Embracer Splits Again

Like a cheap pair of pants, Embracer announced that it's splitting again. In 2027, the company plans to carve out Fellowship Entertainment, the home to The Lord of the Rings, Tomb Raider, and a roster of AAA studios, as a standalone company listed on the Nasdaq Stockholm main market.

If this sounds familiar, it should. In April 2024, Embracer said it would break into three companies. By now, Asmodee (tabletop) and Coffee Stain (community-driven PC games) have both been spun off and listed. The remaining Embracer is now spinning out a third company, Fellowship Entertainment, and keeping whatever is left.

It's worth noting that Fellowship Entertainment has already meant different things at different times. In 2025, the name referred to the entire remaining Embracer after the Coffee Stain spin-off. That comprised roughly SEK 19 billion (~$2.0 billion) in revenue and 6,000 employees. The 2026 version is a much narrower carve-out: SEK 4.4 billion (~$470 million) in revenue and about 2,200 people.

A Founder's Postmortem of His Own Empire

Lars Wingefors, Embracer's founder and board chair, published an open letter alongside the Fellowship announcement. For anyone familiar with Embracer’s history, it is both unintentionally funny and unintentionally revealing. The letter is simultaneously a confession that the old Embracer model was broken, and a pitch that another version of the same thing can work again. It’s also written by the person most responsible for both claims.

"Ever since the foundation of Embracer the question has been asked to me what the strategy of the group really is", Wingefors writes. He frames this as a communications problem: the story was hard to tell because Embracer mixed too many operating models under one roof. But if it takes a decade, mass layoffs, and multiple spin-offs to answer the question, maybe the problem wasn't messaging.

Then there's the passage about M&A. Wingefors writes that he "can once again also see the potential for value accretive, opportunistic, and synergistic M&A" within the remaining Embracer. Coming from Wingefors it almost reads like parody. He then clarifies that M&A could mean acquisitions, mergers, or divestments, which basically means that it could be anything. In other words, "we will still buy companies, but it will go better this time."

To be fair, Wingefors is more candid here than public-company leaders typically are. He acknowledges negative value creation since the pandemic peak. He also says outright that capitalized development spending has been hiding bad investments across the industry, including Embracer. Wingefors backs that up, at least on paper, by adopting Cash EBIT, which strips out capitalization, as the company's key internal profitability metric.

The Ubisoft Pattern

Embracer isn't alone in reaching for this particular playbook. Ubisoft's recent restructuring around Vantage follows the same logic: put the crown-jewel IP in one shiny box, put everything else in another, and tell investors that focus alone will unlock value. In Ubisoft's case, Assassin's Creed, Far Cry, and Rainbow Six went into Vantage Studios, backed by a €1.16 billion investment from Tencent. Embracer's version is a purer spin-off with no outside capital, just a redistribution of assets.

This says something about the games industry in 2026. When a sprawling company can't fix its execution problems, the instinct is to redraw the org chart. Sometimes that genuinely helps, but the underlying challenge doesn't change: AAA game development is expensive, hit-driven, and notoriously hard to forecast. Splitting a company into smaller pieces doesn't make any individual game more likely to ship on time or find an audience. Instead, you might just end up with the same problems in smaller boxes and a nicer slide deck to present them with.

How the Earlier Spin-Offs Are Doing

The useful thing about Embracer’s breakup is that we no longer have to evaluate it entirely in theory. Two pieces have already escaped the mothership: Asmodee and Coffee Stain.

Asmodee is the clear winner. The tabletop company's market cap has climbed from roughly SEK 24.5 billion (~$2.6 billion) at its February 2025 listing to about SEK 30.2 billion (~$3.3 billion) by mid-May 2026. Leverage is down to 0.9x net debt to EBITDA. It's the most legible story of the bunch. Asmodee is a category leader in tabletop with CATAN, Ticket to Ride, and Dobble, among others. In public markets, it probably benefits from being the least "games industry" of Embracer's children. Investors seem to like the predictability.

That said, a meaningful share of Asmodee's recent growth came from distributing other companies' trading card games, namely Pokémon, Magic, and One Piece, rather than from its own studios. Partner-published sales grew 40% in FY26 while Asmodee's own studio-published games actually declined about 6%. Still, Asmodee is proof that the spin-off logic can work when the core business is healthy.

Coffee Stain is more cautionary. It debuted in December 2025 at roughly SEK 5.7 billion (~$610 million) of market value and has since drifted to about SEK 4.5 billion (~$480 million). Wingefors himself flagged one reason: passive index funds sold heavily after the listing on Nasdaq First North, a smaller exchange. That's why Fellowship is targeting the main Nasdaq market instead. Coffee Stain also closed its Malmö studio earlier this year and halted a mobile project.

