Embracer Group to wrap loving arms around Square Enix's scorned Western studios

Interestingly, the deal price is said to be a measly $300,000,000.

Have to imagine this is great news for these various dev teams as they'll be joining a publisher far more culturally aligned with their sensibilities and likely not nearly as willing to throw them under the bus seemingly at random. Scanning the current holdings on their Wikipedia page, it would seem to me that Crystal Dynamics, Eidos Montreal and the rest along with their various active and dormant IP that Square is including in the deal immediately becomes Embracer's flagship development teams, yeah?

Square never loved these studios and it’s good that they are getting away. I wish it was more of an independence story instead of being swallowed up but at least this means there will be some breathing room, or at least more realistic expectations for these teams to work within.

Deus Ex in particular. They had problems but those were decent games that had good sales by any other metric, but didn’t become a live service blowout, so fuck it, 99% success = 100% failure.

Squeenix also feels like they are circling the wagons a bit lately. Or at least sticking to known IP from their Japanese studios. Maybe I’m seeing things, but I wonder if there was a motivation to sell beyond just profitability, but perhaps they needed a cash infusion fast? I have no evidence, just a gut feeling.

It was Crystal Dynamics fault the purchase price is so low.. if only Guardians sold better Square wouldn’t be in this pickle..

I just hope this isn't an example of the famous lyrics: "Meet the new boss.. same as the old boss". I hope these studios now have the creative freedom to make the games they want without this new group breathing down their necks and pressuring them about impossible sales quotas like Square-Enix was going. When you have a game selling millions of copies and the head honcho still says it's a failure, two things are at play. Either Square-Enix is bad at making proper sales prediction and estimates of their games, of they're just very greedy. And to think, this was the same company that was very close to closing, if not for a certain fantasy game that saved their butts. Maybe we will get Days Gone 2 now. One can hope.

It's probably for the best that Square just refocuses more on their output from Japan. I don't know whether or not this puts these studios in a better position under Embracer though. Embracer is still a giant question mark for me. No idea who they are, or what their business strategy is other than just buying up everything than can. They at least seem to let their studios continue to do what they do without much interruption.

They have been... Embraced.

Well at least with Square out of the picture, there's some chances of seeing new Blood Omen games or remake of the classic ones. I don't think Square even heard of Blood Omen.

So I've been looking at this news and from what I understand Embracer isn't actually a publisher, it's purely an investment firm. Now, they're not buying any of Squares publishing business, so the question then becomes how are these studios gonna be handling publishing at this point ? Sure, Embracer has a good amount of different options, but the only real big name is Gearbox. Everything else is well in the B/indie tier. Looking at this I'm having a hard time seeing these franchises getting any sort of new entries that's gonna be anywhere near the quality of their recent titles.

(also, that price seems ridiculously low.)

@ares42: The Embracer Group said just last year they had 2 billion to spend on acquisitions and investments, they just took on 1100 new employees which could cost 300-500m before we see anything from them and they paid for the privilege to do so, Eidos is also already working on a new Tomb Raider.

The price is low likely because the running cost are really high for little to no return in the near term.

That's sorta the main crux here, they're not a publisher, they have no running costs in relation to production. All their operations are run by their subsidiaries. Any investment into the actual games comes from the companies they own, not Embracer Group itself. You don't see their name on any of the products coming from their businesses, because they have no role in the production at all.

It's wild how Square Enix hating it's Western studios has been something of a meme for the past few years, only for it to be blatantly stated with a price tag everyone outside of Japan seems to view as laughable. The craziest part is selling off the fucking Deus Ex and Tomb Raider IPs as part of it. It's hard not to think that they really are just about to go all in on Babylon's Fall NFTs or whatever.

This also filled me with an indescribable mix of hope and fear:

I wonder what else SE offloaded during this deal?

Here's an interesting wrinkle: apparently the profit margins on Eidos and Crystal D were abysmal? I suppose this is what Square would be talking about when saying the games undersold or disappointed, but for whatever reason they often chose the most defamatory language to describe it rather than straight up saying "these studios may release critical and commercially successful products but at the end of the day they spend almost exactly as much money as they bring in and that's frustrating to us."

@nodima: SE language around Tomb Raider was really tame just 'failed to meet their targets' yet the reaction was like Tomb Raider bombed and SE should be greatful it sold 3.4m.

Crystal Dynamics is based in the San Francisco it's just a really expensive place to be selling well isn't going to be enough, it's the same Dead Space story all over again.

SE thinking wasn't even that wild if Uncharted 2 can sell 3.5m during its first few months then Tomb Raider should do better as a multiplatform title its not crazy logic, and CD got three chances to do so.

Whatever gets the ball rolling for the next Deus Ex.

