The Swedish-headquartered company will undergo a phased transformation until the end of March, focusing on cost efficiency, effectiveness, consolidation, and capital allocation.

According to Embracer’s announcement, the initial phase, which will focus on cost efficiency, has already started, and the second phase has also been launched, but further analysis is still being carried out to implement the appropriate steps. The final phase will focus on internal consolidation, resource allocation, and increased synergies. In other words: the company has grown too big, and the structure has not followed the right changes.

Matthew Karch, appointed interim Chief Operating Officer, and Phil Rogers, appointed interim Chief Strategy Officer, to co-lead the program planning and implementation. There will be a reduction of general overhead, corporate, publishing, and selling, and general and administrative expenses costs. The closing of studios and termination of projects that have not yet been announced and with low projected returns are also planned. The plans also include the creation of a more comprehensive, centralized process for game investment and progress review while maintaining creative freedom, consolidation of companies and businesses, including review of operative group structures, reduction of investments into external development with a greater focus on internal development based on owned or controlled intellectual property, increased external funding of internally developed, large-budget games, a renewed focus on the Group’s primary business areas, and Implementing a centralized and standardized, more data-driven and precise approach to game forecasting.

Lars Wingefors, CEO of Embracer Group, explains in an open letter: “This morning we announced a restructuring program across the Embracer Group that will make us a leaner, more robust and a more focused, self-sufficient company. I want to share some background and context to this decision—and what it means for us going forward. During the past years, Embracer invested significantly in acquisitions and a strategy of accelerated organic growth. We have acquired some of the world’s leading entertainment IPs and invested in one of the largest pipelines of games across the industry. Today’s program will transform us from our heavy investment mode to a highly cash-flow generative business this year. It will enable us to meet the worsening economy and market reality as a strong company, and it will fundamentally change our prioritization of growth with raised capital towards optimization and development based on our cash flows. The program will lower our net debt significantly. After completing this program, we will generate growth in profitability with less business risk and higher margins in the PC / Console segment over the coming years. This, in turn, will give us the freedom to continue to grow and deliver the high-quality experiences our players’ value.

The program is divided into different phases until March 2024, focusing on cost savings, capital allocation, efficiency, and consolidation. The initial step, initiated immediately, mainly targets cost savings across the group. The next phase starts immediately and will require further analysis to determine specific actions. The last phase will focus on internal consolidation, further resource utilization, and synergies across the Group. The new interim COO and CSO will implement the measures for each affected company in collaboration with each operative group CEO and management teams. Embracer currently engages close to 17,000 people, and while that number will be lower by the end of the year, it is too early to give an accurate forecast on this.

It is painful to see talented team members leave. Our people are what make up the very fabric of Embracer. I understand and respect that many of you will be worried about your position, and I don’t have all the answers to all your questions. I want to be clear that the decisions about this program were not taken lightly. I am asking all our managers to lead and act with compassion, respect, and integrity. Throughout each phase and wherever possible, we will work to ensure that affected team members receive information first. Where we can, we will try to provide opportunities for our colleagues to transition onto other projects. It’s important to note that while we remove roles in some companies, we will continue hiring in others. We know, understand, and respect that this is a challenging time for every person impacted. Communication and transparency are essential for me, but it’s also an increasingly difficult challenge in matters such as this program.

The reality is that the quicker we act, the sooner we emerge as a stronger company. The actions will include, but not be limited to, closing or divestments of some studios and the termination or pausing of some ongoing game development projects. It will also include decreased spending on non-development costs such as overhead and other operating expenses. We will reduce third-party publishing, focus more on internal IP, and increase external funding of large-budget games. Our new Executive Management team members, Matthew Karch, and Phil Rogers, will work to implement a revised, thorough review process for investments in our ongoing and potential new game development projects. They will also take the lead on further consolidation of operations, including a review of the operative group structure. We will have an increased focus on accountability across the group, ensuring performance aligns with or exceeds current targets. The potential impact from the program of future game releases will almost entirely be around unannounced projects. All announced significant releases will still be released as planned.

I want to thank all of our industry partners that reached out in the past weeks and expressed their respect for Embracer and their desire to do more business with us, whether big, small, or transformative, on our journey forward. As one of the largest content providers in the industry, this is the everyday business we should continue to increase. I see this as acknowledging how important our people, games, and IPs are for the broader gaming ecosystem. We will work together to unleash significant untapped potential in Embracer. We need to leverage better our scale, the quality of our portfolio, and our capabilities. Our commitment to our transmedia strategy remains intact. That strategy alone has great potential to deliver substantial value across the group over the coming years. Ultimately, this will empower our entrepreneurs and creators to continue to provide outstanding and memorable experiences to gamers and fans across the globe. I’m confident in our team’s ability to achieve results and maintain our position as a worldwide leader in the gaming industry.

I’m proud of what we have built over the past years. We should acknowledge that we are heading into a solid year with many excellent releases such as Remnant II, Warhammer 40,000: Space Marine II, Payday 3, Hot Wheels Unleashed 2: Turbocharged, Arizona Sunshine II, Alone in the Dark, Homeworld 3, and many, many others. Our financial year started with one of our greatest successes, Dead Island 2, which exceeded our management’s high expectations. Embracer was founded on the values of trust, a long-term mindset, and a desire to embrace different perspectives. As tricky as some of the decisions we will take over the coming weeks and months will be, we are doing this because we are confident that we will emerge a stronger, more efficient company setting out on a stable future to build even more incredible value across our many studios and a fantastic portfolio of IPs,” Wingefors wrote.

Let’s see who will be affected…

Source: Gematsu