The trend across the games industry of layoffs, delays, and low earnings has hit yet another victim, this time coming for the massive Embracer Group. Embracer Group is well known for their aggressive strategy of studio and intellectual property (IP) acquisitions. They have built an impressive portfolio over the past decade and have the tools in place to make some big money. While that may still happen, it looks like it won’t be happening next year. News of a large partnership suddenly falling through caused Embracer Group’s stock to suddenly drop 40%. So what happened?
During their Q4 (January-March 2023) earnings call this past week, Embracer Group revealed that a partnership worth $2 billion in development revenue had suddenly fallen through the night before. Frankly, it was a shockingly honest earnings call. Embracer stated that the partnership had been in development for some time. A verbal agreement had been made in October 2022 with paperwork and negotiations continuing from there. Everything appeared ready to go, so Embracer Group asked the unnamed partner to execute the agreement so that it could be included in the earnings call. The partner responded that due to circumstances external to the agreement, the partnership would not materialize.
Following this revelation, Embracer Group lowered their expected earnings for 2023/24 from $965 million-$1.3 billion down to $655 million-$840 million. Also hurting their numbers, much like other publishers and studios, are several high profile games that were originally expected to be released in 23\24 getting pushed out to 24/25. Aside from the major partnership falling through, the rest of the story is pretty typical of the current state of the video game industries. Game developers and publishers are still catching up from pandemic-related backlogs and sales are slower due to current economic realities. While losing out on a $2 billion partnership is no small curveball, Embracer Group remains in a good position to get big payoffs from the wave of investments it has made. With many titles being pushed out to 2024/25, it seems likely that the wave of revenue and success is still coming for Embracer Group and its investors.
Image from: Embracer Group