Coffee Stain’s games (Satisfactory, Deep Rock Galactic, Valheim, Goat Simulator) are strong, but it's a small public company with limited liquidity and a narrow hit base. The financials reinforce the point: Coffee Stain's adjusted EBIT margin dropped from 50% in FY25 to 30% in FY26, and Q4 reported EBIT was actually negative. This is not a smooth public-market story: even a well-run evergreen indie compounder can produce ugly quarters.

What Fellowship Actually Is

The man leading the new Fellowship is CEO Phil Rogers, a veteran who ran Eidos (later Square Enix Europe) for nearly 15 years and was a VP at Electronic Arts before that. Rogers wasn't involved in Embracer's acquisition spree, but he's had to deal with the aftermath. In a recent interview with The Game Business, he called it "an absolute humbling experience," and then spent most of the conversation making the case for what comes next.

Fellowship is being positioned not just as an AAA publisher but as an IP monetization and licensing vehicle. The headline franchises are Lord of the Rings, Tomb Raider, Kingdom Come: Deliverance, Dead Island, Darksiders, Remnant, and the Metro series. Behind them sits a long tail of dormant IP (e.g., Deus Ex, Legacy of Kain, Saints Row, Red Faction, Thief, TimeSplitters) that Wingefors says will be offered for external partnerships rather than necessarily revived internally. Dark Horse, the comics and media company, is moving into a new IP and licensing unit, making Fellowship more explicitly a transmedia play than a conventional publisher.

Rogers framed the licensing approach in practical terms in his interview: "We don't believe we have to make it all ourselves. There could be other specialists out there." He compared it to how other entertainment industries work: outside teams pitch treatments, Fellowship evaluates them, and the best ideas get backed regardless of who builds them. Whether that means remakes, remasters, adaptations, or even a TimeSplitters-Fortnite spin-off, the point is to get more mileage out of the IP library without scaling up internal headcount.

That's arguably a tighter pitch than "we make big expensive games." Licensing is higher-margin than internal development. If Fellowship can increase its release cadence to at least two major titles per year, as planned starting FY 2027/28, while also building a meaningful licensing revenue stream, the economics could look very different from a traditional publisher. The trick is that “higher-margin” and “large enough to matter” are different claims.

The profitability claims in Wingefors' letter deserve some scrutiny though. Wingefors claims Fellowship could reach "industry-leading profitability," projects long-term incremental Cash EBIT margins above 50%, and cites an ROI of 3.2x for games released under Embracer's ownership. He points to Kingdom Come: Deliverance II specifically, which hit 3.2x ROI 14 months after release with 3 million copies sold. That's genuinely impressive, but one home run doesn't equal batting average. The obvious question concerns everything that sits outside that denominator: canceled and delayed projects, as well as capitalized development that never turns into a product.

It's also worth noting that part of KCD2's economics come from geography. Warhorse is based in Prague, and as Rogers put it: "Great people in California can make great games, but when your man rate is that much higher than the rest of the world, you've got to really make sure those skills are at that level of differential." Fellowship's studio footprint skews heavily European, which brings real cost advantages — at least in comparison to American studios.

More fundamentally, Embracer has not yet published any standalone profit figure for the new Fellowship carve-out. Investors are being asked to buy a thesis before they can see a P&L. Separate segment reporting only begins this fiscal year.

The open question with the long-tail IP is whether franchises like TimeSplitters or Red Faction are genuinely under-monetized assets or nostalgia inventory with no commercial relevance. There's a wide gap between "beloved by fans on Reddit" and "worth investing real money in." Finally, the core risk hasn't changed: Fellowship still needs to ship expensive games on time in a hit-driven market. Licensing can supplement that, but it can't replace it.

Structure Isn’t Strategy

Credit where it’s due: the debt crisis that defined 2023 is over. Embracer has moved from SEK 16.4 billion (~$1.8 billion) of net debt in March 2024 to SEK 3.8 billion (~$410 million) of net cash by March 2026. Embracer also announced a SEK 750 million (~$80 million) share buyback, signaling that after divestments, cuts, and a brutal reset, it now views itself as having excess capital rather than survival capital.

But the remaining Embracer post-Fellowship sounds a lot like the old Embracer: decentralized entrepreneurs, niche businesses, and opportunistic M&A. The model isn’t new. What’s new is the promise of adult supervision. For that promise to matter, Cash EBIT has to become a real constraint, not just an investor-relations line.

Wingefors wants investors to believe the strategy has changed. What's actually changed, so far, is the structure. Whether those are the same thing is the bet Fellowship investors will be making in 2027. And that bet is not that different from buying Embracer stock at any given time.

