Swedish corporation Embracer Group became a big name in the MMO industry a few years ago when it bought out Perfect World Entertainment’s western branch, which included Cryptic and therefore MMOs Neverwinter, Star Trek Online, and Champions Online, now all bundled under the Gearbox brand. It became an even bigger name in the MMO industry just last week when it inked a deal with Amazon to produce a new Lord of the Rings MMORPG, the licensing rights for which Embracer also owns.
But all is not well with Embracer as of today. The company was set to release its Q4 2022 today, but apparently last night a major business deal fell through. According to the investor report, the “mega-deal” was a “transformative” partnership that had been in the works since last fall, though negotiations had taken “far longer than expected.” Embracer’s CEO, Lars Wingefors, told investors that the deal, worth $2B, would have set a “new benchmark” in the gaming industry and was ready to go “as of yesterday,” but the other party – which has not been named or confirmed yet – balked at the last minute.
That’s driven Embracer to lower its earnings forecast dramatically – by as much as half over the next year – and admit to game delays as it reshuffles assets. The company’s stock has plummeted over 40% on the news, in spite of Wingefors comments that Embracer expects growth anyway over the next two years thanks its portfolio (850 IPs, 130 studios, 200 games in development… goodness). The concern in the meantime appears to be cashflow for the company.
It seems unlikely that the tanked deal with the Amazon partnership; Amazon’s partnered with Embracer on games already, and indeed it was Amazon who announced the LOTR MMO. But it’s certainly possible that last week’s announcement gave another company cold feet; Wingefors himself says that it was “other decisions […] than the agreement [with Embracer] itself” that caused the partner to pull out.
From the investor Q&A this morning, hours after CEO Lars Wingefors apparently learned the deal had fallen through
Earlier, he says it's a hard time for him to be bullish, talked about what happens when you're doing a deal with people you trust
Pretty raw reaction here: pic.twitter.com/oAeMMYACyd
— Stephen Totilo (@stephentotilo) May 24, 2023
