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Game-Time report/In the past two years, the difficulties faced by the gaming industry have been obvious to all peers. The continued increase in R&D costs, the normalization of user behavior after the epidemic, the normalization of the market entering the stock stage, and the soaring purchase costs and user acquisition difficulties caused by changes in the privacy environment of the mobile game market have made every company feel the challenges first-hand.
Especially since 2023, large-scale layoffs at game companies around the world have become the hottest topic in the industry, and also triggered unanimous condemnation from developers around the world during GDC. Among them, Embracer is undoubtedly one of the overseas companies most affected by market changes. This “merger maniac” has now laid off thousands of employees and sold multiple previously acquired studios, including Saber Interactive, which we are going to talk about today.
This American studio founded in 2001 has developed many blockbuster games such as “TimeShift”, “World War Z” and “Halo Master Chief Collection”. payment. In 2020, Saber Interactive was acquired by Embracer for US$525 million, but was recently “redeemed” by the studio CEO for US$247 million.
China is about to welcome the long-awaited 3A masterpiece “Black Myth: Wukong” this year, which has rekindled the hopes of many gamers and players in China’s 3A game.
HoweverSaber Interactive studio CEO Matthew Karch pointed out in an interview with foreign media GI that the 3A game development modelChange is coming.He bluntly pointed out that 3A games have fallen into a vicious cycle and developers need to reduce costs. He also talked about the reasons for independence from Embracer.
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There’s been a lot of discussion and analysis about the gaming industry’s current difficulties, and looking at the game release schedule for the rest of the year, you might be forgiven for thinking there isn’t much reason for optimism.
While there are still a number of AAA games set to release on PC and consoles by the end of the year, the current lineup is quieter than we once expected. Some of the most promising blockbuster games, such as Grand Theft Auto 6, won’t be released until next year. The launch of new platforms often injects capital into the market and brings opportunities for growth. But the release of the next new platform, the successor to the Nintendo Switch, is not expected to be until 2025.
3A games are trapped in a vicious cycle: rising costs lead to price increases, and failure means that even major manufacturers cannot afford to hurt them.
Matthew Karch, CEO of Saber Interactive studio, believes that this is not only because the scale of the current game industry is shrinking, but also partly because of the flaws in the 3A game model that generates the most revenue.
“Games are being cut left and right, so there’s going to be a situation, I think already starting this Christmas, where you’re going to see a real scarcity of games. There’s going to be fewer games being released and there’s going to be consolidation going on in the industry. The impact on the number of games, as well as the increased costs and the turmoil the industry is going through, teams will be reorganized but the capital is not yet in place. So the games industry is actually shrinking and content supply will be far outstripped by demand.”
Despite the gloomy outlook, he believes Saber Interactive, which he co-founded in 2001 and was recently sold to Embracer Group, will thrive thanks to a steady flow of game releases in its pipeline and “the ability to create games in a way that we can An adaptive way to bring the game to market at a price point that we can adapt to.” For Karch, this pricing point is an important factor.
“We don’t have to sell a game to $70, I’d rather not do that, I think that’s expensive, I don’t like that. It’s almost unfair, Helldrivers 2 was so successful Part of the reason is the very low price and easy-to-understand gameplay.”
“Five years ago, all you heard about was the next Assassin’s Creed or the next Call of Duty or Far Cry or Battlefield or whatever; the entire industry was waiting with bated breath for those games to come out , these were the giants. But now you see things like Paloo, Hellraiser 2, and Valhalla come out and eclipse those giants. People are realizing that there’s an opportunity to Producing a great entertainment experience at a price that won’t break people’s bank accounts.”
Saber’s biggest game to be released this year is Warhammer 40,000: Space Marine 2, which Karch describes as “bigger than anything Saber has ever done before.” He believes the game will put the studio into an “elite category” in terms of delivery capabilities.
Although Karch criticized the current triple-A pricing standards, Starfighter 2 will still be priced at $70.
He said, “I mean, Focus (now Pullup Entertainment) is the publisher and we are the developer, but this is a Saber game and I would love to sell it for less than $70, at least digitally, because We can do that, and I think we should. If you make a game that looks, feels, and plays that good, it doesn’t matter how much money you spend on the game. What matters is how many people-months were put into the game. , How many resources have been invested?”
Karch believes that triple-A game development is trapped in a vicious cycle: games are more expensive to make, so game companies charge them higher prices. This means games bring in more revenue, and if they don’t, these companies will make less of these games. Subscriptions and other revenue streams are also putting pressure on traditional models.
“Warhammer 40,000: Space Marine 2” game screenshots
The CEO also discussed growing AAA budgets, with blockbuster games often costing hundreds of millions of dollars. For example, last year, we learned that both “The Last of Us 2” and “Horizon: West” cost Sony more than $200 million in research and development.
“The reason AAA is so expensive is because everyone insists on making AAA games in the most expensive place in the world. If you are Activision and you make a billion dollars, you don’t care that you spent $250 million making this game. But how many high-investment games fail? The answer is a lot, which is why the AAA model is changing.”
He mentioned Saber’s work on “Halo: The Master Chief Collection”, including the development of “Halo: Combat Gold Anniversary Edition”.
“I can tell you with 100 percent certainty that our budget for The Master Chief Collection was definitely one-twentieth the budget of Halo Infinite, but probably more like one-thirtieth or one-fortieth, I think. They’re just as successful. So there’s a way to keep costs down, just develop games wisely and acknowledge that gaming is a global industry and there are people in Buenos Aires, Serbia and Poland playing the same games as us , and they can develop these games.
