Former Embracer CEO says Fellowship Entertainment spin-off is the “most effective long-term solution”

Embracer Group’s former CEO Lars Wingefors has stated that the decision to spin off Fellowship Entertainment “represents the most effective long-term solution.”

After stepping down as CEO last June, Wingefors, now chair of the board, shared his perspective in an open letter to shareholders following today’s announcement.

Fellowship Entertainment will focus on a portfolio of IPs, including Kingdom Come: Deliverance, Tomb Raider, and Lord of the Rings. Embracer will prioritise “a more efficient structure, tighter cost control, and disciplined capital allocation.”

“The main rationale to spin-off Fellowship is to increase management focus to capture the full joint potential of the IPs, their respective communities and some of the best game developers in the world,” wrote Wingefors.

“Just like Asmodee and Coffee Stain [which were spun off in April 2024], we believe Fellowship Entertainment will thrive the most by becoming its own standalone business.”

Wingefors continued: “I think the assets held by Fellowship Entertainment are among the most undervalued in the industry and I feel it’s my duty as the largest shareholder to change this and create a structure to realise their full potential. I’m convinced that Fellowship Entertainment could reach industry-leading profitability and show healthy long-term organic growth above the industry average.”

“We do not expect overall corporate costs to increase due to the spin-off. Our ambition is to operate a lean and efficient overhead for each of the groups. Considering the actual separation is planned in 2027, and the fact that Fellowship Entertainment has a notably stronger product pipeline for 2027 and onwards we believe the timing is about right.”

Wingefors also addressed overall industry layoffs, noting that Embracer “worked hard to retain as many people as possible through a very difficult period, while balancing the needs to drive a profitable business operation.”

This period included a nine-month restructuring program after the dissolution of a $2 billion partnership, reportedly with Saudi Arabia’s Savvy Games Group, in 2023.

More than 1,400 employees were affected by layoffs, which also resulted in the closures of Volition Games, Free Radical Design, Campfire Cabal , and Piranha Bytes.

Embracer also sold Saber Interactive, Gearbox, Arc Games, and Cryptic Studios.

Eidos-Montreal was the most recent studio impacted, with 124 positions eliminated and the departure of studio head David Anfossi.

“Looking back at the large adjustment we made in 2023, we decided not to do a hard ‘US Corporate style’ headcount reduction, but to give a number of studios and IPs the chance to prove themselves,” said Wingefors.

“We have been and are still adjusting to a new industry post-pandemic to drive value. We are now finally past the largest cycle of productions started prior to or during the pandemic.”

“As stated earlier, this is a unique chance to create the future Embracer. The journey over the past decade has given some hard and invaluable learnings, which I, as chairman, will make sure that we will use as we lay the foundation for the coming decade across both future companies.”

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