@ICv2 Embracer Group is preparing for big layoffs after a 2 billion dollar deal fell through. Embracer Group have bought many game studios over the years and unannounced projects are in line to be cancelled however significant releases will still go ahead. The CEO has published an open letter addressing the layoffs.

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"It is painful to see talented team members leave," stated Wingefors in regards to the layoffs. "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. Where we can, we will try to provide opportunities for our colleagues to transition onto other projects."

The restructuring will also result in the closure or sale of some gaming studios. Additionally, some ongoing game development projects may be put on pause or shelved entirely; which could impact future game releases. However, the releases affected will mostly be unannounced projects, and all announced significant releases will go off as originally planned.  

Gamesindustry.biz reports that the Embracer Group (formerly THQ Nordic AB) lost $431 million last year. While Valheim was an unexpected success ELEX II didn't live up to the expectations:

Embracer lost $431 million last year

Publisher posts soaring revenues on acquisitions but says it doesn't need to buy more companies to grow; Elex 2 disappoints

Embracer Group today reported its financial results for its fourth quarter and full fiscal year, showing that its string of high-profile acquisitions helped push net revenues higher, but did not have the same effect on the bottom line.

For the quarter ended March 31, Embracer reported net sales up 117% to SEK 5.23 billion ($525 million), but a loss of SEK 1.67 billion ($168 million), compared to the previous fourth quarter's profit of SEK 159m ($16 million).

The sales gains were driven by acquisitions like Gearbox, Easybrain, and Asmodee, as Embracer reported organic growth of negative 34% for the quarter.

It blamed that number on a tough comparison from the previous year, when its Coffee Stain Publishing division had a breakthrough hit with Valheim.

Revenues from Coffee Stain sank 78% year-over-year for the quarter, from SEK 781 million ($78.5 million) to SEK 171 million ($17.2 million).

While the scope of Valheim's success was unexpected, Embracer CEO Lars Wingefors believed the phenomenon is repeatable, saying, "We hope and believe we have many more of those successes in the pipeline in the year to come."

Beyond that, the company also said the fourth quarter's biggest release, THQ Nordic's open-world RPG Elex 2, did not live up to financial expectations, although it believes it will provide a positive return on investment eventually.

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Thanks Pladio!

Embracer Group has bought Crystal Dynamics, Eidos-Montréal, and Square Enix Montréal; picking up a lot of IPs in the process such as Tomb Raider, Deus Ex, Thief, Legacy of Kain, and 50 back catalogue games from Square Enix.

Embracer will hold a webcast presentation for investors, analysts and media on 2 May 2022 at CET 09.00. Please find details in a separate invitation that will follow this release.

”We are thrilled to welcome these studios into the Embracer Group. We recognize the fantastic IP, world class creative talent, and track record of excellence that have been demonstrated time and again over the past decades. It has been a great pleasure meeting the leadership teams and discussing future plans for how they can realize their ambitions and become a great part of Embracer,” says Lars Wingefors, Co-founder and Group CEO, Embracer Group.

”Embracer is the best kept secret in gaming: a massive, decentralized collection of entrepreneurs whom we are thrilled to become a part of today. It is the perfect fit for our ambitions: make high-quality games, with great people, sustainably, and grow our existing franchises to their best versions ever. Embracer allows us to forge new partnerships across all media to maximize our franchises’ potential and live our dreams of making extraordinary entertainment,” says Phil Rogers, Square Enix America and Europe CEO.

Background and rationale

The collection of studios represents a world-class creative team of ~1,100 employees across three studios and eight global locations, including two of the most reputable AAA studios across the industry in Crystal Dynamics and Eidos Montréal. The studios possess a unique ability to deliver blockbuster hits decade after decade. The acquisition brings a compelling pipeline of new installments from beloved franchises and original IPs, including a new Tomb Raider game. The acquisition builds on Embracer’s mission of creating a leading independent global gaming and entertainment ecosystem. Embracer has been particularly impressed by the studios’ rich portfolio of original IP, housing brands with proven global potential such as Tomb Raider and Deus Ex, as well as demonstrating the ability to create AAA games with large and growing fan bases. There are compelling opportunities to organically grow the studios to maximize their commercial opportunities.

The portfolio of IP consists of iconic franchises appreciated by critics and players alike. For example, two original IPs, Tomb Raider and Deus Ex, have sold AAA units of ~88M and ~12M, respectively. Embracer sees an opportunity to invest in these franchises, as well as the additional acquired IPs such as Legacy of Kain, Thief, and other original franchises. The acquisition also includes the continued sales and operations of the studios’ more than 50 back-catalogue games.

Founded in 1992, Crystal Dynamics consists of almost 300 employees across San Mateo, CA; Bellevue, WA; and Austin, TX. The studio is committed to creating narrative-focused AAA action-adventure games and is led by 30+ year veteran Scot Amos. Prior AAA releases from the studio include Rise of the Tomb Raider and Legacy of Kain Defiance. Crystal Dynamics is actively working on several AAA projects, including the next mainline Tomb Raider game that will deliver next-generation storytelling and gameplay experiences.

Founded in 2007, Eidos Montréal consists of almost 500[1] employees across Montréal, Canada; Sherbrooke, Canada; and Shanghai, China. The studio focuses on creating memorable AAA experiences focused on unique stories and strong characters within the action-adventure and RPG genres. The studio is led by David Anfossi, who has 26 years of industry experience. Prior AAA releases include Thief 4, Deus Ex Human Revolution, and Shadow of the Tomb Raider. The studio is working on a host of AAA projects including both new releases from beloved franchises and original IP.

Founded in 2011, Square Enix Montréal consists of almost 150 employees across Montréal, Canada and London, UK. The studio focuses on building mobile games that players will want to return to for years to come. The studio is led by Patrick Naud, who has 24 years of industry experience. The studio is uniquely talented in creating mobile experiences based on traditionally PC/Console IPs such as Hitman, Tomb Raider, and Deus Ex. The studio will continue to develop and operate memorable mobile games based on AAA IP.

After closing this transaction, the US will be Embracer’s #1 country by number of game developers and Canada will be #2. In total, post pending closings, Embracer will have more than 14,000 employees, 10,000 engaged game developers, and 124 internal studios. Embracer’s upcoming content pipeline includes more than 230 games with more than 30 AAA games. This acquisition will bring additional scale to Embracer’s current AAA segment, and Embracer will have one of the largest pipelines of PC/Console games content across the industry, across all genres. As Embracer’s pipeline matures, this will be a key driver for organic growth in net sales, operational EBIT, and free cash flow.

Currently, Embracer’s development resources are fully utilized either by ongoing internal development projects or by projects financed by external publishers. Embracer’s teams dedicated to work-for-hire services to external studios and publishers are also fully utilized across all territories. The lack of available resources in the industry and demand for these services exceeds our available capacity. Through this acquisition, Embracer will augment its development capabilities specifically within the AAA segment, which will provide opportunities to accelerate organic growth.

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Thanks Lolozaur!