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Default Embracer Group - Lost $431 Million last Year

May 22nd, 2022, 10:18
Gamesindustry.biz reports that the Embracer Group (formerly THQ Nordic AB) lost $431 million last year. While Valheim was an unexpected success ELEX II didn't live up to the expectations:

Embracer lost $431 million last year

Publisher posts soaring revenues on acquisitions but says it doesn't need to buy more companies to grow; Elex 2 disappoints

Embracer Group today reported its financial results for its fourth quarter and full fiscal year, showing that its string of high-profile acquisitions helped push net revenues higher, but did not have the same effect on the bottom line.

For the quarter ended March 31, Embracer reported net sales up 117% to SEK 5.23 billion ($525 million), but a loss of SEK 1.67 billion ($168 million), compared to the previous fourth quarter's profit of SEK 159m ($16 million).

The sales gains were driven by acquisitions like Gearbox, Easybrain, and Asmodee, as Embracer reported organic growth of negative 34% for the quarter.

It blamed that number on a tough comparison from the previous year, when its Coffee Stain Publishing division had a breakthrough hit with Valheim.

Revenues from Coffee Stain sank 78% year-over-year for the quarter, from SEK 781 million ($78.5 million) to SEK 171 million ($17.2 million).

While the scope of Valheim's success was unexpected, Embracer CEO Lars Wingefors believed the phenomenon is repeatable, saying, "We hope and believe we have many more of those successes in the pipeline in the year to come."

Beyond that, the company also said the fourth quarter's biggest release, THQ Nordic's open-world RPG Elex 2, did not live up to financial expectations, although it believes it will provide a positive return on investment eventually.

[…]
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May 22nd, 2022, 10:23
I highly doubt Elex 2 caused them a huge loss. They probably invested 1-2 million at best. The losses come from all the umbrella studios expenses and other buyouts.
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May 22nd, 2022, 10:26
Yes - it's in the the last sentence:
Beyond that, the company also said the fourth quarter's biggest release, THQ Nordic's open-world RPG Elex 2, did not live up to financial expectations, although it believes it will provide a positive return on investment eventually.
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May 22nd, 2022, 10:28
Originally Posted by Couchpotato View Post
I highly doubt Elex 2 caused them a huge loss. They probably invested 1-2 million at best. The losses come from all the umbrella studios expenses and other buyouts.
What makes you think they invested only 1-2 million?

Releasing Elex 2 sandwiched between Elden Ring and Horizon 2 probably wasn't as great an idea as THQ thought.
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May 22nd, 2022, 10:30
Low sales were excepted though as PB games are not mainstream. It will more then likely as quoted already make it profitable over the next two years like Elex.

Probably on multiple sales on different storefronts.

On a side-note if I remember it will have no DLC so that doesn't help.
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May 22nd, 2022, 10:35
Originally Posted by Gorath View Post
What makes you think they invested only 1-2 million?

Releasing Elex 2 sandwiched between Elden Ring and Horizon 2 probably wasn't as great an idea as THQ thought.
Refer to my post above. It's not a mainstream game with a ten+ million budget. It's a b -budget game that gets marketed to a small audience at best. I could be off by 2 million.

Anyway if they spent more then that well PB needs a reality check. As the quality does not meet Triple A game criteria. I also say this as a PB fan and not throwing sand.

It never stood a chance of competing with any big budget RPG especially Elden Ring.

I now expect pitch=forks and insults once again.
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May 22nd, 2022, 10:38
Also congrats @Gorath on popping up after years of silence.

You were missed.

Also Eurojank still fits the label for PB.
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May 22nd, 2022, 10:40
What I understand is that it's a loss of earnings that participated to this negative result and which couldn't balance out all the investments they made in other companies, not the investment on this particular game. Embracer Group is a holding, not a publisher.

But the loss would require sales of that game in a magnitude of 10 million units, they couldn't possibly expect that. I understand it's probably one of the biggest miscalculations this year in their budget.
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May 22nd, 2022, 10:43
Originally Posted by Redglyph View Post
What I understand is that it's a loss of earnings that participated to this negative result and which couldn't balance out all the investments they made in other companies, not the investment on this particular game. Embracer Group is a holding, not a publisher.

