2023 continues to be a tumultuous year for Embracer Group. After buying studios left and right from 2021 until the start of 2023, their rapid growth plan came to a screeching halt after a game deal with a Saudi-backed game development firm, Savvy Games, valued at $2 billion, fell apart. The failure of the deal left Embracer to face a $1.5 billion debt crisis, which they responded to by laying off approximately 900 employees over the past three months. For context, since June, here's what Embracer's restructuring has entailed:
- The complete closure of Volition Games (Impacting ~230 employees)
- The complete closure of Campfire Cabal
- Laying off 26 employees at Beamdog weeks after the studio released Mythforce
- Laying off 18 employees at Cryptic Studios (~14% of the workforce maintain Star Trek Online and Neverwinter)
- Laying off 10 employees at Crystal Dynamics
- Laying off 35 employees at Digic
- Laying off 32 employees at Zen Studios and Pinball FX team
- Undisclosed number of layoffs at Gearbox
However, if a recent GamesIndustry.biz interview with Embracer's CEO of Crystal Dynamics and Eidos and Interim Chief Strategy Officer, Phil Rogers is to be believed, then more studio closures, game cancellations, and layoffs are coming in the future. In the interview Rogers described the company's restructuring process as an "agonizing process" but also reiterated "we know it's a necessary thing for us to hit our new and needed goals. So overall, good progress and we push on." More worryingly, when asked if he expected more cuts and closures he stated:
We report to the quarter, and we're mindful that the operative groups are making changes. Some of that makes the news, and some of it doesn't. We don't comment on that, but we will report on it as we get to those quarterly measurement dates, so the next time will be in February.
We have announced that we expect more restructuring and some more cancellations, potentially some more closures or management buyouts. That's the balance we've got to take internally... Because, as we say, the people cost is significant, and it's significant to us and we have to handle that always with that respect and integrity.
We're in line with our targets on how we bring the debt down, with [operating expenses] savings and the targets for our capital expenditure, which is basically our games pipeline. And obviously we're going to readjust that games pipeline down to the run rate we talk about is SEK 5 billion ($478.4 million) going into next fiscal year. Those adjustments are very, very clear and well understood targets for us. So I think we're making good progress against that.
In terms of those "management buyouts," it has already been reported that Embracer might be in the process of shopping Gearbox, a studio they bought for $1.3 billion. Likewise, Game Informer reported that Embracer is reportedly nearing a sale of or closure of Free Radical Design and the reformed TimeSplitters team.
All of these efforts have assisted Embracer in reducing its looming debt from $1.5 billion to $1.4 billion. Nonetheless, the company remains confident that it can meet its target to reduce this amount to a $750 million net debt before the end of the fiscal year. As absurd as that might sound, Variety reported on November 15th, 2023 that Embracer saw a jump in net sales by 13% during Q2 2023. This was thanks to Middle-Earth Enterprises' Q2 2023 sales jumping by 76% or ~$130 million even though Embracer's console and PC games investments saw a 5% decline. Embracer's investments in tabletop and board gaming through its ownership of Asmodee also appears to be another saving grace as it saw overalls sales increase by 25% during Q2 2023.
UPDATE (11/29/2023)
So... the news coming out related to Embracer just keeps getting worse. Here's a summary of what has happened since I first published this thread:
- Egil Strunke, Embracer's COO and number-two person, has resigned and immediately started a new game company.
- Layoffs totaling 50 personnel are now confirmed for Fishlabs.
- Embracer confirmed that the resurrected Timesplitters team and studio faces closure before Christmas.
- PC Gamer is reporting Embracer's CEO and entire Board of Directors 'discharged' itself from all liability for the 2022/2023 financial year in September.
Direct Quote:
Embracer CEO Lars Wingefors and the company's board of directors were formally "discharged from liability for the financial year 2022/2023" during the company's annual general meeting in September.
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