Embracer Group acquires rights to The Lord of the Rings and The Hobbit via Middle-earth Enterprises

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Video game conglomerate Embracer Group has agreed to acquire the intellectual property rights to The Lord of the Rings and The Hobbit literary works by J.R.R Tolkien.

It will do so by acquiring a secondary fights holder, Middle-earth Enterprises, which acquired the rights to motion pictures, video games, board games, and other rights back in the 1970s. Peter Jackson was able to make his Oscar-winning movies based on licenses that went back to Middle-earth Enterprises.

The price was not disclosed. But it appears that the book rights remain with the Tolkien estate, which includes the grandchildren and other family members who are the heirs of J.R.R. Tolkien, who died in 1973. I also believe that rights to some works, like The Simarillion, the prequel to the stories in The Lord of the Rings, are also retained by the estate. Yet the appendix of The Lord of the Rings has some of this material.

Now it’s a new age, and video games may have more potential than movies. In recognition of that, Sweden’s Embracer Group, through its wholly owned subsidiary Freemode, has entered into an agreement to acquire Middle-earth Enterprises, a division of The Saul Zaentz Company, which owns a vast intellectual property catalogue and worldwide 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 HarperCollins, which have yet to be explored.

“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,” said Lars Wingefors, group CEO of Embracer Group, 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.”

The property will be acquired through Embracer’s subsidiary Embracer Freemode Iconic Holding Inc. and will be part of the operative group Embracer Freemode.

“We at the Zaentz Company have had the honor over the past half century of stewarding the Tolkien rights so that Lord of the Rings and Hobbit fans worldwide could enjoy award winning epic films, challenging video games, first-rate theatre and merchandise of every variety,” said Marty Glick, chief operating officer of the Saul Zaentz Company, in a statement. “We could not be more thrilled that it is Embracer now taking up the responsibility and we are confident their group will take it to new heights and dimensions while maintaining homage to the spirit of these great literary works.”

Background and rationale

It’ll look like this only blockier … OK, so it won’t look like this.

The Saul Zaentz Company based in Berkeley, California, US, was founded in 1976. It was originally set-up as a film production company, which produced award-winning films such as One Flew Over the Cuckoo’s Nest.

The Saul Zaentz Company acquired its Tolkien rights from the heirs and estate of J.R.R. Tolkien and HarperCollins Publishers, who maintain the print publication rights to J.R.R. Tolkien’s literary works. The Saul Zaentz Company first acquired the rights to The Lord of the Rings and The Hobbit in 1976, in an arrangement with United Artists to produce an animated version of The Lord of the Rings, to be directed by Ralph Bakshi.

The film was released in 1978 and has become a cult classic (but controversial among Tolkien fans like me). In 1998, The Saul Zaentz Company licensed New Line Cinema to enable director Peter Jackson’s live-action trilogies of The Lord of the Rings and The Hobbit. The movies have grossed over $6 billion at the box office and won many Academy Awards.

Through its Middle-earth Enterprises division, The Saul Zaentz Company, inspired by a deep appreciation for the fictional world created by J.R.R. Tolkien, also has produced and licensed a wide variety of successful video games, board games, stage productions and merchandise based on The Lord of the Rings and The Hobbit for more than forty-five years.

Embracer’s operative group Asmodee Group is already one of the most successful licensees of The Lord of the Rings and The Hobbit through board games and card games, having published over a dozen games with over 100 expansions since the release of The Lord of the Rings board game over 20 years ago, including classics such as The Lord of the Rings: The Card Game and The Lord of the Rings: Journeys in Middle-earth, a fully-cooperative, app-supported board game set in J.R.R. Tolkien’s iconic land of Middle-earth.

Key upcoming works set in Middle-earth, in which Middle-earth Enterprises has financial interests, include the much-heralded Amazon series The Lord of the Rings: Rings of Power which will premiere on September 2, set thousands of years before The Hobbit and The Lord of the Rings; the animated movie The Lord of the Rings: The War of the Rohirrim (Warner Bros), set for release in 2024, and the mobile game The Lord of the Rings: Heroes of Middle-earth (Electronic Arts).

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, and continue to provide new opportunities for fans to explore this fictive world through merchandising and other experiences.

The acquisition of the rights is in line with Embracer’s IP-driven transmedia strategy. The Lord of the Rings and The Hobbit are among the world’s largest, most enduring iconic entertainment franchises and birthed the fantasy genre.

Middle-earth Enterprises will be a part of the newly founded operative group Embracer Freemode. The company will continue to operate independently under the existing Middle-earth Enterprises leadership team, working closely with Embracer Freemode management and other Embracer operative groups to foster opportunities, growth and synergies within the Group to continue to build and expand the great franchise.

The parties have agreed not to disclose specific terms of the transaction due to commercial reasons.

Advisors

Skadden, Arps, Slate, Meagher & Flom LLP acted as legal advisor to Embracer Group. Arnold & Porter acted as legal advisor and ACF Investment Bank acted as Investment Banker to The Saul Zaentz Company.

Through Tolkien Enterprises, now Middle-earth Enterprises, Saul Zaentz owned the worldwide film, stage, and merchandise rights to J. R. R. Tolkien’s The Hobbit and The Lord of the Rings. It also includes “matching rights” should Tolkien’s estate film The Silmarillion or The Unfinished Tales of Numenor and Middle-Earth. What it did not include was the rights for televisions shows (for any show longer than eight episodes).

In 1976, Zaentz acquired certain rights as regards The Lord of the Rings and The Hobbit from United Artists, who had in turn purchased them directly from Tolkien eight years prior. In 1978, Zaentz produced an animated version of The Lord of the Rings, written chiefly by Peter S. Beagle and directed by animator Ralph Bakshi.

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