But the loss would require sales of that game in a magnitude of 10 million units, they couldn't possibly expect that. I understand it's probably one of the biggest miscalculations this year in their budget.
Yep remember they spent billion's buying ip's and other under-performing studio's. Last month there was an article they still have about $2 billion left for another 20 deals.
After purchasing the likes of Gearbox Entertainment, THQ Nordic and Koch Media, Embracer Group is now looking for further publishers and developers to join its ranks. IP was another asset the firm was said to be considering, as it continues to bolster its catalogue. In November, the firm began its spending spree with the purchase of 12 studios and a PR company.
So these losses can't be affecting them that much.
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May 22nd, 2022, 10:53
Originally Posted by Couchpotato View Post
Refer to my post above. It's not a mainstream game with a ten+ million budget. It's a b -budget game that gets marketed to a small audience at best. I could be off by 2 million.

Anyway if they spent more then that well PB needs a reality check. As the quality does not meet Triple A game criteria. I also say-this as a PB fan and not throwing sand.

It never stood a chance of competing with any big budget RPG especially Elden Ring.
[…]
Your budget considerations are way off.

Elex 2 is a AA game. Team size ca. 30 people in a first world country, ca. 4.5 years. At only 6k costs per person per month this puts it in the 10M EUR area. Plus loca, plus asset outsourcing, plus publisher stuff.
I don't doubt THQ will be able to break even on it, but you need to sell a lot of copies at mid price if the initial sales spike at full price disappoints. And the retail price was lowered quickly, hinting that Elex 2 hardly sold at all.

I agree with your points about not being able to compete with Elden Ring and the lack of DLC not helping.
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May 22nd, 2022, 10:54
Originally Posted by Couchpotato View Post
Yep remember they spent billion's buying ip's and other under-performing studio's. Last month there was an article they still have about $2 billion left for another 20 deals.

So these losses can't be affecting them that much.
Maybe that value was taking more earnings into account. I forgot almost everything about finance, but the investments, what they own and the income are different categories, so a loss doesn't necessarily mean they're running out of money.

Aren't those numbers public? I don't know the Swedish law about that. I barely know how it works in my country, but the financial statements are public here. Of course, it takes some time before they're published, and it's usually very difficult to make anything out when it comes to holdings and big companies which have a lot of internal flows.

EDIT: @Gorath Is that due to THQ Nordic? I missed that part. Oh, I see they're the publisher of Elex II now, I didn't know that.
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May 22nd, 2022, 10:59
Originally Posted by Couchpotato View Post
Also congrats @Gorath on popping up after years of silence.

You were missed.

Also Eurojank still fits the label for PB.
Thanks! Almost exactly 1 year of silence.

I made the mistake of playing Elex immediately after Horizon. Saying it felt rough around the edges would be an understatement.
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May 22nd, 2022, 10:59
Originally Posted by Couchpotato View Post
Yep remember they spent billion's buying ip's and other under-performing studio's. Last month there was an article they still have about $2 billion left for another 20 deals.

So these losses can't be affecting them that much.
They mention in the article, the biggest change over last year is that the studios which made massive monies aren't at the moment as they need to develop games.

Originally Posted by Gorath View Post
Your budget considerations are way off.

Elex 2 is a AA game. Team size ca. 30 people in a first world country, ca. 4.5 years. At only 6k costs per person per month this puts it in the 10M EUR area. Plus loca, plus asset outsourcing, plus publisher stuff.
I don't doubt THQ will be able to break even on it, but you need to sell a lot of copies at mid price if the initial sales spike at full price disappoints. And the retail price was lowered quickly, hinting that Elex 2 hardly sold at all.

I agree with your points about not being able to compete with Elden Ring and the lack of DLC not helping.
Yup, it's closer to 15m EUR in my view as 6k sounds low for costs - even if the salary is 6k employers need to add in all the other costs, which make it go much higher than 6k. I am assuming Germany is even harsher than the UK on this kind of thing.

