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Square Enix-Embracer deal showcases two key video game industry trends

The gaming industry saw yet another massive acquisition in 2022 as video game developer Square Enix sold several of its studios to Embracer Group, formerly known as Nordic Games, for USD 300 million.

Embracer is a Swedish media holding company that has acquired several video game developers, such as Gearbox Entertainment in 2021 for USD 1.3 billion since it was first founded in the 1990s. It has been expanding internationally for over a decade, and recently rebranded from Nordic Games in 2019.

Embracer will get rights to Tomb Raider, Deus Ex, Thief, and Legacy of Kain. Square Enix will use the transaction to focus more on “the launch of new businesses by moving forward with investments in fields including blockchain, AI, and the cloud,” according to the company.

This move by Embracer is just one in a long string of acquisitions to become one of the biggest video game conglomerates in the industry. Earlier this year, Microsoft, Sony, and Take-Two Interactive each acquired big-name developers for billions of dollars, and now Embracer is carving out a piece of the industry pie for itself with its acquisition of Square Enix.

Square Enix America and Europe CEO Phil Rogers sang the praises of Embracer, who he said will “maximize our franchises’ potential and live our dreams of making extraordinary entertainment.”

”Embracer is the best kept secret in gaming: a massive, decentralized collection of entrepreneurs whom we are thrilled to become a part of today,” Rogers said in a press release. “It is the perfect fit for our ambitions: make high-quality games, with great people, sustainably, and grow our existing franchises to their best versions ever.”

For Square Enix, this transaction acts as a bit of a reset in direction. As the COVID-19 pandemic fundamentally changed our world, Square Enix President Yosuke Matsuda said in a blog post on January 1, 2022, that the company would be focusing on the metaverse and other blockchain technologies.

“We are seeing the beginnings of further leaps forward for our business,” Matsuda said. “We remain committed to creating, developing, and providing world-class content, and we will contribute to the happiness of society and its people by offering new forms of excitement.”

Square Enix has eyed the potential of a create-to-earn blockchain platform where players can engage with content in a completely unique way. Matsuda views the current status quo of games to be a “one-way relationship” between the developer and the player. If a player is incentivized to make their own content with “blockchain-based tokens,” then they can maintain a self-sustaining game.

Embracer sees this deal as an addition to its massive collection of intellectual property from several video game developers. The group said it expects “significant net sales” from its upcoming AAA video game releases, and its slew of video game studio acquisitions shows it has worked so far. Microsoft, Sony, Take-Two, and plenty of other companies are looking to expand, and the Embracer-Square Enix deal shows Embracer’s dedication to being listed among those big names.

How Embracer and Square Enix fare in their differing paths could highlight what direction other companies go toward in the future. If Square Enix succeeds in its blockchain vision, more legitimacy will be added to the growing market, and if Embracer grows to the industry powerhouse it wishes to be, other companies will try to add more subsidiaries and studios to compete with Embracer.

GosuRabbit is a marketing agency that specialises in providing entertainment, esports and gaming marketing services for brands, businesses and agencies across the globe.

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