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On November 17, Embracer Group (a game publisher formed from the combination of THQ Nordic and Nordic Games Publishing) announced the acquisition of a dozen game studios. That was a historic day in games, and it was part of an acquisition binge trend that includes deals like Microsoft’s $7.5 billion acquisition of Bethesda in September.

The Karlstad, Sweden-based company has 4,445 employees and said it has 135 game projects in the works right now. Its rapid expansion illustrates the big opportunity in games, particularly as folks are playing more during the pandemic. Market researcher Newzoo expects game industry revenues to hit $174.9 billion in 2020. One of Embracer Group’s big divisions is THQ Nordic, based in Vienna, Austria. I spoke with THQ Nordic CEO Klemens Kreuzer, who described the thinking behind the company’s frenetic expansion pace.

Here’s an edited transcript of our interview.

Above: THQ Nordic CEO Klemens Kreuzer

Image Credit: THQ Nordic

GamesBeat: I wrote about the dozen or so acquisitions you had in the last earnings report. Maybe that’s a good starting point. What’s happening that’s fueling such rapid growth?


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Klemens Kreuzer: As you know, we have a couple of pillars at Embracer Group. One pillar is THQ Nordic, and the others are Koch Media, Deep Silver, Saber, Coffee Stain, and DECA Games. Each pillar is responsible for their own business and their own group, which makes it possible to have so many acquisitions at once. If it were just one company it would be a bit much, but because those acquisitions are allocated under the different pillars, it’s a reasonable amount.

We did only one acquisition this time, which was Purple Lamp, a Vienna-based studio. The majority of the acquisitions were done by our U.S. colleagues at Saber. They’re on a real buying spree. I call them M&A monsters. They’re hungry for more.

GamesBeat: What’s the thinking right now as far as why it’s a good time to do acquisitions?

Kreuzer: We’ve said this quite often in earlier statements, but we believe the market is consolidating. It makes sense for smaller entities to join a group that’s financially sound and solid, that has the abilities you don’t have if you’re alone out there. Those acquisitions benefit from a good network, where we can contribute. If you take Koch Media and Deep Silver, for example, they have their physical distribution network, like we have. This delivers opportunities to those companies.

We believe also that it’s a good time to go toward these development studios because they have outstanding products, and we believe the market is growing. It would be a mistake not to do it right now.

GamesBeat: What is it about these companies that makes them willing to do deals right now?

Kreuzer: From our background, we’ve seen the not-so-nice side of what can go on between publishers and developers. We worked in different companies in our careers. We at THQ Nordic, we saw that you must provide a setup where people and teams can make perfect results and perfect games. This means the development studios need their freedom to do things they want to do, the way they want to do.

All development studios are different. We have 16 studios within THQ Nordic, and each studio is different in how they get things done. They have different ways of organizing themselves, different middleware, engines, hardware, server landscape, whatever. We’ve shown in the past that we provide the right environment for those guys.

We don’t take ourselves that seriously. We can joke about ourselves. We’re patient. You need to be patient in this industry. I’ve never seen it work when you put pressure on a company to deliver something. You never get something good that way. Sometimes this can be frustrating because you need a lot of patience sometimes. But it’s always worth the effort. This is one reason why companies are joining our group. We have this environment and setting that we can provide.

Above: Destroy All Humans is one of THQ Nordic’s franchises.

Image Credit: THQ Nordic

GamesBeat: It sounds more expensive as well. You have to invest in these studios in order for the match to make sense. If studios didn’t get some financial benefit, they’d just stay independent.

Kreuzer: Yes, but it’s not all about the money. It’s making the stuff you want to make in the way you think is right. Of course, financing is part of it, but it’s not the only thing. Along with our last acquisitions, we set up three completely new studios for new teams. There was no acquisition cost for those. The last acquisition, Purple Lamp, of course there was a purchase price, but it’s not about investing a lot of cash into acquisitions. It’s just building it up.

GamesBeat: Are some of these newly acquired companies going to hire a lot of people?

Kreuzer: Yes, yes, a lot of them will. The job sections on their websites will be filling up. All 16 studios we have in THQ Nordic are searching for people. They have ambitions, of course.

GamesBeat: If you’re moving fast, how do you keep some checks and balances in place so you can manage your growth?

