Embracer Group, the entity that owns the rights to The Lord of the Rings, has reported a significant decline in revenue in its Entertainment and Services segment in the first quarter of 2024.
The Sweden-based company reported entertainment sales of SEK 848 million ($81 million), down 54 percent from the same period last year, in the months of April through June.
Total net sales fell 24% to SEK 7.93 billion, with declines recorded across its various divisions, including PC/Console Games, Mobile Games, and Tabletop Games. The company reported a loss before interest and taxes of SEK 1.44 billion, a stark contrast to the previous year’s profit of SEK 421 million. Adjusted EBIT, meanwhile, came in at SEK 828 million, down from SEK 1.67 billion.
Performance in the PC/Console and Entertainment segments met the company’s adjusted expectations, primarily due to a decline in new releases.
Over the past year, Embracer has undertaken a restructuring and announced that these efforts have positioned it to significantly reduce its net debt, achieving free cash flow above SEK 2 billion for the first time. In July, Embracer secured a new revolving credit facility of EUR 600 million ($660.6 million) and a SEK 500 million loan from the Swedish Export Credit Corporation.
Plans are underway to split the company into three independently listed entities. Game publisher Asmodee is expected to hold a capital markets day in the third quarter. The rights to The Lord of the Rings and Tomb Raider will be handled by Middle-earth Enterprises & Friends, which will continue under the soon-to-be-renamed Embracer Group umbrella.
Embracer acquired the rights to The Hobbit and The Lord of the Rings by purchasing Middle-earth Enterprises from the Saul Zaentz Company in 2022.
Anticipation is building as the second season of Prime Video’s The Lord of the Rings: The Rings of Power is set to debut later this month, followed by the anime film The Lord of the Rings: The Rohirrim War in December. Additionally, The Lord of the Rings: The Hunt for Gollum is slated to be one of two upcoming films from Warner Bros. Pictures, New Line Cinema, and the team of Peter Jackson, Fran Walsh, and Philippa Boyens.
Embracer, best known for its gaming products, has implemented a “new greenlight process” to test innovative game concepts that promise immersive experiences in the Middle-earth universe.
CEO Lars Wingefors also confirmed the complete cessation of the company’s activities in Russia, noting that the remaining entities are inactive legal structures, without employees or resources.