In a surprising announcement made just this morning, Embracer Group has acquired essentially the entirely of Square Enix‘s western wing that encompasses several studios and their IPs. This deal includes Crystal Dynamics, Eidos-Montréal, Square Enix Montréal, and a catalogue of intellectual properties that Square Enix has owned for decades, including Tomb Raider, Deus Ex, and Legacy of Kain.
The real kicker here is Embracer Group managed to snag all of these assets for just $300 million USD, a price that seems unbelievable given the value and potential of what these franchises are worth. Insomniac Games, a studio that only owned one IP at the time of its purchase, Sunset Overdrive, was bought by Sony for $230 million USD. And here we have some of the world’s finest studios and most iconic IPs that were sold to Embracer for what, in hindsight, seems like petty cash.
We are thrilled to welcome these studios into the Embracer Group. We recognize the fantastic IP, world class creative talent, and track record of excellence that have been demonstrated time and again over the past decades. It has been a great pleasure meeting the leadership teams and discussing future plans for how they can realize their ambitions and become a great part of Embracer. – Lars Wingefors, Co-founder and Group CEO, Embracer Group.
Gaming’s best keep secret
As for the buyer, acquiring has-been franchises is kind of Embracer Group’s thing. With over 580 franchises under its belt, the Swedish firm is no stranger to owning defunct publishers and studios including THQ, Gearbox, and Nordic Games Licensing. We all know Square Enix wasn’t doing a great job with the esteemed developers they had, selling them for just $300 million is one example of that, so perhaps this could mark the beginning of a new era.
Embracer has said that they’ve entered in an agreement with Square Enix to acquire these assets by July-September of this year, when the deal completes. According to the company, they see these franchises as massive prospects that will benefit from deeper investments. Therefore, Embracer would large sums of capital to fuel growth of these IPs, but will allocate resources more efficiently to ensure maximum ROIs.
The transaction will assist the company in adapting to the changes underway in the global business environment by establishing a more efficient allocation of resources, which will enhance corporate value by accelerating growth in the company’s core businesses in the digital entertainment domain.
What’s a little more concerning is Square Enix’s reasons behind selling their studios and franchises. Unfortunately, one of the contributing factors was blockchain and Square Enix’s drive to invest in the technology. the company mentions in its press release how this purchase would allow them to look into new avenues that were largely untapped beforehand, including AI and cloud computing, and of course the dreaded blockchain which is associated with plagues like NFTs.
The Transaction will assist the Company in adapting to the changes underway in the global business environment by establishing a more efficient allocation of resources, which will enhance corporate value by accelerating growth in the Company’s core businesses in the digital entertainment domain. In addition, the Transaction enables the launch of new businesses by moving forward with investments in fields including blockchain, AI, and the cloud.
All in all, the acquisition of three of Square Enix’s western studios and some of the company’s (ex-) biggest franchises accounts to around 1100 employees in total that would now work under Embracer Group. The press release has mentions of organizational restructuring at multiple points, so we can expect at least some level of redundancy as a product of this deal.
Once the purchase is complete in the third quarter of this year,, Embracer Group will then have more than 14,000 employees, 10,000 game developers, and 124 internal studios to its name. According to the company, it has more than 230 games in development at those studios, and more than 30 are AAA titles. Embracer also described itself as “the best kept secret in the gaming industry” and that statement does have some merit to it, being that 95% of people won’t recognize the name.
Square Enix’s position
As for Square Enix, well they aren’t left completely stranded after this heist by Embracer. Square Enix will still retain publishing rights to the games made by third-party developers that it publishes. This lineup includes franchises such as Just Cause, Life is Strange, and Outriders, and more. It’s clear that Square Enix wants to focus on its Japanese operations and wants to downscale the scope of the company, seeing how they’re clearly struggling to manage it effectively.
Going forward, the Company’s development function will comprise its studios in Japan, Square Enix External Studios, and Square Enix Collective. The Company’s overseas studios will continue to publish franchises such as JUST CAUSE, OUTRIDERS, and Life is Strange.
Again, $300 million for three massive studios and three of the gaming’s most iconic franchises still is unfathomable and I can’t possibly imagine how Embracer was able to pull this off. Bungie, the developer and owner of the Destiny series, was acquired by Sony for more than $3 billion just two months ago, and I’m quite certain that the things included with this Square Enix deal are worth more than that, which makes this purchase just that much more confusing.
Embracer is expected to pay the $300 million USD to Square Enix mostly in cash as a full amount at the time of closing, which is expected to be around July-September, 2022. The press release coinciding with this announcement includes a lot details and in-depth outlooks of the company’s financials and its plans with the newly-acquire properties. If you wish to know all of that stuff, you can check out the press release here.
With this acquisition, the talent at Square Enix is finally freed from the shackles of a meme-worthy company at last. At Embracer, the studios have a real chance, a rebirth of sorts, to finally develop the best games possible by utilizing their now-owner’s extensive portfolio of investments. Deus Ex, a franchise completely neglected by Square Enix for the past few years, is perhaps the most hopeful prospect of this situation.
The acquisition brings a compelling pipeline of new installments from beloved franchises and original IPs, including a new Tomb Raider game. The acquisition builds on Embracer’s mission of creating a leading independent global gaming and entertainment ecosystem. Embracer has been particularly impressed by the studios’ rich portfolio of original IP, housing brands with proven global potential such as Tomb Raider and Deus Ex, as well as demonstrating the ability to create AAA games with large and growing fan bases. There are compelling opportunities to organically grow the studios to maximize their commercial opportunities.
As the quote above clearly indicates, Embracer realizes the worth of solid high-budget single-player experiences in this post-modern world of multiplayer cash-grabs. There is a new Tomb Raider game in development at Crystal Dynamics, powered by the Unreal Engine 5, that will transfer production from under Square Enix to now under Embracer Group, let’s just hope that this deal doesn’t affect that in any way, shape, or form as Tomb Raider is arguably the only thing Square Enix has not messed up in these past few years.
Not only that, now we can see potentially even more games enter development at these studios as early as Q2 2022 which would only help keep the spirit of the workers alive as every day a new company is bought from under their shoes. Whether these new games, maybe even a new Deux Ex, will actually be better than the mediocrity fest Square Enix has been pumping out as of late, remains yet to be seen.