Embracer Group’s 'Lord of the Rings' acquisition comes with major strings attached

The Swedish holding company, known best for its gaming acquisitions, bought the rights to “The Lord of the Rings.” But the deal is much more complicated than it seems.

"The Lord of the Rings: The Fellowship of the Ring." Pictured is Best Supporting Actor nominee Ian McKellen (L) as Gandalf with Elijah Wood as Frodo. (Photo by New Line/WireImage)

Who really owns LOTR's rights?

Photo: New Line/WireImage

A new stakeholder has entered the complex licensing web of “The Lord of the Rings,” and the landmark deal has further complicated the already messy media empire surrounding author J.R.R. Tolkien’s fantasy epic.

The buyer, the acquisition-hungry Swedish gaming conglomerate known as Embracer Group, has purchased Middle-earth Enterprises, and with it the associated film, video game, board game, merchandise, theater production and theme park rights to the core LOTR book trilogy and “The Hobbit'' from its previous owner, The Saul Zaentz Company. Formerly Tolkien Enterprises, Zaentz’s holding group has held onto the rights since purchasing them from United Artists in 1976. (Tolkien initially sold them to UA in 1969, four years before his death.)

We don’t know exactly how much Embracer paid because it bundled news of the deal with five other video game acquisitions for a total of around $788 million. That’s after accounting for what’s known as deferred consideration because Embracer is paying for the deals in part with shares of its company.

But we can assume a large bulk of that amount is reserved for those LOTR rights, which still brings up the question: How did Embracer snag up iconic and lucrative media rights reportedly worth at least $2 billion for such a bargain?

The truth is that Embracer Group did not buy all of the LOTR rights. Instead, it bought a significant chunk of them, but with major strings attached. It turns out the answer to who owns Tolkien’s seminal fantasy trilogy is … well, a lot of different companies, with different media licensing rights being shared or sold among the various parties and even sometimes aggressively litigated over. (These legal squabbles, and the threat of more in the future, may have brought that price down from the $2 billion mark that was reported back in February.)

There is, of course, the Tolkien Estate, which still owns rights to Tolkien’s books, including “The Hobbit,” the LOTR trilogy, “The Silmarillion,” “The History of Middle-earth” and other works. The Tolkien Estate also owns TV rights to series longer than eight episodes, which is precisely why Amazon dealt with the Tolkien Estate, and not Middle-earth Enterprises, to make its upcoming prequel series “The Lord of the Rings: The Rings of Power.”

There is also HarperCollins, the book publisher that owns publishing rights to the trilogy and other works after it acquired Tolkien’s original publisher Allen & Unwin in 1990. Then there is New Line Cinema, the subsidiary of Warner Bros. that produced and distributed the LOTR film trilogy alongside Peter Jackson’s WingNut Films. New Line, for instance, is also listed as a producer of “The Rings of Power” alongside HarperCollins, Amazon Studios and the Tolkien Estate.

The licensing web is even larger when you factor in defunct exclusivity deals, but you get the idea: Tolkien’s Middle-earth is a vastly complex media empire owned by numerous stakeholders. Most players generally have to go through the Tolkien Estate or Middle-earth Enterprises in one way or another to get new projects off the ground.

And not all of these companies are on the friendliest terms; Variety reported that the Tolkien Estate, HarperCollins, Middle-earth Enterprises and Warner Bros. have all engaged in legal battles with one party or another at various points over profits from the films. Warner Bros. in particular appears to have greenlit a new animated LOTR film just days after it was reported Middle-earth Enterprises was up for sale, perhaps in a bid to retain future film rights.

In its press release, Embracer lists “key upcoming works set in Middle-earth” that it has “financial interests” in as Amazon’s “The Rings of Power” (because it draws on both the books and movies); that Warner Bros. animated movie, which is officially called “The War of the Rohirrim”; and Electronic Arts’ in-development mobile game Heroes of Middle Earth. So even though Embracer might not be able to exercise total control over LOTR media, it still has its hands in almost every pot because of how the franchise has been sliced up.

So what does this mean for the future of LOTR? Well, with regard to Embracer, it likely means many more video games, board games and even comics.

Embracer’s primary approach to the entertainment industry since it began an unprecedented buying spree a few years ago has been to acquire as many game studios and as much intellectual property as it can, with major purchases including the parent company of Dark Horse Comics, Borderlands developer Gearbox Software and giant publishing conglomerates in video and board games like Saber Interactive and Asmodee. (Embracer’s purchase of Asmodee — which, through its subsidiaries, has developed LOTR board games for decades — may have helped open the door to the full Middle-earth Enterprises acquisition.)

From the start of 2020 to April 2022, Embracer spent more than $8 billion on 62 acquisitions, and it continues to take in funding to fuel even more expansion plans, most controversially from a subsidiary of the Saudi Arabia sovereign wealth fund. In May, Embracer purchased the studios behind Square Enix Europe properties like Tomb Raider and Deus Ex for $300 million.

“I am truly excited to have The Lord of the Rings and The Hobbit, one of the world’s most epic fantasy franchises, join the Embracer family, opening up more transmedia opportunities including synergies across our global group,” Embracer CEO Lars Wingefors wrote in a statement. “I am thrilled to see what lies in the future for this IP with Freemode and Asmodee as a start within the group. Going forward, we also look forward to collaborating with both existing and new external licensees of our increasingly stronger IP portfolio.”

Embracer is also now hinting at expanding further into film and TV. That’s despite the fact it may have to tread carefully, or engage in some expensive licensing, if it wants to deal in territory still controlled by the Tolkien Estate or Warner Bros. As Polygon pointed out, Warner Bros. may decide to legally wrangle with The Saul Zaentz Company over whether the film studio still owns rights to future film deals, and a looming threat of yet another lawsuit could have deterred other buyers or brought the price down.

But Embracer doesn’t seem concerned. “Other opportunities include exploring additional movies based on iconic characters such as Gandalf, Aragorn, Gollum, Galadriel, Eowyn and other characters from the literary works of J.R.R. Tolkien,” the company said in its press release, “and [continuing] to provide new opportunities for fans to explore this fictive world through merchandising and other experiences.”


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