Square Enix reportedly looking to improve its ‘capital efficiency’

Square Enix is reportedly looking to sell major stakes in its studios to focus on diversifying its capital.
square enix studio stakes

Final Fantasy developer and publisher Square Enix is reportedly looking to sell major stakes in its existing studios to diversify its company structure and free up capital. The announcement was made during a financial call in early August which reportedly focussed on the rising cost of game development and studio ownership.

According to financial analyst David Gibson, the call was a ‘doozy’ filled with extraordinary decisions. For one thing, Square Enix reportedly claimed that the sale of Western studios Crystal Dynamics and Eidos to Embracer Group was driven by ‘concerns that titles cannibalised sales of the rest of the group’ and so the studio could ‘improve capital efficiency’.

Phase two of this plan is reportedly a commitment to new capital diversity – offering stakes in the company’s studios to create new streams of revenue and attract major investors like Sony or Tencent.

Read: Every major video game franchise owned by Embracer Group

‘Rising development costs of making games means with 100% owned studios, they need to be selective and concentrate resources, which limits expansion,’ Gibson explained of the decision. Diversifying studio capital is reportedly another way for the company to be ‘flexible’ and have more on-hand capital, although as Gibson notes, Square Enix should already have more than enough capital for efficiency.

‘Square Enix capitalised game dev costs are currently running at US $840 million,’ Gibson noted on Twitter. ‘But post the Crystal Dynamics / Eidos sale, the company will have US $1.4 billion in cash and zero debt … which is plenty to fund expanded game investment and not sell down stakes in its studios.’

Going forward, Square Enix will undergo a studio portfolio review to determine how best to allay development costs, with the largest impact reportedly being on unspecified European and United States-based studios. According to Gibson, the company is currently refocusing solely on its Japanese studios and flagship titles, and exploring options for the wider Square Enix portfolio.

According to other reports, the company will also be looking to acquire new game studios, although it’s currently unknown how this figures into their plan to diversify capital. Whatever’s in store, it appears there’s massive change now happening at Square Enix.

Leah J. Williams is a gaming and entertainment journalist who's spent years writing about the games industry, her love for The Sims 2 on Nintendo DS and every piece of weird history she knows. You can find her tweeting @legenette most days.