Kreuzer: I have a super team in Vienna. I’m very proud of them. We have very good studio leads. The CEOs of the studios know their jobs and do it quite well. And the studios themselves, although they’re unique and individual in how they do things, the way they’re organized from a corporate perspective, it’s always the same. Those studios are supported by many groups outside Vienna through a centralized unit. We take over some functions for them where we know the studios are not so good at it. Things like accounting and administration, contracts, agreements. We take care of this for them because we know they’re not as good at those aspects. The studios themselves can concentrate on the core things they would like to do, developing games.

With this setup, it’s helped us grow the number of development studios because we have good procedures in place in Vienna. The guys in the studios can do their job with their teams and make games. That’s one of the benefits we offer. We always have everything under control.

GamesBeat: You can be more efficient, but cost reductions seem like they don’t usually drive these kinds of acquisitions.

Kreuzer: Sometimes it’s an aspect. It’s a rationale behind an acquisition. Let’s take Bugbear, for example, from Helsinki. When they were independent, they were financing themselves via royalties. It’s fair to say, in the acquisition process, “If I own this studio, and as a consequence pay the royalties to myself, this is a benefit you can consider.” Sometimes it’s because independent studios need their margins, like every other company in the world needs margins to make profits and ensure a long life. You have better opportunities if you own these studios because those margins go to your area as well. Those are elements behind acquisitions.

Above: Desperados III is another horse in Embracer’s stable.

Image Credit: THQ Nordic

GamesBeat: What is it about the larger game industry that’s making this happen? The interesting thing I’ve heard people say about Electronic Arts — they used to produce about 60 games a year around 2008. They’re down to eight or fewer releases now, but their revenue is two or three times what it used to be. That’s an opposite trend to what Embracer Group is doing.

Kreuzer: Maybe we can say we’re fans of portfolio diversification. You have many eggs in the basket. I can understand the strategy and why EA and other guys do this concentration on just a few franchises, just a few releases each year. Maybe this could be an outcome if you do publishing with many IPs and franchises, where there’s a natural drift toward that kind of development. But I have to say that I’m happy to have so many different games in so many different genres to work on.

We have 61 projects in development together with our friends and colleagues from HandyGames in Germany, although only 40 of those are known to the public. There are franchises and IPs there that have potential where we can do more with them. Maybe it’s better to concentrate on just a few. But for now, we love the variety, and we hope that it stays that way.

GamesBeat: It almost sounds like, historically, you’re at an earlier stage as a company.

Kreuzer: That could be, yes. It’s not that it’s my goal to go that way. When I think about the development of our business, our company is not an old company. The official setup and founding of Embracer Group as a whole was in August 2011, a bit more than nine years ago. I have the feeling that there’s a natural drift to concentrate and focus on less. It’s not my personal goal to go there. I believe that we can do so many things with our IPs. We have more than 100 IPs. You have the high flyers and you have some that aren’t so good. Maybe in five years we say that there are only 10 or 20 IPs we’d like to work on, but for now we’re still in this experimental mode. We see the opportunities. We also have the passion to work on a couple more things.

GamesBeat: It also feels like we’re at a time where you have the potential to make cross-platform games, more widely distributed games. That can help small companies. If you have a game that can go across many platforms, it can find its audience more easily. Each game is more valuable.

Kreuzer: Yes, exactly. If you’re an indie studio and you want to make a console game for the first time, you should expect difficulties. We as a publisher, and developing games internally, we’ve made every single mistake you can make. It’s always fascinating when a team goes to PlayStation or Xbox the first time. You make those beginner mistakes. It’s good to be in a group and have an experienced team around you to help you get through that process. It’s not easy. There are a lot of forms to fill out. It’s not just the technical skills. You need so many other things. Every platform holder works differently.

Above: Through the Darkest of Times

Image Credit: THQ Nordic

GamesBeat: Your expansion also comes amid the pandemic. How has that played into your thinking about timing?

Kreuzer: The pandemic had no influence on our expansion, really. It was interesting to see that it’s possible for us to work from home. We were skeptical at certain stages, because it’s not always easy to do console development from a home office, for example. But people need to entertain themselves when they’re staying at home under lockdown, and we’ve seen this in our catalog numbers. There was an increase in people consuming digital content this spring. It started in China in February and March and then [moved] to Italy, Spain, France, and the United States. But that wasn’t really influential on our acquisitions.