Also, hi Gorath
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May 22nd, 2022, 11:04
Originally Posted by Redglyph View Post
EDIT: @Gorath Is that due to THQ Nordic? I missed that part. Oh, I see they're the publisher of Elex II now, I didn't know that.
Sorry, I'm not sure what exactly you're refering to.
THQ Nordic is the owner and publisher of Piranha Bytes. They are also one of the 10 or so branches of the Embracer Group. So Elex 2 was an internal project.
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May 22nd, 2022, 11:12
Originally Posted by Pladio View Post
Yup, it's closer to 15m EUR in my view as 6k sounds low for costs - even if the salary is 6k employers need to add in all the other costs, which make it go much higher than 6k. I am assuming Germany is even harsher than the UK on this kind of thing.

Also, hi Gorath
Hi Pladio! I came by once a month or so, but didn't post.

From what I understand based on industry types on record is that 6k cost is rather low. If I'm not mistaken Deck13's GM said in a budget discussion that 8k EUR would be a reasonable number to base rough calculations on. This includes everything.
So yes, probably closer to 15M EUR.
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May 22nd, 2022, 11:31
I concede I'm probably off but the quality still doesn't justify a budget that high.

Like you both said the money paid the 30+ workers. Obsidian spent around the same or less for Pillars 2, and they even used crowdfunding. That game unperformed as well.
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May 22nd, 2022, 11:34
As for Embracer they bought Crystal Dynamics and Eidos-Montréal last month for $300 million. That was a steal now bring on the next Deus EX please I beg you.
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May 22nd, 2022, 11:47
Originally Posted by Gorath View Post
Releasing Elex 2 sandwiched between Elden Ring and Horizon 2 probably wasn't as great an idea as THQ thought.
Although that doesn't sound too smart, to release between those two juggernauts, I find it very unlikely that most people that bought either of Elden Ring or Horizon 2, even heard about ELEX 2. I suspect most of the sales of ELEX are, as always, from fans already familiar with their series.

If they want to reach a more mainstream audience, PB really needs to polish their gameplay systems, since currently they're only marginally better than what they had in the old Gothic series. They're very strong in other departments, especially exploration, but there's a big onion to bite through to reach those parts. And you either have to already know the rough state their games are in, and go in with that expectation, or be really open minded and look past such superficialities. And most audiences don't have that patience.

Anyway, about the Embracer group (as an aside, why do I always picture an "embrace of death" when I read their company name), my most positive news was them outright saying they're planning on fully utilizing the IPs they bought, with remasters/remakes/sequels. I'll die if they don't hire a studio to do a proper remaster of the Legacy of Kain games, and make them functional on modern systems. I'd love it if they would do that. I don't have much expectations around any sequels though, in the LOK series. That's pretty much impossible to pull off at this moment in time.
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May 22nd, 2022, 11:53
Originally Posted by Couchpotato View Post
As for Embracer they bought Crystal Dynamics and Eidos-Montréal last month for $300 million. That was a steal now bring on the next Deus EX please I beg you.
I saved Mankind Divided at the point of no return yesterday evening!

I'm quite optimistic we'll get another Deus Ex. Remasters of the old ones first, though.

300M was a steal … except that it wasn't. It was my first impression too, but then I did listened to some podcaster who spent time digging.
The ex-Eidos studios only barely broke even for several years in a row. Square-Enix was sick of them. Good sales numbers for high costs isn't their standard. They gave it one last shot with Avengers. 200M$ invested in their Marvel Adventures. Avengers sucked and Guardians didn't sell.
So the bitter pill is: Embracer has to take their Marvel committments too. And they have running costs for over 1000 employees in North America.

Still a very good deal for Embracer, I guess, if they have the money to keep their new IPs in play.
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May 22nd, 2022, 11:58
Originally Posted by Gorath View Post
So the bitter pill is: Embracer has to take their Marvel committments too. And they have running costs for over 1000 employees in North America.
This is indeed, the most worrying part of this deal. That's basically the black pill of death. I hope they can get out of the Marvel deal.
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