‘Lord of the Rings,’ ‘Tomb Raider’ Find New Home at Fellowship Entertainment Post-Embracer Spin-Off

Entertainment powerhouses The Lord of the Rings and Tomb Raider are set to anchor a new entertainment enterprise soon to be listed on the Stockholm exchange.

Embracer Group, which holds rights to key IPs including The Lord of the Rings, The Hobbit, and Tomb Raider, is restructuring to create two separate publicly-traded entities in Sweden: Fellowship Entertainment and a revamped Embracer.

Lars Wingefors, Embracer Group’s chair and principal shareholder, has highlighted in a shareholder letter that the assets under Fellowship are “significantly underappreciated” in the market. This announcement comes after numerous organizational adjustments and reductions in staff as the company searches for a sustainable path forward.

Fellowship Entertainment will manage the Lord of the Rings IP and various gaming franchises, with operations starting in the first quarter of the fiscal year 2026-2027. Their focus will be on game development, publishing, and licensing which includes managing IP rights across various platforms including games, movies, consumer products, and more.

The new company’s portfolio includes 4A Games, Crystal Dynamics, Dambuster Studios, Dark Horse Media, Eidos-Montréal, Fishlabs, Flying Wild Hog Studios, Gunfire Games, Middle-earth Enterprises, Redoctane Games, and Warhorse Studios. A new publishing division will also be formed, consolidating assets from Plaion and other sectors of the current Embracer Group. The newly formed group reports current net sales of SEK4.39B ($467M) and employs 2,169 individuals.

The transformed Embracer will concentrate on nurturing more entrepreneurial ventures, including companies like Vertigo Games and IPs such as Destroy All Humans! and Titan Quest, along with licenses for popular brands like Hot Wheels Unleashed and SpongeBob SquarePants. This division reports net sales of SEK11.54B ($1.23B) and a workforce of 3,518.

“This split allows for more focused management and accountability, providing each business the framework and leadership needed to tap into their maximum potential,” Wingefors expressed. “I am very optimistic about the growth opportunities that Fellowship Entertainment holds for substantial organic expansion in the upcoming years.”

Phil Rogers, currently CEO of Embracer, along with COO Lee Guinchard, will transition to lead Fellowship as CEO and COO, respectively. Müge Bouillon, presently CFO, will also join as deputy of the existing Embracer starting today. Meanwhile, a search is underway for a new CEO and CFO for Embracer.

“Our strategy is straightforward: to forge a more focused group with two distinct divisions, each poised for clear execution and transparency,” Rogers stated. “I am confident that this restructuring is a strategic move that will enhance long-term value for our stakeholders, our IPs, our teams, and our shareholders.”

As Embracer revealed their fourth-quarter results, they reported a 24% decline in net sales year-over-year to SEK3.91B, although the entertainment services segment, which encompasses Lord of the Rings and other major IPs, grew by 23% to SEK1.7B. Adjusted EBIT saw a significant drop of 64% to SEK360M.

After a series of strategic realignments and cost reductions, Wingefors acknowledges the challenges in conveying the Embracer story due to its diverse operations. Previously, the group had spun off two businesses, Asmodee and Coffee, and established Middle-earth Enterprises & Friends to manage assets like Lord of the Rings, which was acquired for nearly $400M in 2022.

“The primary reason for spinning off Fellowship is to enhance managerial focus and fully leverage the combined potential of these IPs, their communities, and some of the top game developers globally,” Wingefors explained. “Similar to Asmodee and Coffee Stain, we anticipate that Fellowship Entertainment will flourish independently.”

Wingefors also emphasized the company’s efforts to retain staff amid industry-wide layoffs, stating, “While we may be associated with industry layoffs, we have strived to keep as many staff as possible during these challenging times, balancing the necessity of maintaining a profitable operation.”