics on Era.

Feel free to make another thread with a direct link to Square-Enix's statements in the OP.