Square Enix today revealed further details about why it sold Crystal Dynamics, Edios Montreal, and Square Enix Montreal and what comes next.

Square Enix's latest earnings call was quite a doozy. As reported by analyst David Gibson, Square Enix revealed that it had sold its western studios due to concerns that the western titles were cannibalizing sales of the rest of the publisher's games. Selling off the studios plus the IP improves capital efficiency, according to the publisher. Before the sale, game development costs ran at $840 million. Post-sale, the company expects $1.4 billion in cash and zero debt, which they claim will be used to expand their gaming investments.

However, that all is just phase 1 of Square Enix's plans. Phase 2 is all about finding ways to be flexible with their capital, which means evaluating where to expand and where to contract. The biggest impact is expected to come from the remaining US and European studios so that Square Enix can put more resources into their Japanese titles. Furthermore, Square Enix is reportedly looking into selling stakes in its studios to improve capital efficiency. Gibson speculates that Sony, Tencent, and Nexon are likely the key parties interested in nabbing up parts of these studios.

In terms of how Square Enix is doing, the publisher saw a decline in net sales. Other publishers have seen similar dips as the world adjusts to the new normal. Bright spots include the publisher's MMO sub-segment, which was up due to a strong showing from Final Fantasy XIV. Their Amusement and Merchandising segments also saw gains. Remaining major titles releasing this fiscal year include Valkyrie Elysium, Star Ocean: The Divine Force, Crisis Core: Final Fantasy VII Reunion, and Forspoken.