Focusing on a small number of projects and doing research and development in low-cost areas is the way out
These are not randomly selected areas. Saber Interactive has employees in 15 regions around the world, and he says the location of your studio can significantly reduce costs. For example, he pointed to Scars Above developer Mad Head Games’ cost structure, which is one-fifth that of similar studios in California, “and they’re just as good.”
Different from selling itself to Embracer Group in 2020, today’s Saber Interactive is completely different. The 15 regions have increased significantly from the previous 5 regions, and the number of employees has also increased from 800 at the time to 3,500. But before being acquired, Saber had been growing according to its own M&A strategy, which meant that the company was ready for scale expansion.
“Warhammer 40,000: Space Marine 2” game screenshots
He explained, “Because we didn’t join Embracer as a studio company, we already had experience managing multiple teams and were able to replicate this model across the studios we maintain, using a centralized set of technologies. A supportive team that helps where needed and we share experiences.”
“Obviously we have more projects going on, but we have a lot of capable managers and we’re not building a decentralized company like Embracer, but a very top-down structure. But we acquire studios had strong management before the merger, and what they didn’t have before was the opportunity to work on current projects.”
Although many games developed by Saber Interactive and its studios have not been announced, Karch reminded that some games have attracted people’s attention, such as “Starfighter 2”, “Jurassic Park: Survival”, “John Capone” John Carpenter’s Toxic Commando” and the remake of Star Wars: Knights of the Old Republic.
He said: “If anything, I would say we probably have too many projects in development right now and we may cut some of them in the future. I don’t think we will cut resources, we will just cut projects, with Doing fewer projects with the same amount of resources. So I feel like we’re out of a really good position, I don’t know if we’re the largest independent developer in the world right now, I feel like it probably depends on how you define independent, but redeeming yourself from Embracer After that, we probably are.”
Of course, there have been changes during this period. While Saber is larger today than it was before the Embracer acquisition, it is still smaller than it was in early 2024 as its former owner retained several studios, which also required some changes in specific areas.
Karch explains, “We had a relatively small percentage of our studio and staff in Russia, and in the end, because of political sensitivities and not wanting to own assets directly within Russia, we ended up transferring all of them to outsourcers. . But these are people I’ve worked with since my 20s, and I’m not going to abandon them, but I feel a lot of pressure from Embracer to cut off those ties as much as possible.”
“I don’t really want to talk too much about the political aspect of it, other than to say… I feel bad for everyone involved with what’s going on in this part of the world. I don’t think anyone wants that. Some of them,” he said. The people who work for us are protesting and getting locked up, these people are family to me and I will not abandon them.”
“World War Z” ROI is 15 times, I never want to be Activision
Karch previously mentioned when talking about Embracer’s restructuring that he should not bet on Embracer losing, and recalled Embracer CEO Lars Wingefors’ idea of repurchasing Saber Interactive. “We had to run a process and see what the numbers were, and then I had the opportunity to buy back the company. I made a list of assets that I wanted to take away, and around November of last year, I left the CEO position and I focused on Yu basically struck a deal that is now fully funded by me to take the company back. That’s what we did and we walked away on good terms.”
“World War Z” game screenshots
It helps that Saber is a major acquisition in Embracer’s six-year acquisition spree, he added.
“I was lucky because the stock price was low when I joined, we got the shares, I got the cash, and our M&A deal did really well, good enough for me to buy the company back. Of course, we bought it back for less than we sold it for. It’s much lower for companies, at least in terms of actual cash spent.”
The economics of a Saber acquisition and sale remain unclear. Embracer acquired the studio in 2020 for $525 million, which included $150 million in cash plus $375 million in performance-based earnings (the exact amount of the latter is unknown). According to foreign media reports, the price of Karch’s repurchase is US$247 million.
Considering his keenness to restore the company’s independence, and the fact that Saber had been expanding before being acquired, many may want to ask, why did Saber choose to sell itself to Embracer in the first place? Karch explained that at Embracer, he saw an opportunity to be “part of something bigger.”
In 2020, Saber is still enjoying the success of its 2019 game “World War Z,” with Karch estimating that the game, which cost about $12 million, reaped a 15-fold return. After that, the company released Snowrunner, which performed better. At the time, Karch was keen to build on this foundation, but needed a partner with the capital and resources to help Saber grow.
“I’m basically on a treadmill where you’re finishing your game, you’re delivering it, and hopefully you’re getting paid all the milestones, and then if you’re lucky, the game makes money,” he said.
“When I joined Embracer, part of my motivation was to go out and find other studios like mine that were very talented but no one was giving them a chance. Maybe there were parts of the world where they couldn’t do game development, or Harvard grads who don’t get credit for not having worked for publishers in California. I want to give these guys a chance to make games that they would never be able to make independently because they’d be so happy to go from one project to the next Another project without getting anywhere. That’s very much my philosophy and what I want to achieve, and overall we’ve been successful in that.”
“I want to grow, I know the thing about controlling costs and making games that can compete with others, on a budget that might make EA or Take Two cry with envy, and that’s what we’ve been doing.”
Although Karch has funded the buyback of Saber Interactive, he still hopes to find a small shareholder who can help the company go further.
He concluded, “I think we have the potential to change the way games are developed, and given the rising costs, our ability to control costs in a meaningful way, and our ability to create high-quality products, we’re ready to Bringing in some smart people who can contribute, providing some funding for other projects, and growing in a slow but smart way, allows us to have a constant flow of content.”
“We don’t want to be, and I never want to be, the next Activision, that’s never been our ambition. Our ambition is to create great content, diverse content, and bring it to people while supporting ourselves in a meaningful way. Come for entertainment, that’s our direction.”
