It’s been a bad year for video game industry layoffs, especially at the Embracer Group. The publishing giant's speedrun from "purchasing companies it should never have purchased" to "closing studios and laying off around one thousand people" has been swift, and despite efforts to sanitize them by calling them part of a "restructuring effort," they're layoffs that cannot be blamed on the pandemic, or video game industry trends, or the wider economy, whatever that term even means in 2023.
It is Embracer that has fucked huge swathes of the video game industry. It has fucked hundreds of developers, their families and livelihoods. It has destroyed games and killed entire studios, binning not just their prospects but their legacies as well. And it has done so purely because of the greed and gross malpractice of its executive management.
The reality is that when the music stops, they’ll start to struggle to pay down debt.
You only have to look back a few years to find Embracer on a meteoric rise. The European publishing conglomerate was, for a while there, on an acquisition rampage, buying up everyone from small developers to classic franchises (Tomb Raider, Deus Ex) to, uh, a huge slice of the rights to the Lord of the Rings series. Not just the video game rights. The whole thing.
It was a business plan that seemed, to some investor hawks at least, a sound one. Buy some struggling (or at least underappreciated) studios and the games they held the rights to, consolidate them all under one roof, create a megabrand, reap the profits. And for a little while there it seemed to be working.
The Swedish founder of the biggest gaming company in Europe sits overlooking a frozen lake from his snow-clad holiday home in Karlstad, where he courted more than 70 business and media professionals before buying many of their companies. As the chef from his private jet cooks a three-course meal in the kitchen next door, 45-year-old Lars Wingefors insists that Embracer does not fit the classic playbook of a “roll-up”, in which a company aggressively buys up lots of smaller entities. “There are bad stories out there, but we need to prove that we are different,” he tells the Financial Times.
Yeah buddy, you sure did. You proved you were even worse.
That same interview is full of investor praise for Embracer's business model, the kind of empty-calories hype that fuelled the company's boom in the first place. One passage that stands out now--aside from the private jet shit anyway--is where a British hedge fund manager sounds like the lone canary in the coalmine when he suggests the company "is poorly positioned for a wider downturn in the gaming sector after a coronavirus pandemic-fuelled boom".
“They’ve been acquiring all these companies, so you can’t get to their organic growth at any time,” they told the FT. “The reality is that when the music stops, they’ll start to struggle to pay down debt".
And hey, would you look at that. The music stopped. If 2023 could be summed up in one word it would be "layoffs". While those job losses have been inflicted on companies around the world, big and small, nowhere have they been as synonymous as Embracer. At last count over 900 developers had been laid off across Embracer's portfolio, but that was before last week, when even more cuts were made at 3D Realms and Ghostrunner developers Slipgate, nudging the total closer to over 1000. Previous closures included everyone from Saints Row creators Volition to Free Radical, of Timesplitters fame.
Industry analysts and Embracer press releases might blame everything from the pandemic to the economy to the transition from a "heavy-investment-mode to a highly cash-flow generative business". But none of that is true. Especially when, at the exact same time, Embracer can boast of an 11% increase in the value of its shares. That increase isn't in spite of the company's layoffs. It is because of them.
Embracer's layoffs weren't a necessity. They were a choice, the same way workers are always the first to go when overly-compensated management, insulated from real-world consequences, say they need to tighten their belts. The only people to blame for all these job losses--and all the associated upheaval and distress--are Embracer executives.
Those men and women are supposedly the leaders of the company. They're paid extravagant compensation packages in the millions--enough to have private chefs on private jets--to exercise that leadership. Leading means anticipating risk, and making sensible long-term decisions. It means being rewarded when those decisions lead to success, sure, but there's a growing frustration when they're not also held accountable for their failures. Like, say, the company banking their entire future on a $2 billion investment from Saudi Arabia that, when it failed to materialise, exposed them so badly they decided they needed to close a bunch of studios and lay off almost 1000 people just to stem the bleeding.
Every one of those developers has had their life upended through no fault of their own, while those actually responsible for Embracer's woes--for greedily over-reaching, for making such a reckless gamble, and then for so callously mismanaging the resulting challenges--are mostly (long-time COO Egil Strunke left last month) still there.
Maybe, if the time has indeed come to restructure the company, the restructuring needs to happen at the top--where the mistakes were actually made--instead of being dropped on the head of working professionals who are just trying to make some cool video games.
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