Why Square Enix Sold Eidos Montreal and Crystal Dynamics For Just $300 Million
Square Enix has just sold three of its biggest studios. Crystal Dynamics, Eidos Montreal, and Square Enix Montreal have all been sold to Embracer Group for the relatively low price of $300 million in cold, hard cash. For the makers of triple-A blockbusters like Tomb Raider, Deus Ex, and Guardians of the Galaxy, that seems like a seriously small amount.
And yet, Square Enix seems happy to divest itself of these prestigious studios in the name of future profitability.
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Niko Partners analyst Daniel Ahmad broke down the numbers for us. The profit margins on running Crystal Dynamics and Eidos Montreal were far lower than Square Enix's other studios. Crystal Dynamics had an operating profit margin of 3.6%, while Eidos Montreal squeaked by with just 0.65% in 2021. Square Enix overall had an operating profit of 14.2% last year, meaning the sold studios were vastly underperforming compared to other parts of the company.
But this is less about Eidos Montreal or Crystal Dynamics underperforming and more about the fact these studios just make expensive games, and expensive games can sometimes take years to recoup their initial investments--if they ever do at all.
Shadow of the Tomb Raider, for example, cost between $110 and $135 million to produce and market, making it one of the most expensive games ever made. By the time Crystal Dynamics celebrated the Tomb Raider franchise's 25th anniversary, Shadow of the Tomb Raider had sold close to nine million units, but it took almost three years to get there.
Deus Ex: Mankind Divided has a similar story. It cost roughly $70 million CAD to produce Mankind Divided in 2016, and likely many millions more to advertise it, but the
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