Embracer will shut studios and cancel games after $2bn deal falls apart

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The period of ceaseless growth and acquisitions has come to an end at Embracer, with the company now stating that they will be closing studios, cancelling games and making redundancies across its 17,000 employee workforce. They’re also going to throw everything they’ve got at turning The Lord of the Rings into one of the biggest video game IPs going.

The decision comes after a $2 billion partnership fell apart last month, which saw the company’s stock drop by 40%, as well as some dismal game releases, such as Saints Row last year. CEO Lars Wingefors published an open letter explaining how the company’s restructuring plan will take place over the coming nine months.

Wingefors says, “It is painful to see talented team members leave. Our people are what make up the very fabric of Embracer. I understand and respect that many of you will be worried about your own position and I don’t have all the answers to all questions. I want to be clear that the decisions about this program were not taken lightly. […] I am asking all our managers to lead and act with compassion, respect, and integrity. Throughout each phase and wherever possible, we will work to ensure that affected team members receive information first.”

Given the rate at which the company has acquired other publishers, game developers and IP, one of the key areas that Embracer will be making cuts is in consolidating publishing group efforts, but there will still be an impact to the game studios as well. This is a pivoting point from investing heavily and acquiring companies and IP, to trying to make Embracer a more outright profitable company.

Wingefors explained: “The actions will include, but not be limited to, closing or divestments of some studios and the termination or pausing of some ongoing game development projects.

“It will also include decreased spending on non-development costs such as overhead and other operating expenses. We will reduce third party publishing and put greater focus on internal IP and increase external funding of large-budget games.”

Game cancellations will be “almost entirely” around unannounced projects, with the company set to evaluate the various games for profitability. He notes that “all announced significant releases will still be released as planned”, and the company does have a solid lineup that includes Space Marine 2, Hot Wheels Unleashed 2, Arizona Sunshine 2, Alone in the Dark and more.

Crystal Dynamics was quick to publish on social media that they were unaffected by this announcement, with the next Tomb Raider game in development and Microsoft’s cash funding a good chunk of the studio’s wage bill through the development of Perfect Dark.

Having acquired the rights to The Lord of the Rings late last year, Interim COO Matthew Karch also noted in an investor call (via IGN) that they will be “exploiting Lord of the Rings in a very significant fashion” by turning it into “one of the biggest gaming franchises in the world”. So expect Lord of the Rings games to be coming out of your ears by the end of the 2020s.

As always, it’s deeply disheartening to see layoffs affecting game developers, even if the writing has been on the wall given extent of Embracer’s growth and spending. Our thoughts go to all those affects and hope that they land on their feet somewhere else soon.

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