Square Enix studio sales

This is like super ice cold at this point, but Square Enix has announced the sale of three of its Western studios, at least some of their most desirable IP, and 50+ games from the back catalog, essentially reducing its Eidos arm to managing indie games via Square Enix Collective and Square Enix London Mobile, centering Eidos back in the UK. Others have said this, but it’s a smart move for a number of reasons.

A sprawling Eidos

A pre-merger Square first partnered with Eidos on the PC release of Final Fantasy VII. Even though development on that was a mess, it started a beautiful relationship between the two companies due to their similar company culture and overall workflow. Eidos being able to take the not-even-final-copy spaghetti code and rewrite literally 95% of it to get it working on PC absolutely made them an attractive partner, and their ability to communicate halfway around the world effectively ultimately led to Square Enix approaching them with a buyout offer in 2009 when Eidos had been having a rough couple years. Even though many people were surprised, literally everyone thought it was a good idea, so something seemingly beautiful came to be. Square Enix bought Eidos to branch out into Western development, gaining a bevy of popular IPs like Tomb Raider in the process.

Eidos subsequently began to reach across the Western world, with studios across the UK and scattered around Europe and North America. It oversaw several studios over time that were eventually either shuttered or sold back to management, including the successful IO Interactive. The ones we care about for the purpose of this rant are Crystal Dynamics, Eidos-Montréal, and Square Enix Montréal. Of the three, only the latter was specifically created post-buyout, where both of the others had existed prior. It’s also the only one of the three that doesn’t have multiple offices. Eidos-Montréal has one in China, while the rest are scattered throughout the US and Canada, making the UK maybe a sub-optimal place to be managing them from and less central than it once was.

Where did the problems start?

To be blunt, at whatever point Square Enix in Japan started trying to cater to a Western market specifically, i.e. probably immediately after the surprising success of anyone at all buying the original Final Fantasy, which they had to be convinced to release Stateside as they had laughed off the idea there was even a market. Some of the most obvious examples of this failure include Final Fantasy XIII as a trilogy, but it goes as far back as the way they gutted Final Fantasy IV for the US "Easy Type" release on the SNES thinking it was too complicated for Americans (leading to reviews lamenting the changes and soft sales) or failing to release Final Fantasy V at all because they felt Western gamers wouldn’t understand its systems, or the fact they released Final Fantasy Mystic Quest in the US to help teach the US audience what an RPG was and then maybe give us FF5 under the title of Final Fantasy Xtreme for the geniuses among us once they were sure we knew what we were looking at from the fantastic sales numbers (spoiler: this never happened).

This wasn’t strictly a Square issue; Japanese developers throughout the ’80s and ’90s were split on whether foreigners were toddlers who couldn’t comprehend their games or gaming monsters with terrifying skills, with exports commonly making them either pared down and patronizingly easy or controller-snapping impossible to "compensate." Square just happened to fall into the former camp.

Square always was at its best when it wasn’t treating Western gamers differently than Japanese ones and we can probably thank Final Fantasy VII being such a house of cards that removing anything was literally impossible for getting them on that track by telling them leaving it alone was going to make them more money than they’d ever seen before, though this one (1) runanway success ultimately made them think every game should sell that way. FF7 blew the market wide open and the small, faithful niche legitimately did fall away to a flood of people who didn’t know there were other RPGs and for whom their only experience was definitive. That could be a whole rant of its own, but suffice to say everyone was pretty much over it by Final Fantasy X and that’s why it holds a similar popularity, where it’s taken longer for everything that came out in between to get proper appreciation. Either way, it meant that Square largely held that course because if nothing else, they were doing better than before, even if it caused lasting confusion on where their magical infinite market went, and it was almost certainly less work.

But after Square learned the lesson of "leave it the heck alone" for a comfortable decade or so, Final Fantasy XIII (ultimately released in that same 2009 as the Eidos buyout, but starting development in 2004) marks when they started falling back into old habits in search of that magical, unknowable, yet lucrative Western market, trying to make a worldwide game all at once in a messy development cycle with no shared vision until forced to crap out a demo that became their path forward, an engine they were building as they went, a script that was being revised as it was being written that made their English translator swear off ever doing that again, and having literally no game for so long Western playtesters’ feedback came too late to incorporate, when they were supposed to help drive the direction. This did end up getting incorporated into the direct sequel and it didn’t seem to change much. By the third entry, everyone was thoroughly sick of Lightning and everything in her orbit, the engine had been scrapped due to being ONLY good for FF13, and Square Enix had gotten a rude wake-up call that they couldn’t just assume the brand would carry itself, with Final Fantasy XIV having had a disastrous launch to add insult to injury.

