How Embracer’s cuts killed a potential Red Faction sequel and gutted a promising studio

A phoenix is a mythological firebird that is periodically reborn from its own ashes, a symbol of cyclical renewal. It’s also, according to several former employees of Chorus developers Fishlabs in Hamburg, an internal title for the massive cost-cutting project begun by Swedish conglomerate Embracer Group in June 2023.

The current incarnation of a bewildering series of mergers, renamings and acquisitions that date back to the founding of Nordic Games in 2004, Embracer have spent much of the past decade buying up video game studios and licenses, from Deus Ex developers Eidos Montreal to the adaptation rights for The Lords Of The Rings. According to a February 2023 earnings report, by the end of December 2022 the conglomerate had 134 internal studios on the books (including table-top developers) and owned or controlled over 850 IPs, with 224 games in development. Our Graham warned of the perils of such consolidation in 2019, and his misgivings have been borne out. Following the reported collapse of a billion dollar Savvy Games investment deal, Embracer set out to recover their debts by cancelling projects, laying off staff and closing whole studios. Fishlabs – acquired by Embracer in 2018 alongside their parent company Koch Media, nowadays Plaion – were among those burned by “Project Phoenix”, first losing a dozen people in September 2023, and then around half their remaining workforce in November. In the process of these reductions, Embracer also binned off two video game projects – a sumptuous sci-fi metroidvania that was in full development, and a “visual prototype” for a brand new Red Faction game.

Forsaken flies over the mining outpost of Tirak Haven in Chorus
A scene from Chorus, Fishlabs’s well-regarded 2021 space sim. | Image credit: Plaion

We covered the November layoffs, and in the wake of that report, a former employee of Fishlabs got in touch with me to discuss life at the studio leading up to their departure. Following that conversation, I approached several other departed Fishlabs staff to corroborate what I’d heard, all of whom spoke on condition of anonymity. This article is the result, a rare insider account of a studio who, according to sources, were prosperous and pushing into exotic new territory when the axemen came knocking. Embracer and Plaion were approached for comment about this story, but did not reply.

Founded in 2004, and sold to Koch Media in 2013, Fishlabs are the creators of the Galaxy On Fire space sims for mobile, some of which have been ported to PC. In 2021, the developers opened a new chapter with the release of the eerie and charismatic Chorus, which Sam Greer praised for its “over-the-top world and tone with slick dogfighting”. My sources said that Chorus was a profitable release for Fishlabs, despite not meeting the expectations of Embracer management, and that this success was the catalyst for the studio’s transformation into a creator of console and PC games.

In June 2023, Fishlabs had two in-house projects. Project White was the “side hustle”, a team devoted to pitching games based on other intellectual properties that Embracer owned. Project Black – the “shining star” – was an original game which sources say began development in 2021. In-house projects aside, Fishlabs also operated a cross-development team taking on work for other studios, such as Powerwash Simulator developer Futurlab.

Project Black went through many mutations. By late summer 2023, it had solidified into the tale of a brother and sister exploring a planet that has fallen prey to a strange corruption. The sister has completely succumbed to this malady, while the brother has a corrupted arm. The affliction was to be a source of power, however, in that the characters could use their relationship with the corruption to alter the terrain by, for example, generating or manipulating surfaces to jump on. In broader strokes, the game would have taken the form of a third-person metroidvania, with an open-ended world that offered plenty of reasons to backtrack, including skills to unlock.

A spaceship flying through the inside of a huge derelict in Chorus

A woman walking through a strange cavern made up of shiny black rock with red lights in Chorus

Chorus may be a space shooter, but it has an eye for solid terrain – you can imagine this team making a great on-foot science-fantasy adventure. | Image credit: Plaion

Project Black was a troubled endeavour. In development for roughly two years, the game had lovely art, but my sources characterised its design as undecided and lacking cohesion, partly because it didn’t have a single game director but a board of directors. It had a flat operational structure, where ideas came from all over. This meant that everybody felt a sense of autonomy, but it could also be the basis for confusion and delays, as teams blindsided each other with suggestions.

It was a real gamble for Fishlabs – an original game in a genre the studio had little previous experience with. This was also the first time Fishlabs had worked on two major projects simultaneously, according to sources. But there were reasons to be confident. In April 2023, Fishlabs announced that they would receive public funding for Project Black – €5.5 million, the largest sum ever awarded to a video game project by the German government. And while questions remained over the game direction, Project Black was making progress, with nobody in particular at fault for the delays. It just wasn’t coming together fast enough for Embracer.

In September, as the Project Phoenix restructuring programme progressed, there was a review of all companies and their projects under Embracer’s umbrella. Project Black was assessed by a team of senior people from studios authorised to make judgements on Embracer’s behalf, including representatives of Futurlab and Crystal Dynamics. The review group ultimately decided to cancel the game. “It was getting there but they weren’t willing to give it more time,” one source summarised. Project Black was also deemed risky because it wasn’t based on one of Embracer’s other intellectual properties. In the course of the cancellation, Fishlabs laid off 10% of their staff – around 12 people.