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In Other News

💸 Funding & Acquisitions:

• Liftoff Mobile raises $437M in IPO on its second attempt.
• Tripo AI raises nearly $200M in financing for AI 3D and world model tech.
• Akin Babayigit and Makers Fund launch AMF Capital with $28M UA financing for Bear Hug.
• UK-based holding company TruFin has conditionally agreed to sell its 84.5% stake in UK-based indie games publisher Playstack.
• Atari acquires Crossy Road developer Hipster Whale.
• UK-based private equity firm GoldenPeak has acquired a majority stake in UK-based media and entertainment intelligence company Ampere Analysis for an undisclosed sum.

📊 Business & Products:

• New Zealand games sector hits $1B revenue two years earlier than anticipated.
• Stillfront divests OFM Studios and cuts $26.5M Gameberry settlement.
• China approves 158 games in May as licensing pace accelerates in 2026.
• Tencent reportedly preparing UGC initiative for Delta Force.
• VC fund Blue Ocean Games partners with Polden Publishing on data-driven market validation.
• PlayStation first-party sales see modest rebound after half-decade decline.

👾 Miscellaneous:

• Ludeo opens indie dev program offering discovery, creator grants, and up to $10K for top campaigns.
• Global Game Jam launches micro-missions pilot to connect indie studios with emerging talent.
• Roblox seeks to tame the ‘Wild West’ of creator-brand partnerships with Brand Link.
• Why mobile gaming has shifted from a 'core-first' to an 'event-first' model.
• Mattel Digital Studios releases Skeletor: Until Next Time mobile game.
• NBCUniversal, Sony Pictures and Lil Snack launch Jeopardy! Today on Peacock mobile app.

Content Worth Consuming

Mobile Matters: The Impact of Mobile Games for Europe (king.com): “Mobile games have become one of the most widely enjoyed forms of entertainment in Europe, reaching hundreds of millions of players and helping shape the future of the creative and digital economy. Commissioned by King and developed with research partner Nordicity, Mobile Matters explores the role mobile games play across Europe today, from economic contribution and innovation to creativity, digital skills and social impact.”

"Nobody's Making Games for the Retired People" – The Growing yet Underserved Market for Grey Gamers (gamesindustry.biz): “Back in February, MachineGames head Jerk Gustafsson emphasised to GamesIndustry.biz that the video games market still has room to grow. ‘I am 54 years old now,’ he said, ‘and I grew up with games – but I think I was also the first generation that grew up with games. So when I'm going into retirement, when I'm 70 years old, that should be the peak. That should be the peak of our install base, that should be the peak of people that have actually grown up playing games on a daily basis.’”

How to Scale Influencer Marketing to 8 Figures Systems Across 15 Studios by Marion Balinoff (two & a half gamers): “Most teams treat influencer marketing as a series of one-off campaigns. The ones who actually scale treat it as a system — one continuous testing framework that runs from your first nano creator all the way to a Mr. Beast integration. Marion Balinoff returns for episode two of the influencer marketing series, going one level deeper than the foundations. Drawing on 12 years building influencer programs across 15+ studios and eight-figure budgets, this episode lays out the complete testing framework: the three-phase path from knowledge-gathering to scaling, how to read the vertical assessment table, the CPM/conversion/LTV diagnostic for fixing what's broken, the gift-code and giveaway mechanics that move conversion without killing LTV, and the custom in-game integrations that lifted conversion 437% on average. If you watched episode one, this is where the foundations become a machine.”

Embracer CEO: I Hope Trust in Us Is Improving (The Game Business): “In this edition, The Game Business Show speaks to Embracer CEO Phil Rogers. We discuss the formation of new Embracer spin-off Fellowship Entertainment and what it all means. We find out what Amazon's decision to pull out of games has meant for Tomb Raider. And we chat development costs, M&A, AI, GTA, and winning back the trust of the industry.”

Housemarque’s Gregory Louden on Saros, Narrative and Game Design (The AIAS Game Maker’s Notebook): “Trent Kusters chats with Gregory Louden, Creative Director behind Housemarque’s latest dark sci-fi bullet-ballet, Saros. Together they discuss his early work in film with directors such as Alfonso Cuarón and Ridley Scott; transitioning into games and his path from VFX, to narrative, and ultimately direction; creating a spiritual successor to Returnal while developing a brand new IP; focusing on challenging but rewarding gameplay; and building a narrative around the roguelike gameplay.”

The Efficiency Trap That’s Killing Your Game (Building Better Games): “In this episode, we break down one of the most destructive traps in modern game development: confusing efficiency with effectiveness. It’s incredibly easy to measure velocity, count assets, or point to a rising graph on your screen. But if your team is flawlessly hitting its milestones and the game still isn't any fun to play, your chosen metrics are a farce. We explore why game dev is uniquely unsuited for pure manufacturing efficiency, how localized optimizations choke your pipelines, and why real organizational value requires the courage to slow down, leave room for messy learning, and build a clear, shared North Star.”

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