Square Enix/Embracer Group Deal Prompts Speculation of Further Developments

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A promo image for Marvel's Avengers.
Credit: Image via Mobygames.

Reaction to yesterday’s blockbuster deal between Square Enix and Embracer Group, which saw several studios and the IP rights to beloved series like Tomb Raider and Deus Ex become set to transfer from the former to the latter, has been varied.

Many industry commentators and fans were naturally immediately concerned with the effects the deal might have on their favourite franchises and the morality of the Final Fantasy and Kingdom Hearts publisher’s proposed reinvestment of the funds into “fields including blockchain, AI, and the cloud”.

However, arguably the most major source of speculation and confusion surrounding the deal was the size of the price being paid, especially when compared to recent acquisitions by Microsoft and Sony.

Square Enix/Embracer Group Deal Prompts Further Development Speculation

A few possible justifications for the $300 million figure quoted in both companies’ press releases have emerged, one of which seems to hint that the deal could serve as a forerunner to a larger acquisition.

This very much unconfirmed rumour stems from the initial reaction of VentureBeat’s Jeff Grubb to the news on Twitter, in which he eluded to both profitability struggles for Crystal Dynamics and Eidos Montreal and a possible need for Square Enix to streamline ahead of a potential future acquisition by a larger company as conceivable impetuses for the deal.

In terms of the latter, Grubb said: “no idea if that happens, but it's more likely today than yesterday”, while also suggesting that the company’s proposed investment in controversial blockchain technology likely wouldn’t put off any potential buyers.

The online rumour mill was quick to position Sony as the party they thought most likely to acquire Square Enix, with some assuming that Grubb’s comments meant an acquisition was indeed imminent.

This prompted Grubb to clarify things, reiterating that he couldn’t confirm any Sony/Square Enix deal and citing the fact that reports of big acquisitions very rarely pre-date official announcements because of the refusal of industry sources to discuss them and the risk of negative consequences.

Grubb also added: “I do believe that Square Enix is trying to best position itself for acquisition. But that doesn't mean anything. These deals can fall through or get completely flipped on their head.”

One area that does seem to have fairly concrete evidence is the financial state of the studios sold by Square Enix, with David Gibson, a Senior Analyst at MST Financial, citing the Marvel games produced by both Crystal Dynamics and Eidos Montreal as having underachieved in his Tweet about the news.

“In a little under two years they lost $200 million on two Marvel games”, said Gibson, though he also added: “it still looks like a low price given the optionality on probably 4 AAA titles coming through”.

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