It was a bit harder to make acquisitions because we couldn’t fly to the U.S., and the guys in the U.S. couldn’t fly to Europe. There was a lot of video conferencing and so on. But we have a super passionate team. The CEO and cofounder is the majority owner of the company. Our decisions are super quick. This has always been the case. We’re a bit more corporate now, of course. I remember we did the deal at the THQ auction in about 30 minutes, coming to the final number.

But that’s one of the strengths of Embracer, being really fast. Everyone has [CEO] Lars Wingefors’ mobile phone number. Some of us are in daily contact with him and the other guys at Embracer. We don’t have to request a meeting in two weeks or anything like that. We can make quick decisions. If everything is on the table, there’s no need for a lengthy discussion. We just get the deal done and go to work.

GamesBeat: Do you have any kind of tier system where you figure out which titles will have the most employees or marketing support behind them? How do you figure that out?

Kreuzer: Of course, you can see we have smaller releases and bigger releases. SpongeBob, for example, was one of the bigger releases for us this year. It gets a different marketing budget compared to smaller, more indie-style project. But the marketing and PR team at THQ Nordic is 12 people. They’re supported by PR agencies across the globe, where there’s need. They try to give attention to each of those titles. Of course, they have the ones they love themselves. That’s normal because people have their favorite products. But so far it’s not a resource problem.

We’ve never felt like we can’t spend on one project because we need to spend more on another project. Every project needs to be evaluated on a case by case basis. Maybe two weeks before release, we come to the conclusion that it makes sense to add 30% or 40% more marketing funds. Sometimes it can also go the other way. But so far, luckily, we haven’t had any issues with scarce resources for marketing or the teams behind it.

GamesBeat: How many employees and how much revenue are part of your division relative to the whole Embracer Group?

Kreuzer: This quarter we were lucky enough to be the number one pillar regarding revenues. It was roughly 55 million euros on the THQ Nordic side, out of more than 200 million. As far as what the future holds, that’s hard to answer because when we did the IPO, we said we would never do forecasts. It can backfire so badly in this industry. But as far as employees, we are at 648 today. I wouldn’t be surprised if this number grows to 1,000 or more sometime in the future. It’s not a goal to have so many people, but the development could be in this direction. When we started the company in 2011, there were seven of us.

Kingdoms of Amalur: Reckoning now belongs to THQ Nordic.

Above: Kingdoms of Amalur: Reckoning now belongs to THQ Nordic.

Image Credit: Mike Minotti/GamesBeat

GamesBeat: How many different teams does that cover?

Kreuzer: As of today, it’s 16 teams internally, and then we have third-party developers as well. If I add in the external people working on our projects, our games, it’s more than 1,000 people. We use outsourcers constantly. That’s always a topic. We need those guys for their support on so many projects.

The core thing, though, is you need a super team around you. That reduces the complexity. We’re in a lucky position to have such excellent people, and we’ve had them since starting the company. The personnel fluctuation at THQ Nordic is very low. Nobody wants to leave. That’s a good thing. I’m very proud of that. Many of those guys have been with us since the beginning, like Philipp Brock, our PR and marketing director. He’s been with us since 2011.

GamesBeat: It feels like this makes Embracer and THQ Nordic unique companies in the game industry. I can’t think of anyone else that’s very similar right now, unless you look at Microsoft and all the companies they’re buying.

Kreuzer: No, I think it’s unique, a unique way of setting up a group of companies. One secret, for sure, is to give the people their autonomy, to make decisions in their own field, their own pillar. There’s a lot of trust in the management of those pillars, and those managers have a lot of trust in their own employees and teammates. If you put that trust in people, they feel more responsible. That’s why many people like to work with us.

I’m not a corporate guy. I don’t like it if it’s too corporate, to be honest. I understand that large corporations need different procedures to handle their complexity, but I’m happy that we can still be different, even though we have such a remarkable size. Because it’s split up into these pillars, we have these good units that can do things on their own with the trust of the entire company.

GamesBeat: Do any other companies have more studios? Embracer Group is close to the size of something like Nexon. Not companies in the industry have 5,000 people or more.

Kreuzer: It’s true. It’s thanks to this setup. You can compare it maybe a bit to the Volkswagen group, the carmaker. They have other carmakers in the group, like Porsche or Audi, Bentley, Lamborghini. Motorcycle companies like Ducati. Those are unique groups within the group. They benefit from each other by sharing technology or whatever. That’s similar to our structure. It emphasizes the unity of each pillar, which is a good thing. It helps them all grow. It would be harder to grow this if it was super centralized, where everything has to go in one direction.

