Embracer must focus on quality not quantity if it wants its bets to pay off | Opinion

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It was too good to be true. The Embracer Group under the leadership of its CEO Lars Wingefors was set to be the most successful European video games publisher, rivalling the giants in the U.S. Years of numerous acquisitions of video game studios, distributors and publishers had made Embracer into a powerhouse in the industry.

But now, after its failed partnership deal with an unnamed company, coupled with the collapse of its share price (down by as much as 40% in one day) when that deal fell through, many are now questioning what is the long-term strategy for the company? Is the model of buying studio after studio, funded by loans, a secure one if revenue growth cannot keep up?

At all costs, Embracer needs to avoid making content for content's sake

The Embracer Group is now paying the piper from all that borrowing. With a lower market capitalisation thanks to that share price crash, probable higher interest rates on the loans and rising costs in production (thanks to inflation), this all culminated with the management of Embracer looking for a haircut. By the looks of it, they intend to take off a lot of hair.

As reported by Gamesindustry.biz, Embracer's restructuring program involves studio closures, the company looking to cut its debt by a third to around $1B, and seeking economies from laying off some of its 16,600 headcount. Uneasy times lie ahead.

The fact is that although the company generated revenue growth, its spending – especially on acquisition loans – out-paced the growth in income. The strategy to build an empire on cheap credit, shareholder goodwill and forecasted growth was sound provided the credit continued to stay cheap,