Cutting and closing studios isn’t the way out of this mess, Embracer

A couple months ago, THQ Nordic visited our offices and showed off bits from a new game it was publishing. Alone in the Dark, developed by Pieces Interactive, rebooted one of the oldest horror game franchises out there, and featured appearances from Jodie Comer and David Harbour. Marketing for the game went all-out: Hollywood actors, a real life haunted house experience, and some of gaming’s biggest names covered its launch, PewDiePie and VideoGamer included.

It released in March earlier this year, and less than three months later, the development studio closed down entirely. Embracer acquired Pieces Interactive in 2017 and oversaw the release of a few mobile game expansions, before the studio aimed to focus on AAA instead. Pieces had been culled long before it even had a chance to find its footing, though I’m not sure anyone expected anything else.

The Embracer Group has long been the center of industry discourse for its handling of its many, many studios and subsidiaries. Just this year, Embracer sold Gearbox Entertainment and Shiver Entertainment, alongside divesting from Rainbow Studios and Saber Interactive. The group has been very vocal about its restructuring in the past year, too. In June 2023, it laid out initial restructuring plans from then until March this year, with a heavy emphasis on lowering its “net debt significantly.”

The financial report released by the group in May commented on the performance of its AAA and PC games: “In Q4, results were also impacted by a softer-than-expected performance for the two titles Alone in the Dark and Outcast: A New Beginning,” before it goes on to comment on the successes of the Star Wars: Battlefront Classic Collection, South Park: Snow Day, Tomb Raider I-III Remastered, Deep Rock Galactic: Survivor, and another mention of Alone in the Dark.

I’m not sure if Embracer need to hear me say this, but a mass culling of studios is not the way out of this mess. There are 73 AAA studios under Embracer’s wing, 6,404 employees, and 255 unique IPs at risk right now, and this is much more valuable than any annual revenue stream.

Layoffs have been the talk of the town in the games industry for the past two years. A culmination of economic crises and a decline in growth following the pandemic have affected studios no matter the owner. With Tango Gameworks last month, Timbre Games this week, and Galvanic Games this morning, the industry has not faced a bleaker time than this.

With Embracer lumping Outcast: A New Beginning in with Alone in the Dark as titles that “ultimately performed below management expectations,” I can only wish the best for Appeal Studios which has been around longer than most.

When I think of gaming corporations that aren’t consistently locked in a cycle of buying studios, then selling or closing them: Capcom comes to mind. For the seventh straight year now, Capcom has continued to hit record profit margins, and I think this is largely down to the fact that it keeps things simple. Capcom has half the employees as Embracer’s AAA division, and nowhere near as many in-house studios. Albeit, Capcom does outsource a lot of its development work, though this is far from a bad thing. It keeps things simple and risk-free for the most part.

Embracer went on a buying spree not too long ago. The rights to a large chunk of the Lord of the Rings franchise were acquired for $395 million in 2022, according to Variety, with The Verge later going on to report that a later $2bn sale to a Saudi buyer had fallen through in 2023. After the multi-billion dollar deal was off the cards, Embracer then began its restructuring program, with Campfire Cabal the first to go.

When Disney took over the rights to Marvel and Star Wars, it was a sign to the billion dollar corporations that obscene financial growth will follow entertainment monopolies. Amazon, Microsoft, and now Embracer have joined the scene too, and the impact it has had on the industry is devastating. Massive brand acquisitions have never been good for gaming, and at this rate, they never will be.

When THQ Nordic visited us at the start of this year, its cramped release line-up was tinged with urgency. Perhaps it was feeling the pressure of its parent, Embracer.

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