Tom Bankswww
Good morning 跑了松鼠好嘛, I'm Tom Bankswww, and this is Goose Pod for you. Today is Sunday, November 09th. We're here to discuss a major shake-up in the video game world.
Mask
That's right. I'm Mask. We're diving into the news that Square Enix is undergoing mass layoffs as it reorganizes and consolidates its development, pulling its focus back to Japan. It's a big move with big consequences.
Tom Bankswww
It certainly is. The headlines are focused on the human cost right now. We're hearing that over a hundred individuals in the UK are potentially impacted, and an unknown number of employees in the United States are also being dismissed. It's a tough day for many talented people.
Mask
Tough, but necessary for corporate evolution. The numbers are interesting. In the UK, it’s about 137 jobs at risk. The key phrase is 'at risk' because UK law requires consultations that might save some roles. In the US, it's more direct. This is a strategic pivot, not just a cut.
Tom Bankswww
And this isn't the first tremor from this earthquake. Square Enix already laid off some of its Western workforce earlier in 2024. This feels like a continuation, a much larger aftershock that signals a fundamental change in their global strategy. It’s a pattern.
Mask
Exactly. You have to connect the dots. This isn't an isolated event. It's part of a larger trend we're seeing across the entire industry. The post-pandemic boom is over. Companies are course-correcting after a period of unsustainable, rapid expansion. The bloat is being trimmed.
Tom Bankswww
'Bloat' is a harsh word for people's careers. We're talking about an estimated 45,000 jobs lost in the gaming industry between 2022 and 2025. January 2024 was a peak for these layoffs. It's affecting everyone, from giants like Microsoft and Sony to, well, Square Enix.
Mask
It's not just Square Enix. Look at Embracer Group, they shed nearly 8,000 jobs. Unity, Microsoft, EA, Sony, they've all made significant cuts. The cost of making a top-tier AAA game has skyrocketed to over 200 million dollars. That level of investment demands brutal efficiency.
Tom Bankswww
And it seems the junior staff are bearing the brunt of it. I read a quote from a level designer who said finding a junior-level role now is nearly impossible. We're losing a whole generation of talent before they even get a chance to establish themselves in the industry.
Mask
That's a talent pipeline problem, a consequence of market correction. Unfortunate, but the market doesn't reward inefficiency. Companies are focusing on senior, proven talent to lead smaller, more agile teams. The days of massive, sprawling teams with large junior pools are ending for many.
Tom Bankswww
So with these cuts, what's even left of Square Enix in the West? They're still managing some big franchises, right? I know fans of games like Life is Strange and Just Cause might be feeling a bit nervous about what this all means for their favorite series.
Mask
They've retained a few key Western IPs. Life Is Strange, Outriders, and Just Cause are still under their Western management. They're also still publishing Powerwash Simulator. But the core of their big-budget development is clearly retreating back to their home turf in Japan. A strategic consolidation.
Tom Bankswww
You know, to really understand today's news, you have to rewind a bit. This whole situation is a direct result of a massive deal that happened back in May 2022. It feels like that was the first big step that led us to where we are today.
Mask
You're talking about the sale to Embracer Group. An absolutely pivotal moment. Square Enix sold off its three major Western studios: Crystal Dynamics, Eidos-Montreal, and Square Enix Montreal. They didn't just sell the buildings; they sold the family jewels along with them. A fire sale, really.
Tom Bankswww
Family jewels is right! We're talking about intellectual properties like Tomb Raider, one of the most iconic video game franchises of all time. And Deus Ex, a series beloved for its deep narrative and world-building. Legacy of Kain, too! These are legendary names in gaming history.
Mask
And they sold it all for a mere $300 million. To put that in perspective, Tomb Raider alone has sold over 85 million copies. Embracer acquired about 1,100 employees and a catalog of over 50 games. It was a shockingly low price, a clear sign Square Enix saw these assets as liabilities.
Tom Bankswww
That's what's so baffling. Why would they see them as liabilities? Eidos was a powerhouse they acquired back in 2009 to make a big splash in the West. It seems they spent over a decade building this presence, only to dismantle it for what sounds like a bargain price.
