Hi Everyone. Thanks for tuning in for another week of Naavik Digest. If you missed last week’s edition, we wrote about Krafton’s latest earnings and plans for the future. Check it out, and let us know what you think.

Earnings Analysis: Nintendo, Krafton, Unity, AppLovin & Roblox

In this Metacast episode, Aaron Bush, Tammy Levy, and Elyssa Goldberg, join your host Maria Gillies to discuss the latest earnings from Unity, AppLovin, Roblox, Krafton, and Nintendo — as well as the future of community play.

You can find us on YouTube, Spotify, Apple Podcasts, Google Podcasts, YouTube, our website, or anywhere else you listen to podcasts. Also, remember to shoot us any questions here.

#1: Embracer’s Empire-Building Underperforms in Q2


This week, Swedish video game holding company Embracer Group announced its Q2 FY’23 results and shared several significant updates, which we will cover below.

Embracer Today

Before we discuss the major changes, let’s crunch some numbers. First of all, Embracer has been one of the most active strategic investors in terms of gaming and entertainment M&A activity for the last several years. As a result, the group has grown into one of the largest companies in the industry, with more than 15,000 employees and more than 800+ titles in its portfolio. Currently, Embracer divides its business into 4 segments, covering several entertainment industry areas:

  • PC & Console Gaming: 11,165 employees across 96 studios; 252 IPs in the portfolio
  • Tabletop Gaming: 2,445 employees across 22 companies; 370 titles in its portfolio
  • Mobile Gaming: 1,135 employees across 11 studios; 41 IPs in the portfolio
  • Entertainment & Services: 941 employees across 3 companies; 164 IPs in its portfolio

Embracer usually announces a series of deals at once, and this quarter was no exception. The company announced the acquisition of nine companies for a total of $765m.

It’s also worth noting that Embracer shares have fallen -55% year-to-date, down from $9.40 to $4.32 (as of the time of writing). Of course, the general downward trajectory correlates with much of the industry, but the outsized downward movement reflects the broader market’s reduced optimism about Embracer’s ability to create outsized value.


According to Embracer’s investor presentation, the company generated 190% revenue growth year-over-year, reaching $903.2m (SEK 9.5B), while Adjusted EBIT grew 115%, hitting $200.2m (SEK 2.1B). The biggest share of Net Sales is generated by PC & Console gaming (43%), with Tabletop (34%) in 2nd place, Mobile gaming (15%) in 3rd place, and the rest (8%) belonging to Entertainment & Services.

Embracer generated “only” 35% organic growth, so this dramatic increase in revenue is largely connected to M&A activity; for example, the newly acquired Tabletop segment brought in $305.3m (SEK 3.25B) of Net Sales. At the same time, the PC & Console segment has increased almost 2x due to new titles in the portfolio, including Tiny Tina’s Wonderlands, Marvel’s Avengers, and Marvel’s Guardians of the Galaxy.

However, despite such strong growth, the company decreased its full-year EBIT forecast to $2.18B - $2.72B (SEK 8B - 10B) versus the previously range of $2.8B - $3.7B (SEK 10.3B - 13.6B).

There are several reasons behind this, including game delays (like Dead Island 2), underperformance of some key Q2 PC & Console releases, and the current negative macroeconomic situation. Obviously Embracer isn’t alone in its struggles, especially regarding mobile, which as an overall market segment will decline for the first time ever this year. So it’s not shocking to see Embracer’s Mobile segment show a lower Adjusted EBIT margin and continued negative EBIT due to higher UA expenses and lower revenue from the in-game ads. Hopefully this turns around.

The PC & Console segment remains the main revenue driver for the group, but this quarter’s releases didn’t meet expectations. Saints Row, Way of the Hunter, and Destroy All Humans received mostly average and negative feedback from both the press and gamers. Taking into consideration the importance of all titles, the results were far away from expectations. Despite a number of acquisitions the group made in order to obtain strong IPs, we observe a weakening pipeline. Upcoming titles include the long awaited Dead Island 2, Goat Simulator 3, and a new IP Evil West.

In addition to the lagging performance of its several releases, Embracer has also decided to close Square Enix Montréal only two months after the purchase. The studio was known for mobile titles like Lara Croft Go and Hitman Go, but the group made the decision to cut the expenses and focus on its premier franchises and AAA games. According to Bloomberg's sources, some staff were transferred to Eidos-Montréal for the development of a new installment of Deus Ex.

Further Development and Changes

For several years in a row now, we have observed Embracer transform from a pure PC & Console gaming company into a multi-pronged entertainment giant. With the Asmodee acquisition, Embracer grabbed a significant share of the Tabletop market, which spurred the growth of its financial figures and a significant change in its revenue mix. For instance, in this quarter last year, video games generated 85% of sales; this quarter, video games generated only 58%, and the Tabletop segment now represents 34% of sales.

The group aims to continue building a profitable business in the creative industry despite the challenges of geopolitical and economic issues around the globe. One of the possible ways to persevere, which was decided by the Embracer’s Board of Directors, might be spinning off some internal businesses into separate publicly listed companies in the future, which, in turn, might lead to higher shareholder value and improved strategic flexibility. At the same time, the Group announced transformative partnership and licensing deals with several industry partners for the development of several large-budget games, which will be released over the next 6 years. These partnerships and deals, which entail working on established IPs, may be an advantage for Embracer, and if executed well could result in higher forecasts over time. We will see how that goes.