Tomb Raider reboot lets goooo.

Can Lara go back to being cool now?

Just out of curiosity, what makes up Square Enix's bottom line these days? I assume it's:

• MMO addicts giving dumptrucks of money to FF XIV
• the nation of Japan buying anything Dragon Quest, until the end of time
• a variety of Final Fantasy and Kingdom Hearts games and side games that probably all do pretty well both within Japan and internationally

I assume that's the bulk of it, and all their other JRPG and Nier oddities amount to smaller line items in their overall revenue/image.

Even if the studios were just barely profitable, it seems like a weird business call for them to un-diversify their portfolio, and give up brands that are iconic to the West and originate in the West.

@bisonhero: I think you're ignoring ancillary licensing stuff like merch, as well as their mobile games, which they make a lot of. They have also released a bunch of other JRPG stuff recently from Octopath Traveler and Triangle Strategy to Chocobo GP and them Bravely Defaults. I don't know how that stuff does but they keep making tons of it so it must be doing okay, and I think you are severely underestimating merchandising sales and mobile game incomes.

I think it makes total sense for Square to dump its Western studios. They've owned them for a long time and they've never produced hits or added much value for Square (even if they've made some very good games like the Tomb Raider reboots.) They're assets that might add diversification or value on paper but they don't really add much to the company bottom line. Furthermore, there were big cultural clashes between the head honchos at Square Japan and the western studios that were probably distracting headache.

Square is focusing on its core business model. We've seen that there's been a massive uptick in JRPG and other previously Japanese focused games in west. Even games like the Yakuza series now get global releases explicitly because the Western market is a much bigger chunk of their income. The Japanese console market is basically dying so Japan's video game makers are now essentially global producers (much like Hollywood now makes movies for a global audience.)

From a strategic standpoint if your western stuff isn't working and you can't make it work why not double down on what does work? With a diversified audience you're much less vulnerable to economic downturns and your profit margin is bigger focusing on stuff that you're good at instead of trying to get better at stuff you can't get right.

Square bought the Western studios as a way to tap the Western market. Instead the Western market embraced the Japanese style games and bought Final Fantasy VII Remake while ignoring Avengers. Why keep underperforming assets on the books when they have no real purpose anymore?

And it's probably better for those studios to go somewhere else that might be able to work better with their cultures and get them to be more commercially successful so it's at least plausibly a win-win.

You actually should not undersell Enix with just "lol! Dragon Quest makes bank." They were the dominant force of the merger when it first happened and flush with cash. And to their credit, Enix diversified their portfolio to where it wasn't just Dragon Quest. Their anime and manga division, which later became Square Enix Holdings, owns a shit ton of IPs that are still making the company millions.

And yeah, Dragon Quest makes a lot of money. It turns out people like comfortable, reliable games that meet or exceed a bar of quality. They'll even buy spinoffs!

I feel like if I remember correctly, the Square Enix merger was somewhat similar to the Discovery/Warner deal in that Square felt like the much bigger name at the time with much more valuable IP and future projects, yet like Discovery's executives becoming the new leaders of WarnerDiscovery (or whatever it is) the Enix people mostly took over the business while Square's creatives maintained production control. I could be totally wrong but that's how I remember it!

Legacy of Kain, ready to rise after an eternity.

I think another part of this is just western games being more expensive to develop for, with the philosophy being "You need the biggest game, with the most realistic graphics, and tons of advertisement in order to hit the widest audience in order to make the most money". A lot of Japanese development seems to be on the other end of that where they can get away with having a lower budget and less risk involved when a game doesn't explode on the sales charts and more gain when it does better than expected. It might seem insane that the people who brought you Babylon's Fall would sell off their Marvel's Avengers team, but it probably cost a whole hell of a lot less to make Babylon's Fall then it did Marvel's Avengers.

@brian_: It has been pretty neat to see that trend develop over the back half of last gen and into this gen. So many Asian games in general, not just Japanese, catch my eye with their art style and bonkers character work even if the technical qualities can feel like late 360 product with an HD layer over them. Like Scarlet Nexus, a game I put way more time into than I would otherwise thanks to incredible character art and environment aesthetics despite the actual...look of them being kind of subpar or drab with a lack of animation or detail or what have you.

And I still really, honestly loved the pre-patch/PS5 upgrade version of FFVIIR where you could feel like you were looking at PS2 characters standing in front of PS3 backgrounds interacting with PS6 main characters with a PS4 aliasing layer draped over all of it. Or the NieR series which objectively looks really rough most of the time and yet...that oil rig is also a kaiju, so...who cares? Obviously you have your Kojimas and legacy Squaresoft IPs that still try as hard as they can and often succeed at being at or near the forefront of technical prowess, but it's been interesting seeing Eastern developers recover from the PS3/360 era slump by giving up on their PS1/PS2 reputation and letting the West take the reigns on technical supremacy while they mostly double down on art direction and world building.