The rest of the Project Black team were split up between the company’s other projects. Around half joined the company’s cross-dev team, working on external projects, while the other half joined Project White. Crucially, Fishlabs were able to retain their German government funding and transfer it to Project White.

A WIP image of a rocky, tropical environment with sweeping purple organic matter covering the stone in Fishlabs' cancelled Project Black

A piece of lush, tropical, alien vegetation from Fishlabs' cancelled Project Black

WIP environments from Project Black, as shared on ArtStation by senior 3D environment artist Denis Novikov.
Image credit: Denis Novikov / Plaion

The Project White team had experimented with various game ideas throughout Project Black’s development. There was a pitch for a new Lord Of The Ring game, though this didn’t get very far – license-holders Middle-Earth Enterprises (acquired by Embracer in August 2022) never really responded to Fishlabs’ overtures. “They just went quiet,” one source told me. “Never heard from them again”. Naturally, the pitching team also considered making a sequel to Chorus. But around the time of Project Black’s cancellation, one exciting pitch became the focus: a new Red Faction game.

Embracer announced the closure of Red Faction’s original creators, the wonderful Volition Inc, on 31st August 2023. At the time, the studio’s former parent group Deep Silver thanked Volition “for their unforgettable work on Saints Row and Red Faction, whose IPs will live on at Plaion”. As you might expect, my sources expressed mixed feelings about pitching a new game in a series whose creator studio had just been shuttered, with one describing it as “ghoulish”.

The pitch made sense to studio members, nonetheless. Fishlabs had ample experience in science fiction, and as a new entry in a well-known, proven series, the Red Faction game would surely be safe against cancellation. Sources added that the Red Faction universe was especially appealing to Fishlabs staff in the wake of Project Black’s demise and amid the wider news about Embracer’s butchering of their studios. Red Faction, after all, began life as a story of working people fighting corporate injustice.

The logo art for the original Red Faction on PC, showing a stencil of a hand gripping a pickaxe
The original PC cover art for the first Red Faction, published by THQ in 2001. | Image credit: Plaion /

While the transferred Project Black staff carried out wider research on Red Faction, the existing Project White team worked on a “visual prototype” or “fake trailer” created with Unreal Engine 5, to present to Plaion.
At this early stage, there were many ideas about the project’s direction, some of which would likely have been abandoned as the game evolved. But the basic ambition was to create something similar to 2009’s open world third-person Red Faction: Guerrilla, in which you can tear down whole bases with a sledgehammer, while ignoring the events of the under-loved fourth Red Faction game, Red Faction: Armageddon. “We were trying to look at what did Guerrilla do right, what did Armageddon do wrong, and how can we marry the two and continue on with it,” one source explained.

According to one set of draft story concepts discussed by several sources, Fishlabs’ Red Faction game would have been set 100 years after Guerrilla on a more terraformed and colourful Martian world map of similar size to the previous game’s world, featuring new and redesigned locations. There were plans for a female protagonist, who would once again take part in an underground workers revolution. There would likely have been a range of factions, from predatory corporations to homegrown Martian communities, with whom you might have had to forge alliances to complete your objectives.

While the game was envisaged as a “safe sequel” with a familiar emphasis on wrecking buildings, members of the Project White team also wanted to create a more open-ended play experience – closer to an immersive sim, perhaps, with opportunities for stealthy infiltration and player disguises alongside vehicle customisation. There were pie-in-the-sky aspirations to create an extremely reactive setting with dynamic dialogue, in which characters would comment on your methods of completing quests.

A WIP design for a green and grey-coloured science fiction rifle for Fishlabs' Project Black
A WIP weapon design from Project Black, as shared on ArtStation by senior 3D artist Niklas Kirchmer.Image credit: Niklas Kirchmer / Plaion

Even given the grief and anger over Project Black’s cancellation and the subsequent layoffs, sources claimed that morale on the Red Faction project was good. Partly, this reflected the natural camaraderie born of sharing a painful experience. But many at Fishlabs also felt that the worst might be over. According to several people, studio leadership made sincere assurances that Fishlabs were safe from further cuts because they had independent government funding, and were making money for Embracer through their cross-dev team. Lessons had also been learned from the problems of Project Black’s development. The Red Faction project had a clearer hierarchy, with a game director and an art director working closely together. There was less ambiguity about the game’s direction because, again, Red Faction is an established narrative universe with many precedents to build on.

Fishlabs pitched the Red Faction game several times to Plaion, the studio’s immediate corporate parent. The most elaborate pitch came in mid-November, and involved an element of cosplay. In addition to screening the “fake trailer”, team members posed as characters from the game, with the Red Faction resistance group “hacking” a presentation given by a sinister corporate agent. Plaion’s immediate feedback was positive, and sources say there was wide confidence that the game would be greenlit. But it wasn’t to last.

During the week of 20th November, there was another internal vote on the Red Faction project’s future. The vote was split 50-50, which meant that the Red Faction game was immediately cancelled. In the wake of the cancellation, Fishlabs studio leadership were told to lay off almost everyone not attached to an active game project. The crucial email came on a Friday, with Fishlabs bosses then working over the weekend to draw up a list of people who would be let go.