All the while this was crashing in slow motion, Eidos-Montréal had done a fantastic Deus Ex that was one of the few things keeping Square Enix afloat and was offered the opportunity to outright do Final Fantasy XV just for someone to get the series back on its feet. While their space opera, Project W, was rejected by the Japanese management as the next Final Fantasy, it was at least allowed to continue production as its own thing for a year Xenogears-style as Project Nova before its (overly) ambitious scope was deemed too expensive and it was canceled. This stuff happens. Unfortunately, while they worked, due to the company bleeding money, there was a shake-up in management in Japan and a new CEO who sought to restore the Japanese side of the company rather than let the Western side have the glory, which led to conflicts and the Eidos-Montréal studio head walking. Where before there was some level of mixed messaging, this change in leadership made it very clear they had zero support in Japan, which marked a shift into a slow decline for Western operations.

Ultimately, what was Final Fantasy Versus XIII would emerge from development hell in a new engine to become the new Final Fantasy XV and it was considered the success the Japanese side of the company needed, though at the expense of the Western side. Versus was torn screaming from Nomura’s loving arms and he was sent to work in the Kingdom Hearts mines, allowed one final visitation to pass along the care and feeding of his baby to Tabata. Tabata had managed to save FF14 by inviting literally everyone who’d ever played to watch it get blown up (seriously) before starting over and was brought on to Versus as the only one anyone really felt could be trusted with it at that point, or anything else, really, other than Nomura himself, and having a third failure in their flagship franchise was simply not an option. Tabata is quoted as saying his successes came from a place of not resting on your laurels and actually focusing on quality. Final Fantasy XV not only restored the brand name, but finally seemed to capture the Western market the way they’d hoped as an action RPG the way they’d wanted it, from the Japanese side of the company, the ripples of which have since permeated everything they’ve done, but eventually likewise wore out its own welcome as a multimedia franchise, with games media hailing its "death" as director Tabata left Square Enix and all additional… additions abruptly stopped.

After the unexpected Western success and positive reception of Bravely Default in the interim as a more traditional turn-based JRPG, Square Enix seemed to finally realize that they were chasing a market that didn’t exist when there was a waiting market that had bought everything the Japanese market did without half the same complaining for that solid decade on the PS1 and PS2. This in part inspired them to consolidate operations back in Japan and focus on the Japanese market, since the worldwide market would fall into place as fans of Japanese games, though action RPGs seem to have continued forward by merit of inertia. Square Enix has been convinced that they need to return to their roots for the sake of their core audience.

But actually, sales

Not that this happened in a bubble. With Eidos’ studios largely in the US and Canada, it seems things just were in a slow decline even regardless of the Japanese shake-up. Square Enix Montréal was created from the ground up and had a lot of internal conflict despite some moderate successes in the mobile market. It doesn’t seem to have ever quite found its footing and while it operates in a very novel way, more like the small studios of old, it just got mismanaged. That in itself wasn’t necessarily the driver of the issue, but a floundering mobile studio doesn’t help. New Japanese management caused a lot of friction with the existing heads of the Western studios and they began dropping like flies in the following years and that alone has a lot of ripple effects for things like morale and whatever projects get delayed or canceled. Executive meddling from Japan had been negatively impacting operations for years, forcing games to be carved up to meet deadlines and DLC and microtransactions to be inserted to patch things together.

The igniting spark is that Crystal Dynamics released the underwhelming Avengers and that dragged down the amazing Guardians of the Galaxy from Eidos-Montréal by association, with many reviews quick to try to drive a wedge between the two that never quite saved it in the market.

Eidos-Montréal isn’t part of the problem here. They’re a good studio who released a good work that, unfortunately, was more or less a victim of the Marvel Cinematic Universe tying their product to an inferior one. For that matter, Crystal Dynamics isn’t really a bad studio, either, just one that released one objectively average (if buggy) game that happened to be attached to a cultural zeitgeist and that was set up for failure from the beginning, even before the monetization got involved as the most tone-deaf addition possible, with interest immediately taking a hit the first trailer because they couldn’t use the likenesses of the actors the game was about. It’s not like they didn’t try to fix and support it, either.

The problem is really that Square Enix as a parent company doesn’t know what makes a Western game good and was unable to intervene in Avengers to keep it from tarnishing their Marvel license, or may have even been at fault for its shortcomings because of its seeming inability to read the room while it’s at it. Given other related complaints, it’s likely there was executive meddling from Japan.

