Embracer CEO Lars Wingefors Discusses the Challenges of the AAA Market

The latest financial reports from Embracer Group have highlighted the stark contrast between the performance of two of its major releases from the previous fiscal year. On one hand, Deep Silver's Dead Island 2 has been a massive success, with three million sales and seven million players since its launch in April 2023. On the other hand, THQ Nordic's Alone in the Dark has failed to meet management expectations after its debut in March. According to Embracer CEO Lars Wingefors, the AAA market is highly competitive, and it's challenging to succeed if a game doesn't stand out from the crowd. The two games may not be directly comparable, but they share some similarities, including established IP, horror genre roots, and sizable budgets. Wingefors emphasizes that the reality of the market applies to both games equally, and that consumers have numerous options to spend their time and money on. A recent Newzoo report revealed that over 60% of playtime in 2023 was spent on games six years old or older, making it difficult for new games to gain traction. The outlook is more positive for Dead Island 2, which has become the fastest-selling AAA game in Embracer Group's history. However, the company is still facing challenges, particularly with rising development costs. Wingefors mentions that the industry is facing the same problem as other industries, with inflation and increasing costs, making it essential to find ways to reduce costs or increase pricing. The possibility of raising game prices is being discussed, but no company has attempted it yet. Instead, developers may focus on creating games with lower budgets or releasing games at a cheaper price to attract a larger audience. Wingefors believes that there are consumers willing to engage in high-quality, single-player games and spend money on them. The company is confident that it can achieve its AAA ambitions, with several titles in the works that could potentially surpass the success of Dead Island 2. The games industry is known for its boom and bust cycle, with layoffs and consolidation following every spike in investment and consumer spending. While some call for a solution to break this cycle, Wingefors believes it's a reality of the industry's nature, driven by its global growth and high margins.