As THQ Nordic, for example, we’ll never go into the free-to-play market. But another pillar in the group, like DECA Games, those guys know how to do that. They have experience and knowledge in that area. You can grow a group like Embracer because you have those different abilities and knowledge hubs around the pillars in the group.

GamesBeat: What do you think about geographic diversity, especially now that we have the capability to work online from anywhere?

Kreuzer: The pandemic has changed things. We’ve realized that video conferencing works. A year ago, if somebody had told me that we’d be having so many video conferences, I wouldn’t have believed it. The technology a year ago, two years ago, it was still shit. There was always the one guy who was connecting from his phone in a cafe somewhere and it didn’t work. But now it works perfectly.

There will be a change in thinking about things like business trips and coming together in person. Personally, I’m a fan of personal meetings. I like the fact that my people travel, although we have to be careful about CO2 emissions and so on. Travel gives you new impressions. You have face-to-face contact. You can understand other countries and cultures if you hang out with those guys, if you don’t just meet them in the office. In a bar or a restaurant, that’s where you have the best meetings sometimes. It’s beneficial for people to see other parts of the world and find a better understanding. Just for society at large, that’s a good thing.

Above: Wreckfest is an example of smaller games Embracer publishes.

Image Credit: THQ Nordic

I love, for example, when we — this year it wasn’t possible, but when we have our Christmas parties or summer barbecues, we try to get at least five people from every studio to those events. It’s impressive to see it, especially the Americans. They’re not so used to Europe. It’s eye-opening for them to come to another part of the world, and it’s good for our guys to go to the United States as well, hanging out with their American colleagues. America is one of the superstars in game engineering and design. It’s always good to see Americans and Europeans discussing and exchanging ideas about game design. When we get together like that, the results are better and better. You have an impact from both sides of the world. Having more input can only be beneficial to the outcomes.

We’re here for the long run. Lars has promised to keep this going for 25 years. He has 22 years to go. It’s true of all of us. We love to develop games. Some things need time to emerge. The studios in our group, for example, all have plans across the next five to 10 years. It’s not just the next project. The majority of the studios know exactly what projects they’ll be doing five or 10 years from now. It’s good for them because they can orient themselves and make decisions today about what needs to happen in the future.

GamesBeat: Big publishers in the past have gone back and forth around the diversity and unity of their teams. Electronic Arts has worked at times to try and get all their studios on the same game engine. Ubisoft, by contrast, has allowed them to choose their own technology. They’ve made these strategic decisions depending on how connected they want the company to be. Do you have policies in place around those kinds of things?

Kreuzer: No. It’s the sole discretion of the development studio. If the studio wants to use the Unreal engine, they go for the Unreal engine. If they want to make their own proprietary engine, they can do that, if they make a strong argument for it. Developing your own tech is a different animal. Out of our 16 studios, 11 of them are using Unreal, but this was never pushed from our side. It was their choice.

In our experience, this needs to be the sole discretion of the studio, whether they want to use Unity or Unreal or whatever else. They’re unique. They have individual skills. If you force them to use something, you can be sure that at a certain stage it won’t work. Then somebody is going to stand up and say, “I told you so.” Or they’ll find ways not to do it.

We try to communicate what we’re doing quite openly. We try to keep the studios informed of what we’re doing as THQ Nordic, how we deal with problems like the pandemic. They were all informed about what we were doing at the home office so they could orientate themselves around what we’re doing here in Vienna and other parts of the world. We try to get everyone together at certain events, whether it’s Gamescom or GDC or our Christmas party. We use those events to bring everyone together, just to have a lot of people in the room so they can meet in person.

That’s the way to go as far as forming unity among the developers, not through something like technology. I can understand the rationale behind it. But we want to give them freedom to make choices within their own studio entity. We think that’s the way to go. Between the studios, they can all talk about what they’re doing and why. If they communicate constantly about their choices, that’s the best way to build them into a family together.

I remember the early days of Christmas dinner. It was about 10 people. Last year, we had close to 200. We needed a couple of buses to move everyone around. But it’s important to come together. People like it. Personal contact is good, especially in this industry, where we do so much in front of screens.

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