In its recent Q3 report, Embracer, the owner of the beloved 'Lord of the Rings' IP, revealed that its licensing revenue from the Tolkien universe has provided a significant boost, despite overall results falling slightly below expectations. Embracer, a Swedish gaming conglomerate, has undergone a substantial restructuring program over the past year, leading to the closure or disposal of numerous game studios and titles and significant staff layoffs. These actions have had a ripple effect throughout the gaming industry.
Embracer's latest report, published on Thursday, confirmed that the company had laid off 8% of its global workforce. It is important to note that this figure may not include those working on a freelance basis. Despite these measures, Embracer's CEO, Lars Wingefors, acknowledged that the company is unlikely to reach its target of reducing its net debt to SEK 8 billion ($761 million) by March 31. However, he expressed optimism, stating that Embracer is currently engaged in several sizable divestment processes that could strengthen its balance sheet.
Under its Entertainment and Services division, Embracer houses its valuable collection of Tolkien intellectual property, which includes not only 'Lord of the Rings' but also 'The Hobbit.' The report highlighted that this division experienced a year-on-year net sales growth of 12%. Wingefors attributed this growth primarily to the 'stronger than expected' revenues from licensing deals related to the 'Lord of the Rings' franchise. These deals include licensing for the Magic the Gathering trading card game, continued success of the two Peter Jackson trilogies released by Warner Bros., and the new PC/Console game, 'Return to Moria.'
Looking ahead, Wingefors expressed excitement for the upcoming theatrical release of the animated prequel 'The Lord of the Rings: The War of the Rohirrim' in December. Embracer is undoubtedly expecting this release to further fuel the momentum and success of its Tolkien IP.
However, the Q3 results did fall just below market forecasts, with Embracer's adjusted operating profit amounting to 2.15 billion Swedish crowns ($204.40 million), representing a 7% rise compared to the previous year. Prior to implementing its restructuring program, Embracer had embarked on a spree of acquisitions, purchasing numerous game studios and entertainment properties. Some notable acquisitions include Dark Horse Comics, Anime Ltd, the 'Tomb Raider' franchise, and, of course, Middle-earth Enterprises, the owner of 'Lord of the Rings.'
While Embracer navigates its restructuring process and adapts to the evolving gaming landscape, the company remains optimistic about the potential of its Tolkien IP. With strong licensing revenues, anticipation for new releases, and ongoing dDivestment activities, Embracer aims to strengthen its financial position and continue capitalizing on the enduring popularity of the 'Lord of the Rings.'