Early the next week, there was a surprise all-hands meeting, encompassing on-site staff and remote workers. If you have any experience of being mass laid off, you’ll know that a surprise all-hands meeting is seldom great news. But many staff went into the meeting nonetheless with high hopes. People had been told that Plaion and Embracer liked the Red Faction game, and some assumed the meeting would bring confirmation that it had been greenlit for full development.

A giant mech in Red Faction Guerrilla stomping around the surface of Mars
Even today, Volition’s Red Faction Guerrilla is legendary for its terrain destruction systems. | Image credit: Deep Silver

When staffers entered the meeting, however, it was obvious what was coming. “You could see that both the company chiefs had been crying a lot, and there was a representative from Plaion there as well,” one person told me. Around 50 people were laid off, cutting across departments – level design, narrative, game design, programming, audio, art and animation. As with the previous cuts, a handful of staff were transferred to Fishlabs’ cross-development team. Even as they announced the layoffs, studio development director Tobias Severin and managing director Stefan Beier both declared that they would step down.

In gutting Fishlabs, Embracer have done a colossal injury to one of the industry’s kinder creative communities. My sources painted the picture of a studio with a transparent and supportive working culture, in which the leadership were visible and involved day-to-day, staff trusted each other, people weren’t guilt-tripped for taking time off, and everybody felt like they had a chance to contribute in a meaningful way.

It wasn’t paradise: there were conflicts and tricky personalities, but in general, all my contacts looked back on their experiences at the company very fondly. People also characterised Fishlabs as a studio on the make, following the warm reception for Chorus. Project Black was supposed to be the next big pivot, a step beyond the space sim genre that might have opened the way for all kinds of game concepts, whether original in-house creations or licensed adaptations.

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Above all, Fishlabs was a studio whose leaders were prepared to fight for their staff. While it’s hard to go into detail without breaking confidentiality, several sources told me that the studio’s management and especially Severin and Beier worked hard to save positions and soften the blow for those leaving Fishlabs, both following Project Black’s cancellation and after the rejection of the Red Faction pitch.

The November layoffs were more chaotic. Some people had recently moved to Germany, meeting part of the relocation costs themselves. Others were still on probation, meaning they were strictly speaking entitled to only two weeks severance under German law. Certain team members were based in different countries, which affected their severance packages. According to several people, however, Fishlabs leadership and the company’s embattled HR team were able to arrange a better deal in some cases.

Concluding each interview, I asked my sources whether they agreed with the now widely-reported tale behind Embracer’s need to “restructure” – that they were banking everything on an eventual blockbuster investment deal such as the reported Savvy Games cash injection to offset their debts after so many acquisitions. All broadly echoed this narrative. I also asked for general thoughts on what Embracer were like to work under. Sources described the parent company as “hands-off”, with most communication arriving through Plaion, and not much communication with other studios under Embracer’s umbrella. While the company was aloof, this is hardly unusual for parent organisations, and nobody had any complaints about Embracer’s overall management prior to the beginning of Project Phoenix.

Forsaken flies through asteroids on the Path To The Enclave in Chorus
Chorus is on some level a horizontal open world, with environments that feel like huge arenas full of floating structures. | Image credit: Plaion

I also asked my interviewees for their thoughts on why the past year and a bit have been so terrible for game developer livelihoods, with thousands of people laid off, a grisly procession of studio closures and hundreds of project cancellations across the industry. The overall verdict was a familiar one: companies overhired and overspent during the boom period created by Covid lockdowns, with much investment going towards web 3.0 technologies, NFTs, metaverse projects and latterly, generative artificial intelligence tools that haven’t delivered the desired growth, even as global interest rates have risen and scared away investors.

Sources also pointed out that the most expensive “triple-A” projects have never been more expensive, requiring enormous returns to break even. But several people also noted that the games industry goes through cycles of mass layoffs, because simply having a stable business isn’t enough for investors. Revenues must grow by a chunky margin: if they don’t, costs must be cut. Embracer’s mishandling of their business might be grotesque, but it’s business as usual nonetheless. “We make a shitload of money, but it doesn’t go back into the games,” one person commented. “It goes into a lot of now very wealthy peoples’ pockets, and the people who actually make the games kind of scrape by, most of the time.”

I haven’t spoken to anybody who is currently employed at Fishlabs for this feature – for clarity, all of my interviews were carried out across winter 2023 and spring 2024. But according to my sources, the studio essentially lives on as a cross-dev team working to support other Embracer companies. As of March 2024 and the
sale of Gearbox to Take-Two
, Embracer have supposedly concluded their “restructuring”, though they still found time to close Pieces Interactive just this week. They have also announced plans to retire the now-poisonous Embracer brand and divide their empire of video game and tabletop publishers and developers into three organisations, overseen by many of the same executives. It’s possible that Fishlabs will rise phoenix-like from the ashes and work on in-house projects again – the studio survived bankruptcy prior to being acquired by Embracer as part of the latter’s acquisition of Plaion. But it won’t be the same Fishlabs who developed Galaxy On Fire and Chorus, tried their hand at metroidvania with Project Black, and who might have given us another Red Faction.

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