Embracer’s transmedia approach, which we mentioned in our previous coverage, is still an ongoing process, but we can already observe some of the results. After acquiring tabletop games publisher Asmodee, the team has already started evaluating 25 gaming projects for collaboration and development based on Asmodee’s IPs. In addition, Asmodee also identified multiple ways to work together with Dark Horse, the company’s acquired comics segment. Furthermore, with the acquisition of The Lord of Rings IP, Embracer should have vast opportunities to use it across all of its business segments.

Like with all growth-by-acquisition companies, empire building doesn’t necessarily translate into outsized per-share value creation. That per-share value creation hasn’t happened over the past couple years, but we won’t cast full judgement on Embracer yet. This earnings report wasn’t 100% positive; although entering new markets has led to growth both in Net Sales and Adjusted EBIT, there are still signs of weakness and underperformance. Again, this isn’t entirely unique to Embracer, but it still matters and is worth keeping an eye on. Naturally, this also isn’t the end of Embracer’s story. The company has collected abundant strong IPs and experienced game development teams and will use those resources to facilitate further organic growth. The company already has somewhat considerable debt and has heavily diluted shareholders in recent years, but management still appears eager to continue growing its empire through further M&A. We’re curious to see how aggressive it will continue to act, how deals will be funded, how organic growth will trend from here, and at what point Embracer decides to shake things up (such as spinning off certain units). Whatever the case, it’s a fun and important company we’ll continue to follow. (Written by InvestGame)

GameIQ Solves The Industry's Toughest Challenges

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Game publishers and strategists today are facing various key challenges:

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• Confidently focusing on the highest potential genre for a new game release

With the enhancements we’ve made to data.ai Game IQ including Feature Tagging, Genre Summary, and Tag Trends, you can now effectively solve these challenges.

#2: InvestGame Q3 2022: Gaming Deals Activity

New Strategies Investgame

We at Naavik are thrilled to share InvestGame’s latest report that covers the industry’s 2022 deals activity through Q3. We were happy to support and share our insights!

The theme of this report is “cooling investments and consolidation.” Here are the key takeaways:

  • 626 closed deals with the overall deal value of $51.4B. Deal value jumps to $124.5B if we include 10 announced but not yet closed deals.
  • Q3 continued the trend of cooling down that we saw in Q2 for several reasons: a challenging and recessionary macroeconomic situation, post-pandemic user engagement changes, post-IDFA deprecation pressures, increased regulatory scrutiny, among other factors.
  • Q3’22 is the first quarter with negative growth metrics for blockchain gaming related investments. Even though the total number of deals grew (up 2.8x YoY; 61 versus 22), the total deal value shrunk 14% ($932m vs $1.09B). This showcases a drop in valuations but also potentially slightly waning investor interest in this nascent corner of the industry.
  • Gender diversity data was updated, including for FY 2021. In 2022 YTD, 89% of gaming companies are male-led (511), with mixed-led occupying 9% (52), and women-led 2%.

🎮In Other News…

💸Funding & Acquisitions: 

  • Earnings: Embracer | Nvidia | Aristocrat
  • Zynga’s Rollic acquired Popcore, a leader in the puzzle genre. Link
  • Yahaha — a UGC platform — raised $40M. Link
  • Heroic Story raised $6M for a web3 TTRPG. Link
  • Methodical Games raised $15M. Link
  • Landmark Games raised $4.6M. Link
  • Noodle Cat raised $4.1M in a round led Makers Fund. Link
  • Eschatology Entertainment raised $4M. Link


  • Tencent received its first commercial game licenses in two years. Link
  • Blizzard is (temporarily) pulling out of China due to an expiring license. Link
  • US’s October consumer video game spend. Link
  • NewZoo predicts game market revenue will decrease by 4.3% this year. Link

🕹Culture & Games:   

  • The latest on 100T’s Project X. Link
  • An inside look at Apple’s reality headset. Link

👾Miscellaneous Musings:  

  • SimCopter 64’s lost history. Link
  • Social Strategy of Cult of Lamb. Link
  • Palmer Lucky’s SAO headset to celebrate the launch of Nervegear. Link

This Week In Naavik Pro

New Strategies Games

Looking for more great games industry analysis? Check out Naavik Pro!

This past week the Naavik Pro team published:

  • A mini-deconstruction of Space Ape’s Boom Beach: Frontlines, including what the game does well and poorly in its soft-launch
  • A new blockchain gaming monthly market update, with new data and insights on active wallets, transaction volumes, game launches, and funding trends.
  • A new financial market update which discusses multiple earnings and macro updates.
  • Analyses on Unity’s and Playtika’s earnings results, how the FTX fallout is affecting the games industry (part 1), and Microsoft’s first web3 gaming investment in Wemade.
  • An updated game radar with takes on Paradise Fortune Casino Slots and Summoners War: Chronicles.

Next week we’re publishing a deconstruction of Project Makeover, a multi-pronged deconstruction on hypercasual games in web3, earnings updates on NetEase and Aristocrat (Pixel United), and well as further updates on the FTX fallout and the war for Layer 2 dominance. And there’s much more coming after that!

If interested in learning more or signing up, request a demo below.

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