Embracer exec warns of "more cancellations, potentially some more closures" to come

Embracer Group's restructuring process is still in its "early stages", and as such, we can expect "more cancellations, potentially some more closures" and some possible "management buyouts", according to Phil Rogers, CEO of the operating group that includes Crystal Dynamics and other Western studios previously owned by Square Enix.

All that comes from a GamesIndustry.biz interview in which Rogers discussed Embracer's attempts to make savings and reduce their net debt, following a series of big acquisitions over several years and the reported collapse of a $2 billion deal with Savvy Games.

Announced in June, the restructuring process has seen Embracer shut down Saints Row developer Volition and lay off around 900 people across their operations, including staff at Mythforce developer Beamdog and Star Trek Online developer Cryptic. In the process Embracer have reduced their net debt to $1.4 billion, and are hoping to bring it down to $757 million by the end of their next financial quarter in March 2024. The company are rumoured to be thinking about closing Timesplitters developer Free Radical and selling off Borderlands developer Gearbox.

In the interview, Rogers didn't specify who or which projects might be on the chopping block. "It's always a tricky question," he told the site. "We report to the quarter, and we're mindful that the operative groups are making changes. Some of that makes the news, and some of it doesn't. We don't comment on that, but we will report on it as we get to those quarterly measurement dates, so the next time will be in February.

"Our priorities are... very much keeping a focus on working together, keeping eyes on the goal at a project level," Rogers went on. "We have announced that we expect more restructuring and some more cancellations, potentially some more closures or management buyouts. That's the balance we've got to take internally... Because, as we say, the people cost is significant, and it's significant to us and we have to handle that always with that respect and integrity."

As GI notes, Embracer had over 200 games in development when it announced this year's restructuring process. In broad strokes, how will the company decide which projects to cut?

"First and foremost, we look at entertainment values," Rogers said. "It has to be fun to play. I'm never a big fan of the 'fewer bigger, better' [approach]. Bigger games aren't always fun. I know how hard it is to make smaller games and to bring those entertainment values to bear from experience at Crystal when we started working on digital spin-outs of Lara Croft. For Lara Croft and the Temple of Osiris, that was a AAA team trying to make a game with much, much smaller budgets. So many teams are producing games today for much, much smaller budgets.

"Then we do look at how we would assess the commercial outcomes, how we squint and would see those returns," he went on. "There's the potential for genres as well, where we've got overlap in potential genres or whatnot... That would help us make some decisions. It also helps us explain decisions with teams. One of the softer but very clear advantages of going through this process I found is it really has got teams to work together to share, to discuss, and that's helped us then with those decisions when we've had to deliver them."

2023 has been an especially bad year for layoffs at videogame publishers and developers. "There's a lot of it going around the industry at the moment of restructuring, but the downside, obviously, is the impact on people," Rogers noted. "It's something that really Embracer feels for."

He added that "it's been an agonising process to see the sort of headcount [reduction], but we know it's a necessary thing for us to hit our new and needed goals. So overall, good progress and we push on."