Swedish gaming conglomerate Embracer Group, which has rapidly swallowed game studios and popular IP in recent years, will undergo a major restructuring that will require the publisher to close multiple studios and cancel several games. The news comes weeks after it reported that a deal worth $2 billion in revenue for the company had unexpectedly fallen through.
CEO Lars Wingefors announced the restructuring in an open letter in addition to a webcast for investors and a press release on Tuesday morning. He said the restructuring has been split into three phases and is expected to continue until March 2024. The nature of these phases is unclear, and under the general guise of cost cutting and consolidation to reduce debt below SEK 10 billion, amounting to approximately $930 million. .
However, Matthew Karch, the now former CEO of Saber Interactive and current interim chief operating officer, said the first phase of cost cutting will be “immediate and noticeable.” This means that an unknown number of the Embracer Group’s 17,000 employees will be laid off as part of the process. Neither Wingefors nor Embracer Group has detailed when specific closures or layoffs will take place. Polygon has contacted the publisher for more information.
“Embracer currently employs close to 17,000 people and while that number will be lower by the end of the year, it is too early to make an exact prediction on this,” Wingefors said in the letter. Karch said the studios to be shut down are “underperforming” or not making games “meet our standard”. Embracer Group said the affected projects “have not yet been announced” and have “low expected returns” on investments.
Embracer Group owns the rights to both Tomb Raider and Lord of the Rings; it acquired Tomb Raider when it bought Eidos, Crystal Dynamics, and Square Enix Montreal from Square Enix in 2022. That year Embracer Group bought the licensing rights Under the spell of the Ring And The Hobbit by purchasing rights holder Middle-earth Enterprises. Early this year, Embracer announced that it has five mystery Lord of the Rings games in development by third-party partners.
The implication of the press release is that any announced game is “safe” from the restructuring plan – or at least won’t be canceled. Karch added a caveat in the webcast, saying that the canceled games were “for the most part” unannounced.
Following the announcement, Crystal Dynamics posted a statement on Twitter to confirm that neither the upcoming Tomb Raider game nor Perfectly dark will be affected by the restructuring.
“We know we need to exploit Lord of the Rings in a very significant way and turn that into one of the biggest game franchises in the world,” said Karch. “And that is clearly something we are going to do. That’s a much better use of resources than some of the other projects some of our teams have worked on.”
The Embracer Group’s two major acquisitions are not the only ones; the publisher also owns Saints Row publisher Deep Silver and has consolidated the video game industry in recent years by buying up studios. As of 2020, Embracer Group has acquired or established more than 50 game studios and offices. It’s part of a larger trend of seismic acquisitions and consolidation over the span of a few years that saw Grand Theft Auto publisher Two-Two Interactive buy mobile giant Zynga, Microsoft’s planned acquisition of Activision Blizzard for a whopping $68.9 billion. , and Sony’s acquisition of Lot 2 developer Bungie. Embracer Group has also expanded into comics and tabletop games by acquiring Dark Horse Comics and Asmodee, respectively.
However, it seems that the Embracer Group’s rampant buying spree may have moved too quickly – and now it’s struggling to keep up with the responsibility and cost of its purchases. Embracer group had a mysterious $2 billion partnership planned to help save it, on top of the $1 billion investment from Saudi Arabia’s investment fund, which fell through at the last minute. That news forced Embracer Group to lower its profit forecast to a range of $655 million to $840 million.
In its recent earnings report in May, Embracer Group said its prior fiscal year was “challenging” due to “moderate reception” of “notable releases” and game delays, despite net sales increased 121% to approximately $3.5 billion.