Interesting point. I always forget that some of the Asian conglomerates have significant divisions in anime and manga even when they are nominally a software and/or hardware company.

The Dragon Quest series is just fascinating to me, in the abstract. Dragon Quest is to Japan, what Pokemon is to the world. A comfortable JRPG series that doesn't change much that people just keep buying, to tap into that childhood nostalgia, I guess. It's just wild to me that DQ is so stratospherically popular in Japan, but enjoys only modest success abroad. They develop an entire MMO in Dragon Quest X, and then never release it outside of Japan. Absolutely wild.

@nodima: @brian_: So what both of you are saying is that Nintendo's approach to hardware being a couple of years behind the current generation and them focusing more on art design instead of powerhouse graphics was the right move all along?

@av_gamer: It is A right decision for sure. It has served them very well.

For some studios and hardware producers chasing gaudy graphics and realism has done very very well. Activision may have had a rough time lately but a lot of that has to do with stuff outside of game design and it has been extremely profitable and gained a lot of stock market value. Sony has done very very well for itself with its big budget games (to the point where it has cut out its smaller budget projects.)

There are multiple ways to make money in the video game space, but mismanaging Western subsidiaries that clash with your business and management style isn't one of them.

I'm going to push back on two statements here. First, while the initial history of Dragon Quest has been one where the franchise struggled outside of Japan, that has been less an issue since the PS2 era. This has continued to recent times where Dragon Quest XI: Echoes of an Elusive Age was consistently in the top sales position in North America for multiple months.

Likewise, calling the appeal of the franchise "childhood nostalgia" does not explain why the demographics for the series' sales in and out of Japan continue to be in the teens to early 20s. The Dragon Quest fanbase isn't getting older. It continues to attract new and younger players because of its low barrier of entry. The franchise pioneered the genre and has become a cultural landmark. Shit, the Dragon Quest theme was even played during the Tokyo Olympics (which is problematic for reasons separate from the series).

Yuji Horii, the figurehead of the franchise, will go down as a titan of the Japanese video game industry for several reasons. At the top of that list is a fact that he has stated as to what the underlying design philosophy of Dragon Quest has been. Everyone has the ability to see the end of the game as long as you keep playing.

This is basically the case. Enix was the dominant partner in the original merger. Squaresoft had worldwide name recognition, but Enix had money. Here's where things get interesting, though. While Square all but purged their "old guard" (i.e., Sakaguchi, Tetsuya Takahashi, and ect.) the old guard of Enix are still there. Sugiyama, the awful scumbag he was and may he rest in shit, had to die before he was finally pulled from scoring Dragon Quest soundtracks. Yuji Horii is TECHNICALLY listed as a freelancer, but come on... the man is still listed as Design/Project Lead of Dragon Quest XII.

If Square-Enix is readying itself for a sale, then they are going to need to pay off a ton of people. I think if anything, those older sensibilities butted against the low margins from Eidos. 0.65%? REALLY?!You might as well as put FFXIV money into US treasury notes if that is what they were getting out of Eidos.

@av_gamer: I don't think that philosophy can necessarily be applied to hardware. I think that only works for Nintendo's hardware when they also have a compelling use case to go with it. I think the Switch only gets away with games looking the way they do because of it's weird hybrid nature. If that thing was just a standard home console, and games still looked like they do now, sales would probably be abysmal. The Wii U wasn't able to convince people on the two screen experience, but if it was more powerful, I think it probably would have sold better than it did.

@nodima

You make an excellent point. Basically Square Enix would have generated more money investing in 10 Year US Treasury Bonds (it was 4% at 2009 which was when they acquired the studios) than the profit earned from Crystal Dynamics and Eidos.

As hard as it sounds, those studios were too expensive (CD is located in San Francisco) and weren't profitable enough to keep in their portfolio. Guess Square Enix will now be doubling down on its JRPG roots. Final Fantasy will be their graphical showcase, Dragon Quest is the easy revenue generator and they also have all those 2D pixel remasters that cost very little to produce.

Don't be fooled by Nintendo's graphics Breath of the Wild had 300 people working on it over 4 years, that's right in the Tomb Raider 2013 ball park.

And it's been 5 years without seeing Breath of the Wild 2 which atm is the longest development time between titles for Nintendo, they may not be pushing graphics but are meticulous about getting the gamplay right.

Nintendo spoke about this with regards to the Wii U;

"When it comes to the scale of software development, Wii U with HD graphics requires about twice the human resources than before."

And it increased again with the Switch and will with the rumoured 4K'ish Switch 2