Mask
Because they were underperforming. Look at the data. Games like Marvel's Avengers and Guardians of the Galaxy, despite being tied to the biggest movie franchise in history, didn't meet their massive sales expectations. They were incredibly expensive to make and the return just wasn't there. The market rendered its verdict.
Tom Bankswww
I suppose that's the harsh reality of the business. Still, it feels like a missed opportunity. Crystal Dynamics had a proven track record with the Tomb Raider reboots. It just seems like there was a disconnect between the Japanese parent company and its Western studios. A culture clash, perhaps.
Mask
It's always a culture clash. It's a clash of priorities. The Japanese headquarters focuses on its core, domestic IPs like Final Fantasy and Dragon Quest, which are consistent, massive sellers. The Western studios were a high-risk, high-cost experiment that ultimately failed to deliver the required returns. It was a failed expansion.
Tom Bankswww
And now, as part of this whole reorganization, we're hearing about their plans for the future, and it involves a lot more technology and a lot fewer people, particularly in one specific area. It’s a part of the story that I think has people the most worried.
Mask
You mean the AI strategy. It's not just a plan; it's a declaration of the future. They've stated, quite publicly, that they expect 70% of their Quality Assurance, or QA work, to be handled by generative AI by the end of 2027. This isn't just a change, it's a revolution.
Tom Bankswww
That's a staggering number. QA testing is a critical part of game development, ensuring the game works as intended. It's traditionally been a very human-driven process. The idea of machines taking over 70% of that work... it’s hard to even imagine the logistics of that.
Mask
It's about efficiency and scale. A human QA tester can only work so many hours and test so many scenarios. An AI can run millions of simulations simultaneously, 24/7, without fatigue. It can identify bugs, balance issues, and exploits with a level of thoroughness that a human team could never achieve.
Tom Bankswww
But there's a certain intuition to human testing, isn't there? A good tester can feel when something is 'off,' even if it's not technically a bug. They understand the player experience in a way an algorithm might not. Can an AI really tell if a game is 'fun'?
Mask
'Fun' is a subjective metric that can be broken down into measurable components: engagement time, player retention, completion rates. AI can analyze these data points far more effectively. They're not just replacing human labor; they're aiming to create a fundamentally more robust and data-driven development process. This is progress.
Tom Bankswww
I think this is where we really see the central conflict. It’s a classic story, really. On one hand, you have the human element of creation, the artists and testers who pour their hearts into these games. On the other, you have the relentless march of business and technology.
Mask
I wouldn't call it a conflict. I'd call it an optimization. The goal is to create better games more efficiently. The tension arises from a resistance to change. People are romanticizing old methods. The reality is, the old methods are becoming financially unsustainable for the scale of modern games.
Tom Bankswww
But is the new method sustainable for the people? Square Enix is essentially saying its future is in Japan, with Japanese development sensibilities, and that a significant portion of the human quality control will be done by AI. It feels like a double blow to their Western workforce and creative partners.
Mask
It's a strategic realignment. The West is a crowded, expensive market. They believe they can achieve a stronger, more coherent creative vision by consolidating development in Japan, where their greatest successes have always originated. The AI is simply a tool to make that consolidated workforce more powerful and productive.
Tom Bankswww
There's also a tension in what kind of games they'll make. The Western studios they sold were known for specific genres—cinematic action-adventure with Tomb Raider, immersive sims with Deus Ex. Their core Japanese teams are famous for JRPGs. Are they abandoning those Western tastes entirely?
Mask
They aren't abandoning Western tastes; they are abandoning the inefficient Western development model that failed them. They can still create games with global appeal from Japan. The goal is to build a globally integrated marketing strategy around a core, unified development structure. Less internal division, more focused output.
Tom Bankswww
But that division can create innovation! Having different studios with different cultures and ideas can lead to creative breakthroughs. Think about it, some of the best music comes from fusing different styles. I worry that by consolidating everything in one place, their portfolio of games might become… monotonous.
