Embracer's Sales Drop: The Impact of Tolkien IP

Embracer, a big player in the gaming and entertainment industry, just released its report for the second quarter of 2024. The numbers aren't great: the company saw a 21% drop in net sales for its gaming group, down to around $782 million. Their entertainment and services division also took a hit, with sales dropping by 10%. The profits followed the same trend, falling by 33%. What's interesting is that the company blamed the "Lord of the Rings" IP for some of the drop. Embracer bought the Tolkien IP in 2022 for a hefty $395 million. But, the company’s subsidiary Middle-earth Enterprises had a slower quarter due to no new game releases. Despite this, they had better-than-expected film revenue. The biggest drop was in Embracer’s PC/console games division, with a 46% sales decrease. Mobile and tabletop games also saw drops, by 8% and 6% respectively. Embracer says these results are due to release delays, higher production costs, and tough comparisons to last year’s big releases like “Remnant II” and “Payday 3. ” On the brighter side, “The Lord of the Rings: Return to Moria” did better than expected on Steam and Xbox. But, “Disney Epic Mickey: Rebrushed” didn’t perform as well in digital sales. Embracer is going through some changes. They plan to split into three publicly traded companies by 2025, with one of those being the tabletop games division Asmodee. The other two will focus on digital gaming and the Tolkien IP. The company is optimistic about the upcoming animated film “The Lord of the Rings: The War of the Rohirrim, ” hoping it will boost earnings. They also released new games like “LEGO® Monkey Palace” and “The Lord of the Rings: Duel for Middle-earth, ” which are doing well. CEO Lars Wingefors said they are working to improve margins and reduce debt. But he acknowledged that some parts of the business are still struggling.