Lord of the Rings IP owner Embracer Group has seen net sales at its Entertainment & Services division fall by 15%, but is betting big on Middle-earth in coming years.

Entertainment sales for the fourth quarter of 2023 (covering January to March 2024) were SEK1.26B ($118M), down from SEK1.49B the previous year. Embracer noted the Middle-earth Enterprises unit that houses Lord of the Rings was likely to make a “somewhat lower expected contribution” year-on-year than expected.

Overall, Embracer’s net sales fell 5% to SEK8.88B, with the PC/Games and Tabletop Games units providing the lions’ share of revenue, and while there was a SEK20.38M EBIT loss, down from SEK95M a year ago. Adjusted EBIT was SEK1.3B, up 56%.

At the same time as unveiling the results, Embracer announced CFO and Deputy CEO Johan Ekström had decided to step down, with Phil Rogers, who is leading the new newly formed Middle-earth Enterprises & Friends unit stepping up as Deputy CEO. Müge Bouillon is the new CFO. Embracer recently went through restructuring process since last year, and in April revealed it was splitting its business in three, with Middle-earth Enterprises & Friends housing  Lord of the Rings  and  Tomb Raider  rights. Shareholders are currently assessing the plan.

Embracer, which snapped up the Lord of the Rings and The Hobbit franchises through its August 2022 acquisition of Middle-earth Enterprises , has made the news recently following David Zaslav’s Upfronts announcement that Warner is making two new LOTR films, the first of which will be directed by Andy Serkis and is called Lord of the Rings: The Hunt for Gollum . Phoebe Waller-Bridge is also penning a Tomb Raider series for Prime Video — Embracer owns rights to the video game brand through CDE Entertainment.

Embracer co-founder & Group CEO Lars Wingefors admitted Q4 had been an expected “quieter” period for the Entertainment & Services division with “fewer new releases and products compared to previous quarters.” However, he added: “We see great potential in the Lord of the Rings IP and believe the universe can become a key driver in the coming decades, with the aim to delight fans across the globe. New Tomb Raider stories in streaming and film will allow us to further nurture and grow another unique IP, taking it to new heights. Strong partners, such as Warner Bros. Discovery and Amazon MGM Studios, that complement our capabilities, are an important part of our IP strategy.”

Wingefors added that there was “significant untapped potential within the group, which I am confident the new structure will unleash. [Games publisher] Asmodee, [indie gaming label] Coffee Stain & Friends and Middle-earth Enterprises & Friends will all boast sufficient scale, coherent strategies and a clearer focus, paving the way to unlock value in our high-quality assets.”