Swedish gaming conglomerate Embracer Group, which has been rapidly gobbling up game studios and popular IP over the past few years, will undergo a major restructuring that will require the publisher to close multiple studios and cancel several games. The news comes weeks after it reported that a deal worth $2 billion in income to the company had unexpectedly fallen through.

CEO Lars Wingefors announced the restructure in an open letter alongside an investor webcast and a news release on Tuesday morning. He said the restructure is split into three phases and is expected to continue until March 2024. The nature of these phases is unclear, and under the general guise of cost savings and consolidation to reduce debt below 10 billion Swedish Krona, which equals roughly $930 million.

Matthew Karch, the now former Saber Interactive CEO and current interim chief operating officer, said, however, that the first phase of cost-saving will be “immediate and noticeable.” This means that an unknown number of Embracer Group’s 17,000 staff will be laid off as part of the process. Neither Wingefors nor Embracer Group have detailed when specific closures or layoffs will happen. Polygon has reached out to the publisher for more information.

“Embracer currently engages close to 17,000 people and while that number will be lower by the end of the year, it is too early to give an exact forecast on this,” Wingefors said in the letter. Karch said the studios to be closed are “underperforming,” or not creating games “up to our standard.” Embracer Group said that the impacted projects have “not yet been announced” and have “low projected returns” on investment.

Embracer Group owns the rights to both Tomb Raider and Lord of the Rings; it acquired Tomb Raider when it purchased Eidos, Crystal Dynamics, and Square Enix Montreal from Square Enix in 2022. That year, Embracer Group bought the licensing rights to The Lord of the Rings and The Hobbit by buying rights holder Middle-earth Enterprises. Early this year, Embracer announced that it has five mystery Lord of the Rings games in development by external partners.

The implication of the news release is that any announced game is “safe” from the restructuring plan — or, at least, will not be canceled. Karch, in the webcast, added a caveat, saying that the games canceled have “for the most part” not been announced.

Following the announcement, Crystal Dynamics put out a statement on Twitter to confirm that neither its upcoming Tomb Raider game nor Perfect Dark will be impacted by the restructuring.

“We know we need to be exploiting Lord of the Rings in a very significant fashion, and turn that into one of the biggest gaming franchises in the world,” Karch said. “And that’s obviously something that we’re going to do be doing. That’s a much better use of resources than some of the other projects that some of our teams have been working on.”

Embracer Group’s two big acquisitions are not alone; the publisher also owns Saints Row publisher Deep Silver, and has spent the last few years consolidating the video game industry by buying up studios. Since 2020, Embracer Group has acquired or founded well over 50 game studios and offices. It’s part of a larger trend of seismic acquisitions and consolidation in a span of a few years that saw Grand Theft Auto publisher Two-Two Interactive buying mobile giant Zynga, Microsoft’s planned acquisition of Activision Blizzard for a staggering $68.9 billion, and Sony’s buyout of Destiny 2 developer Bungie. Embracer Group has also expanded into comics and tabletop games, buying Dark Horse Comics and Asmodee, respectively.

It appears, however, that Embracer Group’s rampant buying spree may have happened too fast — and now it’s struggling to keep up with the responsibility and cost of its purchases. Embracer Group had a $2 billion mystery partnership planned to help bail it out, on top of its $1 billion investment from Saudi Arabia’s investment fund, that fell through at the last minute. That news forced Embracer Group to lower its earnings projection down to a range of $655 million to $840 million.

In its recent earnings report in May, Embracer Group said the previous financial year was “challenging” due to “lackluster reception” to “notable releases” and game delays, despite net sales being up 121% at roughly $3.5 billion.

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