Mask
Diversity of thought is valuable, but not when it leads to bloated budgets and missed targets. The conflict isn't between creativity and monotony; it's between undisciplined creative exploration and focused, profitable creation. Square Enix is choosing the latter. It's a business decision, not an artistic one.
Tom Bankswww
And what about the players? There's a conflict in expectations. Players in the West who loved the games from Eidos and Crystal Dynamics are now left wondering if the company even values them as customers anymore. The message this sends is that they're prioritizing their Japanese audience and projects above all.
Mask
The message is that they are prioritizing stability and quality. A healthy company produces better games. Players will ultimately benefit from a Square Enix that is financially sound and creatively focused, even if it means short-term changes to their development footprint. A successful company is better than a bankrupt one.
Tom Bankswww
Let's talk about the immediate impact. Beyond the obvious and unfortunate job losses, this has to be sending shockwaves through the company culture. For the employees remaining in the Western publishing and marketing divisions, morale must be at an all-time low. It’s a tough environment to work in.
Mask
The impact is a necessary cleansing. It creates uncertainty, yes, but it also clarifies the company's direction. Those who remain know the new mission: support the Japanese development core and integrate marketing globally. It's a painful but clarifying moment that forces everyone to align with the new strategy.
Tom Bankswww
But what about their presence in the Western market? This move seems to shrink their footprint significantly. For decades, Japanese game companies have been trying to appeal more to Western gamers. This feels like a full-scale retreat, leaving the field open for their competitors. It's a risky gamble.
Mask
It's a calculated risk. They're not abandoning the market; they're changing how they approach it. Instead of creating Western games for the West, they'll create Japanese games for the world. Look at the success of games like Elden Ring or anything from Nintendo. A strong, authentic vision can be universally appealing.
Tom Bankswww
That’s a fair point, but it affects the types of games we'll see. The impact on game diversity is real. We're losing major developers of cinematic, story-driven single-player games that were distinct from Square Enix's JRPG fare. The industry feels a little smaller and less varied today because of it.
Mask
The market abhors a vacuum. If there is a genuine, profitable demand for those types of games, other studios will rise to fill it. The impact isn't a loss of a genre, but a shift in who produces it. Square Enix has decided it's not their most profitable path forward. Someone else will take the baton.
Tom Bankswww
And financially? The article mentioned their digital entertainment sales were down. This kind of massive restructuring is often a reaction to financial pressure. I wonder if this move will reassure investors, or if they'll see it as a sign of a company in turmoil. Stock prices can be fickle.
Mask
Short-term, the stock might be volatile. But long-term, investors reward a clear, decisive strategy aimed at profitability. Cutting underperforming divisions and investing in efficiency-driving technology like AI is exactly the kind of tough decision that signals strong leadership to the market. It shows they're serious about the bottom line.
Tom Bankswww
So, looking ahead, what does the future of Square Enix look like? We're picturing a company that's smaller, more centralized in Japan, and heavily reliant on AI for things like quality assurance. What kind of games will a company like that produce five years from now?
Mask
Leaner, faster, and more ambitious. With development consolidated, they can share technology and talent more effectively between their big franchises. Imagine the learnings from the Final Fantasy VII Remake project being instantly applied to the next Dragon Quest. The AI will allow for massive, complex worlds with fewer bugs.
Tom Bankswww
It sounds efficient, but I still worry it might lack a certain spark. The future seems to be focused on their big, established Japanese franchises. Do you think there's any room for new, experimental ideas in this new structure, or will they just stick to guaranteed hits?
Mask
Innovation will come from technology, not geography. The experimentation will be in how they use AI to create new gameplay systems or larger, more reactive worlds within their established IPs. The future is about vertical innovation within their proven brands, rather than horizontal expansion into risky new genres.
Tom Bankswww
That's the end of today's discussion. The big takeaway is that this is a pivotal moment for Square Enix, marking a major retreat from the West to focus on its Japanese roots and a bold, perhaps controversial, leap into an AI-driven future. Thank you for listening to Goose Pod.
Mask
It’s a story of consolidation, efficiency, and a bet on the future of technology over the old ways of doing things. The impact will be felt for years. See you tomorrow.
