Square Enix is going to make blockchain games — but that’s not all it’s doing

Square Enix is offloading some of its largest studios. The publisher announced it is selling Crystal Dynamics and Eidos to European megapublisher Embracer Group for $300 million. The deal enables Square to get these less-profitable teams off its books. This is especially important during a costly reloading phase for Crystal Dynamics and Eidos, according to Niko Partners analyst Daniel Ahmad.

“Square Enix’s western studios have underperformed across triple-A games based on owned IP, and more recently licensed IP like Marvel,” Ahmad told GamesBeat. “With high operating costs and a two-year window minimum before we see the next triple-A releases from the studios, it’s likely that Embracer Group is taking on more than just the $300 million price tag in the short term. Embracer will be looking to tap into the talent pool and IP at these studios to generate returns over the long term.”

But then what is next for Square Enix? In a note to investors, the publisher reiterated what Ahmad said. Getting rid of Crystal Dynamics and Eidos frees up resources for more profitable projects. But Square also claims that it will instead pursue “blockchain, AI, and the cloud.” Again, the company believes those areas can optimize its net income.

“Square Enix plans to use the proceeds to streamline its game business and invest both in its core development teams in Japan, as well as future trend areas such as cloud, AI and Blockchain,” said Ahmad. “Square Enix is still experimenting with blockchain, and this was mentioned as an additional focus over the long term.”

Of course, it’s possible that this is just big talk from Square. Blockchain is trendy with investors, and maybe leadership at the publisher wants to capture some of that excitement. But Dr. Serkan Toto, Tokyo-based consultant with Kantan Games, thinks Square Enix is serious about its interest in emerging tech.

“I think they will really invest significantly in the blockchain and metaverse space. Their president announced this move enough times now,” said Toto.

Square Enix president Yosuke Matsuda revealed the company is looking into blockchain and NFTs in a New Years letter to fans and investors.

“Let’s hope they will put their focus more on high-quality games made in Japan that are exportable to the rest of the world,” said Toto.

Square Enix’s Japanese efforts, however, haven’t proven much better than what it has done at Crystal Dynamics or Eidos. Those teams and partnerships have produced critically panned products like Balan Wonderworld, The Quiet Man, Left Alive, and Babylon’s Fall.

But maybe Square Enix can reinvest in quality now that it isn’t splitting its focus as much.