Scoop: Saudi-funded Savvy Games was the mystery partner in collapsed $2B Embracer deal
The previously unknown partner in a $2 billion video game mega-deal that mysteriously and dramatically collapsed last spring was the Saudi government-funded Savvy Games Group, Axios has learned.
Why it matters: The fallout of the failed deal sent shares of The Embracer Group — Savvy's would-be partner, and one of the most voracious acquirers of video games studios in the last several years — plummeting, and forced it into cost-cutting mode.
- More broadly, the revelation may raise questions about how Saudi Arabia will proceed with its controversial ambitions to invest $38 billion in the video game industry.
- An Embracer spokesperson declined to comment for this story. A Savvy rep did not reply by press time.
- Embracer had been promising investors news of a lucrative "transformative partnership … with several industry partners" since November 2022.
- But in a May 24, 2023 note, Embracer management announced the collapse of one of those massive partnerships, while carefully avoiding naming the partner.
- "All documentation was finalized and ready to go as of yesterday," the company said. "We asked for the execution of the agreement before our Q4 announcement. However late last night we received a negative outcome from the counterparty."
- While Axios' sources were clear about who the deal was with, they were less certain about why Savvy walked away.
- Embracer has risen to prominence in recent years through a string of acquisitions, including its May 2022 $300 million purchase of several elite studios, along with the rights to the iconic Tomb Raider gaming franchise. In August 2022, it announced a $365 million purchase for the rights to Lord of the Rings.
- Savvy emerged in January 2022 with the news that Saudi Arabia's sovereign wealth fund, or Public Investment Fund (PIF), was setting it up as an attempt to invest in gaming and diversify the Kingdom's economy. It immediately announced the $1.5 billion purchase of two esports firms.
- Savvy committed to ng $38 billion in the gaming industry, and in April 2023 said it would purchase mobile gaming company Scopely for $4.9 billion.
- Embracer and Savvy announced a stock deal last June, with the Saudi firm purchasing $1 billion worth of Embracer shares — a move Embracer CEO Lars Wingefors swiftly defended amid criticism that the investment would compromise his company's values.
- While Savvy executives have told Axios and others that their operation, which has a board chaired by Saudi crown prince Mohammed Bin Salman, is a genuine effort to get into gaming and address the professional and leisure interests of the kingdom's youthful population, it's nonetheless been accused of being a distraction from the country's human rights record, similar to criticism of so-called "sportswashing" that's emerged from Saudi-backed efforts in boxing and golf.
- Meanwhile, some Embracer divisions continue to announce new games. And Embracer still has a lucrative deal with Amazon, which committed in December to publish the next Tomb Raider game as it, too, attempts to establish itself as a player in big-budget gaming.
- But some Embracer studio projects are getting canceled — and one studio, Campfire Cabal, announced last week that it was being shut down due to Embracer's
