After losing $200 million on Marvel games, Square Enix now fears risk

Instead of buying new game studios, Square Enix is open to acquiring stakes in game developers and making side deals to co-finance and publish games.

After losing $200 million on Marvel games, Square Enix now fears risk
2 minutes & 15 seconds read time

After losing an estimated $200 million from Avengers and Guardians of Galaxy, Japanese games publisher Square Enix is afraid of risk and is taking big measures to combat it...including possibly selling off stakes of its developers.

After losing $200 million on Marvel games, Square Enix now fears risk 1

In a recent Q&A with investors, Square Enix made some very interesting comments about the future of its game studios. Executives in the Japanese games publisher, which is known for major franchises like Final Fantasy, said that management is open to the idea of "forming joint ventures and taking minority stake" in order to reduce the significant volatility involved with making games.

This volatility and risk was exposed with two major flops for Square Enix; the company's duo of Marvel games, Avengers and Guardians of the Galaxy, not only missed internal expectations but led to an estimated loss of $200 million. This heavy loss led Square Enix to sell its entire Western game studios branches, which include Crystal Dynamics and Eidos Montreal, to Embracer Group for just $300 million. Also included in the deal were franchises that continually missed Square Enix's lofty expectations including Tomb Raider and Deus Ex.

While Square Enix is still profitable and still doing well (despite losing 37% in Q1 revenues due to foreign exchange rates and lower game sales), the company is gearing up for major new games.

Square Enix's spending on new games has swelled to a record-breaking $792 million in FY22. Square Enix is spending more money on game development than it ever has before and it is doubling-down on major fan-favorite franchises like Final Fantasy 7, which is getting multiple new game releases.

After losing $200 million on Marvel games, Square Enix now fears risk 3

Square Enix wants to do it all...which requires lots of risk.

The publisher's communications do seem odd considering Square Enix is trying to invest in practically every major technological breakthrough in the gaming space. Square Enix CEO Yosuke Matsuda has promised to invest in more fledgling tech like cloud gaming, VR/AR/XR, and more recently, the volatile and ultra-speculative market of NFTs and blockchain gaming.

Matsuda has expressed interesting in creating a play-to-earn blockchain platform for future Square Enix games.

"The cost of developing a single title is on the rise. As such, owning studious outright means that while you can expect major returns, your downside risk is also substantial. The result of this is greater-than-expected earnings volatility.

"Therefore, rather than insisting on full ownership, we want to additionally adopt other approaches such as forming joint ventures and taking minority stakes so that we will be able to hedge our investment risk, thereby controlling our volatility and achieving both growth and the optimal balance sheet profile."

After losing $200 million on Marvel games, Square Enix now fears risk 22
Buy at Amazon

Marvel's Guardians of the Galaxy - PlayStation 5

TodayYesterday7 days ago30 days ago
* Prices last scanned on 1/28/2023 at 2:46 pm CST - prices may not be accurate, click links above for the latest price. We may earn an affiliate commission.

Derek joined the TweakTown team in 2015 and has since reviewed and played 1000s of hours of new games. Derek is absorbed with the intersection of technology and gaming, and is always looking forward to new advancements. With over six years in games journalism under his belt, Derek aims to further engage the gaming sector while taking a peek under the tech that powers it. He hopes to one day explore the stars in No Man's Sky with the magic of VR.

Newsletter Subscription

Related Tags

Newsletter Subscription
Latest News
View More News
Latest Reviews
View More Reviews
Latest Articles
View More Articles