Embracer Group recently publicized a significant overhaul of its operational structure, entailing the suspension and cancellation of some games, employee layoffs, and closure or divestment of several studios. The move is part of a broader strategy to streamline the business and cut costs following the breakdown of a proposed $2 billion deal over six years, despite having a verbal agreement with the undisclosed intended partner.
The restructuring process is expected to take until next March to fully implement. CEO Lars Wingefors stated in a public letter that it is “too soon to provide an exact prediction” of the number of employees out of Embracer’s roughly 17,000-strong workforce who will be affected by the changes.
The restructuring measures will encompass “the cessation or temporary suspension of certain ongoing game development projects, and the closure or divestment of some studios,” as per Wingefors. He added that the plan also involves minimizing non-development expenditures such as overhead and other operational costs, trimming third-party publishing, and shifting focus to internal intellectual property while enhancing external funding for large-budget games.
The company has yet to confirm the studios intended for closure or sale. Embracer stated that the game terminations will predominantly affect projects that have not been made public and that are expected to yield low returns. Wingefors assured that “all significant releases previously announced will proceed as scheduled,” including those from Crystal Dynamics, who are currently developing a new Tomb Raider game and collaborating with The Initiative on Perfect Dark.
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Over the past few years, Embracer has been consolidating its position in the gaming industry, acquiring notable gaming companies and intellectual property rights. Its 2021 acquisition of Gearbox cost $1.3 billion. The following year, Embracer purchased Crystal Dynamics, Eidos-Montreal, and Square Enix Montreal (which was rebranded by Embracer shortly before its closure) in a $300 million deal that included rights to renowned franchises such as Tomb Raider, Deus Ex, Thief, and Legacy of Kain.
Last year, Embracer secured rights to The Lord of the Rings, with ambitions of transforming it into “one of the world’s leading gaming franchises.” Matthew Karch, the company’s acting chief operations officer, informed investors that Embracer plans to capitalize on The Lord of the Rings franchise substantially. Several LOTR games are underway, including another attempt by Amazon at a MMO set in JRR Tolkien’s universe.
Embracer is also devising a more thorough review process for investments in current and prospective projects moving forward. Wingefors highlighted that the company will reinforce accountability to ensure “performance aligns with or surpasses current objectives.”
Concluding his letter, Wingefors acknowledged that the restructuring would entail making “challenging” decisions. However, he expressed confidence in the process, stating that “we are undertaking these measures because we believe that we will come out of this as a more robust, efficient company, prepared for a steady future to create even greater value across our numerous studios and outstanding IP portfolio.”
Frequently Asked Questions (FAQs) about Embracer Group Restructuring
Why is Embracer Group restructuring its operations?
Embracer Group is restructuring to reduce costs and streamline its business operations. This decision follows the failure of a potential $2 billion deal despite a verbal agreement with the proposed partner.
How will the restructuring affect Embracer’s employees?
It’s currently unclear how many of Embracer’s nearly 17,000 employees will be affected by the restructuring. The company’s CEO, Lars Wingefors, stated it’s “too early” to provide an exact prediction.
Which gaming projects will be affected by Embracer’s restructuring?
Embracer’s restructuring will lead to the termination or pausing of some ongoing game development projects, especially those that haven’t been publicly announced and are projected to have low returns. However, all previously announced significant releases will proceed as planned.
What acquisitions has Embracer Group made in the past?
Embracer has acquired several notable gaming companies and intellectual property rights in the past. For example, it bought Gearbox for $1.3 billion in 2021 and acquired Crystal Dynamics, Eidos-Montreal, and Square Enix Montreal in a $300 million deal the following year.
What are Embracer’s plans for the future?
Embracer aims to establish a more comprehensive review process for investments in ongoing and potential new projects. The company also intends to enforce greater accountability to ensure performance aligns with or surpasses current objectives. Additionally, it plans to capitalize on recently secured rights to The Lord of the Rings franchise.