Step aside, Krispy Kreme – the new champion of overexpansion is here, and its name is Embracer Group. The ambitious video game publishing giant’s years-long spending spree finally ended in May when CEO Lars Wingefors announced that “we were informed that one major strategic partnership that has been negotiated for seven months will not materialize.”
In June, Wingefors followed that up with an open letter to the Swedish holding company’s 17,000 staff, a handful of whom are being laid off – the letter stated that Embracer Group would decrease spending across the board, reduce third-party publishing and “put greater focus on internal IP and increase external funding of large-budget games.”
Over two months later, on Monday, we learned what exactly happened – the $2 billion deal that suddenly collapsed was with Savvy Games Group, which is backed by the contentious Saudi Arabia Public Investment Fund led by Saudi Crown Prince Mohammed bin Salman. Given Embracer had already received a $1 billion investment from the same fund last year, it’s a surprise the deal fell through.
This news comes after Saudi Arabia announced plans in April to invest $38 billion in video gaming as part of the crown prince’s Vision 2030, his economic plan to reduce the country’s reliance on oil and ultimately provide its population with jobs in numerous other industries – video game development included.
Embracer is not the only game publisher to receive funds from the Saudi Arabia Public Investment Fund – Electronic Arts and Nintendo have done the same, and many have criticized the companies for accepting massive investments from a government with a well-established track record of human rights abuses.
Nevertheless, Embracer tends to hold a more positive reputation with gamers than many similarly sized publishers like EA or Activision-Blizzard due to their hands-off approach with development studios and willingness to publish a diverse array of titles. Over the past five years, Embracer had been on a spending spree buying up studios, with many speculating as to when their aggressive expansion might end.
That time is now, and although lips have been tight regarding which studios are suffering layoffs and closures and which game projects have been canceled altogether, gamers now know that Campfire Cabal, the developers of Expeditions: Rome, has been closed down entirely after relocating to a brand new office in November.
And while Embracer might not be a household name like EA, they were working on becoming just that by buying up Metro owners Deep Silver, Tomb Raider creators Crystal Dynamics, Deep Rock Galactic developers Ghost Ship Games, Saints Row creators Volition and Borderlands creators Gearbox Software, to name a few.
While these iconic IPs are unlikely to be on the chopping block at Embracer, the studios behind them are likely to suffer from layoffs. News of which studios are closing or experiencing layoffs is likely to come in piecemeal, which is frustrating for gamers and downright terrifying for developers.
In some ways, this is business as usual. Despite generating almost $347 billion in revenue in 2022 according to Statista, the gaming industry is subject to the worst turnover rate in the tech sphere – around 15.5 percent according to LinkedIn. At many studios, 65-80 hour work weeks are common in the months leading up to a title’s release date. For an industry focused on fun, actually working in it is remarkably unfun.
With Embracer permitting a greater level of creative freedom than many of its peers, gamers and pundits alike have been hopeful its deep pockets would lead to the development of more imaginative games in a AAA landscape dominated largely by samey titles. That dream isn’t altogether dead, but compromised – the scope of this blow to the gaming industry will become increasingly clear in the months to come.
Riordan Zentler can be reached at firstname.lastname@example.org.