For Yosuke Matsuda, the president of Square Enix, it is now too expensive to own entire development studios. Better to focus on joint ventures and have minority stakes in them. The statement dates back to a speech on August 4, 2022, made in front of shareholders, but was only recently transcribed.
“Finally, I would like to talk about our investment strategy on development studies and new domains.
Traditionally, our policy has been to fully own our own development studios. Unfortunately, development costs have increased enormously in recent years, so I want to tell you about ways to allocate capital to studios that give us more flexibility. This includes not only full ownership, but also joint ventures, equity-based affiliates and minority interests. Instead of insisting on ownership, we will reduce risk by investing in studios through a variety of capital structures, working to enrich our portfolio and achieve sustained growth. “
Matsuda then explained that the development cost of individual games is now very high. So the benefits of owning a development studio don’t outweigh the increased risks, which make revenues uncertain.
This does not mean that Square Enix will no longer own internal studios, but that it will increasingly tend to entrust its projects to external studios, in which it will participate financially. The sale of Eidos and Crystal Dynamics to Embracer Group fits perfectly into this new operating logic.
If we want, Matsuda’s declaration is another sign of the ever-decreasing sustainability of video game development, in particular triple A games, which in the face of huge investments, do not guarantee adequate returns.