Embracer announced a "comprehensive" restructuring of its operations, signaling that layoffs, game cancellations, and studio closings will take place in the coming months. The goal is to reduce the group's debt below SEK 10 billion (just under $1 billion) by the end of the 2023/24 fiscal year (i.e., next March), and the most distressing part of the announcement is the intention to reduce overhead costs by at least 10% per year. Indirect costs here mainly mean wages.

According to the company's announcement, the restructuring will include "studio closures and the termination of projects that have not yet been announced and have low return prospects." CEO Lars Vingefors issued an open letter in which he referred to the layoffs without giving specific numbers: "[Embracer] currently has close to 17,000 employees and this number will come down by the end of the year, but it is too early to make an exact prediction.

"It is hard to see talented team members leave. It is our employees who are the backbone of Embracer. We understand and respect the concerns many of you have about your positions. I want to make it clear that the decision regarding this program was not made lightly."

Key elements of the restructuring include:

The company is reducing its investment in external development and focusing on "internal development based on owned or controlled IP" while seeking external financing for the largest internal titles.

"Over the past few years, Embracer has invested heavily in both acquisitions and strategies to accelerate organic growth," Wingefors said, and he can say that again. Last year, the company acquired Crystal Dynamics, Eidos Montreal, Square Enix Montreal, and various IPs including Tomb Raider for $300 million (Square Enix Montreal closed shortly after). Even more eyebrow-raising was the acquisition of the Lord of the Rings IP for just under $600 million (the deal also included other elements such as Tripwire, a Maneater studio).

While such a restructuring may have been inevitable after such a run, perhaps more immediately shocking was the recent announcement that a deal worth over $2 billion had collapsed in its final stages. Embracer did not elaborate on the nature of the deal, and Wingforce, which had to break the news to its investors, could only say that it was stunned: "It was a tough night."

I contacted Embracer Group for comment on the number of studios that would be closed. Games scheduled for release over the next year include "Remnant 2," "Warhammer 40,000 Space Marine 2," "Payday 3," "Alone in the Dark," and "Homeworld 3."