read from VGC and twitter:
According to Gibson, the sale of Crystal Dynamics and Eidos to Embracer Group was phase 1 of Square Enix’s plans, and phase 2 will be “diversification of studio capital structure”.
“Rising development costs of making games means with 100% owned studios, they need to be selective and concentrate resources, which limits expansion,” Gibson wrote. As such, the publisher will be “doing a studio portfolio review”.
He added: “Some studios will remain 100% while others will change (equity method or joint venture)”, Gibson explained, adding that Square Enix “will also look to explore to expand the studio portfolio”.
According to Gibson’s reporting on the call, the “biggest impact is on EU / US studios around large titles”, and that the changes mean Square Enix “will be able to allocate resources mainly to Japan titles”.
“So Square Enix is looking to sell stakes in its studios to others to improve capital efficiency,” Gibson summarised, “right when others like Sony etc. are buyers. I would expect Sony, Tencent, Nexon etc would be interested.”
Gibson also noted that, in his estimation, Square Enix’s decision is “extraordinary” because the publisher should have more than enough money to meet its needs without having to sell stakes in its existing studios.
“Square Enix capitalised game dev costs are currently running at $840 million,” he wrote. “But post the Crystal Dynamics / Eidos sale the company will have $1.4 billion in cash and zero debt, which is plenty to fund expanded game investment and not sell down stakes in its studios.”
According to Gibson, the sale of Crystal Dynamics and Eidos to Embracer Group was phase 1 of Square Enix’s plans, and phase 2 will be “diversification of studio capital structure”.
“Rising development costs of making games means with 100% owned studios, they need to be selective and concentrate resources, which limits expansion,” Gibson wrote. As such, the publisher will be “doing a studio portfolio review”.
He added: “Some studios will remain 100% while others will change (equity method or joint venture)”, Gibson explained, adding that Square Enix “will also look to explore to expand the studio portfolio”.
According to Gibson’s reporting on the call, the “biggest impact is on EU / US studios around large titles”, and that the changes mean Square Enix “will be able to allocate resources mainly to Japan titles”.
“So Square Enix is looking to sell stakes in its studios to others to improve capital efficiency,” Gibson summarised, “right when others like Sony etc. are buyers. I would expect Sony, Tencent, Nexon etc would be interested.”
Gibson also noted that, in his estimation, Square Enix’s decision is “extraordinary” because the publisher should have more than enough money to meet its needs without having to sell stakes in its existing studios.
“Square Enix capitalised game dev costs are currently running at $840 million,” he wrote. “But post the Crystal Dynamics / Eidos sale the company will have $1.4 billion in cash and zero debt, which is plenty to fund expanded game investment and not sell down stakes in its studios.”
