Layoffs, Studio Closures, And Game Cancellations Are Coming To One Of The Biggest Publishers

Embracer Group, the gaming giant that owns Borderlands studio Gearbox, the rights to The Lord of the Rings, and Tomb Raider studio Crystal Dynamics, is making some drastic-sounding changes to its business setup. The company on Tuesday announced a "restructuring program" that aims to help make the company "leaner, stronger," and "more focused [and] self-sufficient." Layoffs, studio closures, and game cancellations are coming as part of this.

The announcement of these moves comes not long after Embracer said it lost a $2 billion deal at the 11th hour. Embracer said it only had a verbal agreement for this deal, but it was still a major loss. What role the loss of this deal had on the restructuring plan is unknown, hosaodver.

CEO Lars Wingefors made the announcement in a memo shared with staff and posted on the company's website. He said in recent years, Embracer has been on a journey of growth, and indeed, Embracer made so many acquisitions and investments in the past five years that it became something of a meme to be "embraced" by the company.

That period of massive, accelerated growth is now over. Wingefors said the "restructuring" will transform Embracer from "heavy-investment mode" to becoming a "cash-flow generative" company.

"It will enable us to meet the worsening economy and market reality as a strong company and it will fundamentally change our prioritization of growth with raised capital towards optimization and growth based on our own cashflows," Wingefors said.

The executive said Embracer's net debt will be lowered through the move and, if all goes to plan, Embracer will have greater profitability with less business risk in the coming years. "This, in turn, will give us the freedom to continue to grow and deliver the high-quality experiences our players really value," Wingefors said.

To get there, Embracer is cutting jobs, cancelling games, and closing studios. The first phase of this plan, which is happening now and should run until March 2024, will target "cost savings across the group." The second prong, which is also happening now, will see Embracer conduct "further analysis to determine specific actions" about how to move forward. The final phase will focus on "internal consolidation" and an effort to create "more synergies" within the company.

In terms of layoffs, Embracer said it has about 17,000 people under its umbrella today, and that number "will be lower" by the end of 2023. However, Wingefors did not say how many jobs would be impacted.

"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," Wingefors said to staff. "I want to be clear that the decisions about this program were not taken lightly."

Wingefors said, where possible, affected staffers might have the opportunity to transition to other projects within Embracer. But not everyone will have that chance, as Wingefors said, "We are removing roles in some companies." He also stated that Embracer will "continue to hire" in certain aspects of the business.

"The reality is that the quicker we act, the sooner we emerge as a stronger company," Wingefors said.

In addition to layoffs, Embracer said it will close or divest of some studios and cancel or pause some in-development projects. Wingefors did not reveal which games or studios might be impacted, but Crystal Dynamics put out a statement to say it will continue to work on its new Tomb Raider with Amazon and the new Perfect Dark reboot with Microsoft.

Wingefors said the cancellation or pausing of games will be "almost entirely" focused on unannounced games. Games that have already been announced will, in general, be seen through to release.

Additionally, Embracer will decrease spending on non-development costs and reduce third-party publishing. The aim, going forward, will be to focus on internal IP and increase external funding on "large-budget games."

Some of Embracer's upcoming games include Remnant 2, Warhammer 40,000: Space Marine 2, Payday 3, Hot Wheels Unleashed 2, Alone in the Dark, and Homeworld 3.