The solution

Re-homing those studios. No, seriously, they’re doing exactly the right thing. It’s not like Square Enix hasn’t outright shuttered studios before and they could have done that here, but instead they’re selling them to a Western holding company along with their incredibly desirable IP and award-winning back catalog so everyone can continue to enjoy it all. They’re allowing the talent to operate under, hopefully, better management. Selling 3 studios for a paltry $100 million each plus their IP plus their back catalog seems like a slap in the face, but as far as Square Enix is concerned, they’ve been underperforming for years. Part of that has been admitted to be unreasonable expectations, but if they haven’t figured out reasonable targets by now and understand they’re not going to, Embracer Group seems happy to take their numbers and that’s mutually beneficial. That and IP is no good if you don’t have anyone to make it, which simply doesn’t fit into Square Enix’s plans going forward as they refocus on traditional Square and Enix properties, plus their own new IP. Square Enix has showed less and less interest in it anyway since it’s been really good at winning awards, but really bad at meeting sales targets. Awards don’t pay the bills. Square Enix literally doesn’t see the value in any of it, but in the end we all benefit from them not trying to hoard it or hold it hostage. This in itself is a recurring pattern for Square Enix and many of the studios they released rather than closing either lasted on their own two feet for years before closing, got snapped up by others like Toys for Bob, or are still running independently like IO Interactive. Square Enix seems to have some concept that they’re just not able to properly manage foreign studios and this batch is essentially the last of them to be set free.

The assumption seems to have been that having Western studios under their belt would tame the unknowable beast of the Western market without Square Enix having to actually understand it themselves, but in reality, Square Enix’s failure to understand it, or that there was no single Western market that didn’t want Japanese games, ultimately put them in a position where their efforts to court the phantom proved less fruitful than they’d hoped. They asked for the Western side to save them, but conditions changed and that help and really any place at the table was later rejected, which was probably the biggest shove of anything to send the two ships drifting apart. Square finally learned "to thine own self be true" and in pursuing that, they’ve made a pretty wise decision to cut both ships free so each can sail in the appropriate direction.

When you have this kind of conflict, having any kind of amicable resolution at all is a miracle. The solution may not be actually amicable, but in the end, they’re doing the right thing and everyone benefits.

Embracer Group also seems excited to revive multiple series that have gone dormant, which is good for fans. The whole thing really seems best for everyone. In a way, it’s a parallel to how Eidos was absorbed in the first place. There’s just someone else whose culture and enthusiasm are better fits as things have drifted apart over time.

In the future

Square Enix has clarified that they’re NOT wasting the sales money on NFTs and seem to be shying away from that load of crap despite intitial enthusiasm. I can’t say anything on NFTs that hasn’t already been said, but to put it bluntly, the maker of Final Fantasy VII should absolutely have known better in the first place. I’m sure it’s less because they read the room (as I said, that doesn’t appear to be their strong suit) or took the phenominal backlash to heart (they blithely brushed it off) so much as the recent near-total crash of the NFT market and the dismal failure it’s been in other games, but the faster blockchain dies, the faster we can keep our planet from dying.

What they ARE doing is using the money to buy or found additional studios centralized in Japan. This makes sense from a cultural perspective because current management wants a strong Japanese core and doesn’t care about the rest of the world. As stated, restoring honor to the Japanese side of the business took priority over investing worldwide, and ultimately they know exactly what they want and how to get it in Japan.

Sometimes good things have to come to an end and it seems like this is the best end for these studios. Ultimately, relationships die because of unmet expectations and Square Enix has not had their expectations met by these studios for a long time, even if those expectations were unrealistic. Embracer Group seems to have much more reasonable expectations and a lot more enthusiasm than Square Enix’s growing neglect of the properties these studios own and frankly the studios themselves.

Square Enix may see an eventual end to the idea that everything has to be an action RPG, with clear demand for turn-based RPGs, and might start innovating back in that direction. There’s been no shortage of innovation in that battle setup in the past and there seems to be a pendulum swing with even noted action-RPG series Yakuza taking a highly popular turn-based approach after feeling they’d tapped out the number of ways you could stomp a rival gangster otherwise. Moreover, Square Enix in focusing on what makes them special in the first place is going to have a return to form regardless of what they make because all of the issues of the past several years have stemmed from trying to be something they’re not. On one hand, they’re not going to have Tabata to save the day anymore, but on the other, there’s still plenty of talent left with Nomura gaining creative leadership and others stepping up and Square Enix is nothing if not smart about promoting internally and fostering promising talent, at least within the Japanese offices.

Square Enix investing in where it works best, its own local offices, is going to put it in a stronger position, and releasing these studios to someone who can better leverage them is ultimately ensuring the success of both. That’s not something you always see in the industry, but Square has always done things a bit differently.