Embracer Group, the company that recently purchased Middle-earth Enterprises and currently owns the rights to The Lord of the Rings franchise, recently touted the franchise’s power claiming that much of its growth in its Entertainment & Services division was due to The Lord of the Rings. The company specifically highlighted Magic The Gathering’s The Lord of the Rings: Tales of Middle-earth™ card set as one of the primary drivers of sales.
Back in June, Embracer Group revealed they purchased Middle-earth Enterprises for a steal, “The most significant acquisition of these acquisitions is the acquisition of the Middle-earth Enterprises which owns a vast intellectual property catalog and world-wide rights to motion pictures, video games, board games, merchandising, theme parks and stage productions relating to the iconic fantasy literary works The Lord of the Rings trilogy and The Hobbit by J.R.R. Tolkien, as well as matching rights in other Middle-earth-related literary works authorized by the Tolkien Estate and Harper Collins, which have yet to be explored.”
They then shard, “The consideration for the Middle-earth Enterprises acquisition sums up to SEK 4,265 million, where SEK 2,901 million has impacted the cash flow.” 4.265 billion Swedish Krona roughly converts to around $398.8 million.
To highlight how shockingly low that number is, Variety claims that “estimates at the time project the rights … were worth up to $2 billion.”
Not only did they purchase Middle-earth Enterprises for a steal, but Tolkien’s The Lord of the Rings is already raking in the dough for the company. In their most recent earnings report, Embracer Group reported, “In the quarter, the Entertainment & Services segment also made a notable contribution, growing by 70% organically with a 15% Adjusted EBIT margin. The high margin is primarily explained by a strong contribution from Middle-earth Enterprises, driven by strong licensing revenue for The Lord of the Rings.”
“The performance of Middle-earth Enterprises is well ahead of the business plan developed at the time of acquisition a year ago,” Embracer Group continued. “It is encouraging to see many exciting external projects based on this incredible IP, including the recently successfully released Magic the Gathering trading card game The Lord of the Rings: Tales of Middle-earth™, the upcoming PC/Console survival-crafting game The Lord of the Rings: Return to Moria as well as many other exciting new products that will grow the IP further.”
This growth from The Lord of the Rings clearly shows there is a demand for the property. However, it also might be a cause for concern for many fans of The Lord of the Rings as Embracer Group made it abundantly clear they planned to exploit the franchise.
Back in June as the company announced mass layoffs and a restructuring the company’s Interim Chief Operations Officer Matthew Karch stated, “I’ve been with the company for many years and I’ve seen vast ways in which I think we can improve that I consider to be low-hanging fruit. I’m excited to get these plans implemented and to show some really rapid and visible result.”
“And for that purpose we are initiating multiple actions that are going to strengthen our cash flow generation and that will leverage our portfolio of IP, which I consider to be some of the best in the world to create a stronger company,” he relayed.
Later during the Q&A portion of the press conference Karch was asked about potential growth opportunities he saw for the company. He answered, “With some more centralization, and I’m obviously not implying we are moving from one model to another, but we are going to incorporate elements of consolidation and centralization into certain aspect of our business.”
“We are going to have a much better picture of the teams that are coming available. And we are going to have much better data to support product selection and to create product which is going to ultimately achieve better results than some of our past products have. And so I have a high degree of confidence that this entire process is going to easily translate into better product selection that is more profitable and that gives us a better opportunity for growth in the future.”
He then touched on The Lord of the Rings, “And that helps to leverage the IP that we own within our organization. I mean we own The Lord of the Rings. We know we need to be exploiting Lord of the Rings in a very significant fashion and turning it into one of the biggest gaming franchises in the world. And that’s obviously something that we are going to 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.”
“Working together we have those opportunities and we are super excited to put that to work relatively quickly,” he concluded.
Clearly, Embracer Group has no problems exploiting The Lord of the Rings even when they are actively undermining the franchise as was the case with The Lord of the Rings: Tales of Middle-earth™ Magic the Gathering trading card game.
The trading card set race replaced a number of characters including Aragorn, Eowyn, and Gandalf among others. One of the card set’s designers, Justice Geddes, a self-proclaimed queer-trans writer, explained the decision, “My main contribution to this contemporary re-imagining of the Lord of the Rings was to consistently push for a diverse Middle-Earth setting that stayed true to the Tolkien text. I guided continuity and lore checks, focused on character and society details, and applied primary source material to our work.”
Magic: The Gathering officially justified the race replacement in a blog post written by the company’s Content Manager Adam Styborski. He stated, “The look and the feel for the world, the characters, the weapons, the locations, and the story moments are going to be intimately familiar yet fresh and relevant for a wider audience.”
He added, “The folks at Middle-earth Enterprises take their roles as stewards very seriously, and every decision about characters has been made with deep reverence to the original.”
Styborski then noted the card set followed two guiding principles: diversity and originality.
He wrote, “Diversity: The Lord of the Rings is about the different peoples of Middle-earth coming together to fight Sauron, finding strength in their diversity. We want to make this appealing story fresh and relevant to an even wider audience.”
He then added, “Originality: The goal of this set is to express the story and setting of The Lord of the Rings in cards for Magic: The Gathering. Countless prior efforts have painted vivid pictures of this world, but our goal is a modern take on the work of J.R.R. Tolkien, lovingly crafted for a new generation of players and fans.”
Following the card set’s release Senior Art Director Ovidio Cartagena defended the decision to race swap numerous characters telling NPR, “At any given time we are surrounded by diversity, and it is our hope in this world to someday get along and come together despite our differences.”
He added, “It is also a message from us to fans of all walks of life: you are welcome here, you have a place here, you belong.”
What do you make of The Lord of the Rings driving a 70% increase in sales for Embracer Group?