Annapurna-Remedy Deal Is Smart Solution to Gaming’s Funding Woes

Much has been made of difficulties the video gaming industry and Hollywood are facing in 2024, but a new partnership at last presents a solution to a growing problem for gaming.

At the end of August, Remedy Entertainment announced it would partner with Megan Ellison’s Annapurna Pictures on exclusive film and TV rights to “Alan Wake” and “Control,” two AAA properties at the Finnish studios.

This alone isn’t unusual. After several recent successful adaptations of gaming IP, such as HBO’s “The Last of Us,” Amazon’s “Fallout” and last year’s billion-dollar “The Super Mario Bros. Movie,” everyone wants to tap into gaming’s captive audience.

But Remedy’s deal with Annapurna, a producer on many Oscar-nominated films and a former distribution partner of MGM Studios’ United Artists Releasing before MGM was acquired by Amazon, isn’t the typical licensing agreement, as Annapurna will now fund half the development expenses for “Control 2,” with Remedy remaining its sole publisher.

The path to this deal encapsulates the stakes at play for AAA studios, let alone one of the last few independent entities.

While there are no reports of extensive layoffs at Remedy over the last three years, that was not the case for the publisher of 2019’s “Control,” 505 Games. A subsidiary of Italy’s Digital Bros publishing group, 505 Games closed its offices in Spain, France and Germany and February.

Less than a month later, Remedy announced it had obtained the full rights to “Control,” snatching the flashy sci-fi IP back amid widespread cancellations of projects at prominent publishers in the throes of mass layoffs.

While a smart move to prevent the possibility of a similar outcome for “Control 2,” it marked the first self-publishing foray for Remedy, a publicly traded company that relied on Epic Games to publish its last hit, “Alan Wake 2,” last October.

The first follow-up to the acclaimed 2010 game, “Alan Wake 2” became Remedy’s fastest-selling game ever, a relieving accomplishment for a game that went through multiple false starts before finally entering production in 2019.

Still, Remedy was staring down widening operating losses in the quarter before “Alan Wake 2” published and identified the need for games continuing to sell for years. Remedy did have one project, “Codename Kestrel,” in development that was intended to be a free-to-play shooter but announced its cancellation in early May, echoing PlayStation studio Naughty Dog’s December 2023 move to scrap a multiplayer “Last of Us” project that was much farther along in development.

Self-publishing remains a risky bet in AAA gaming. While venture capital hasn’t left the space entirely, it tends to prefer games with scale — i.e., live services — not so much AAA games that take increasingly longer to conceptualize and produce for newer generations of console hardware and high-end PCs.

As a result, self-publishing remains a risky bet. Bungie briefly presented an optimistic vision for full independence when it bought back “Destiny” from Activision, only to be acquired by Sony and subsequently see significant restructuring after failing to adequately juggle expansions to its core live-service and new games in the works. Sony continues to face challenges in the live-service space, having just shut down “Concord” less than two weeks after its launch.

French studio Don’t Nod is another company that pivoted to publishing its own games, as well as smaller third-party titles, after it stopped working with Square Enix on “Life Is Strange,” the narrative-driven sci-fi franchise it created for the publisher.

Despite a significant investment from Tencent in 2021, a February report indicated the studio was juggling too many projects as a French union sounded the alarm on working conditions. The next month, Don’t Nod announced a restructuring of operations. Tencent is also a minority investor in Remedy.

Annapurna’s partnership with Remedy correctly recognizes the need to maintain stability for the same IP from which it seeks to extract its own value. Most interesting is that Annapurna Interactive, the company’s gaming division, is not involved as a joint publishing deal.

Annapurna co-founder Hector Sanchez, who returned to the company as its president of interactive and new media in August, previously ran Epic Games’ publishing arm in a stint that included “Alan Wake 2,” an indication of the kind of strategy that becomes possible when executives are well versed in multiple sectors of media.

As for the potential adaptations themselves, working with a highbrow prodco should be a decent fit for Remedy’s head-trip IP. To date, the only adaptation of a Remedy game was 2008’s “Max Payne,” which was released through 20th Century without any producing credits for Remedy or publisher Rockstar. Additionally, AMC was developing a series adaptation of “Alan Wake” two years ago, though it did not move forward before the Annapurna deal.

The Remedy-Annapurna deal makes even more sense when looking at the future of “The Last of Us.” While Naughty Dog has confirmed it is working on multiple projects, a third game has yet to be announced, putting the franchise on track to encounter the same issue “Game of Thrones” did with HBO, when the series adaptation of George R.R. Martin’s novels caught up and surpassed Martin’s unfinished story arc.

While HBO parent Warner Bros. Discovery’s financial woes are certainly impacting episode orders, the network’s current solution to adapting the only sequel to “The Last of Us” is to split it into multiple seasons of varying lengths, potentially up to a fourth season. Even when a third game is confirmed, there’s no telling what its development cycle will be, given the likelihood of it being a next-gen release.

There’s an argument to be made for WBD to contribute funding to the next potential game to speed up its timeline, though this arrangement would be unlikely, as Warner Bros. Games still has a $200 million loss from “Suicide Squad: Kill the Justice League” it is getting over.

Thanks to Annapurna, “Control 2” has a clearer path toward a finish line that ensures the company can also adequately create a story bible for whatever adaptation materializes from the new partnership.