Launching and operating paid strategy games remains a profitable business for the Swedish developer and publisher Paradox Interactive. Her revenue and audience are growing. However, now the company is looking for new sales channels, wanting to increase the user base.
Ebba Lyngerud
This was stated in the commentary to the annual results for last year by the CEO of the company Ebba Ljungerud (Ebba Ljungerud):
Steam has been our most important distribution channel for more than ten years (...) At the same time, we understand that user behavior changes over time, and, therefore, it is important for us to continue testing new channels.
By testing new channels , Ebba means the following stories:
- Last June, the company made some of its games available to Xbox Game Pass subscribers on PC. In October-December, she also hosted Stellaris, Hearts of Iron IV and Europa Universalis IV there;
- in October, as an exclusive, the company posted a new strategy for Surviving the Aftermath in the Epic Games Store (we are still talking about early access, not a full-fledged release);
- In December-January, Paradox Interactive began experimenting with the introduction of a subscription model in Europa Universalis IV;
- Once again, the company is trying to gain a foothold in the mobile market: in January, it released a free-duplex Stellaris: Galaxy Command.
It is difficult to say how much the new distribution models help the company in increasing the audience and increasing revenue. However, the development of cooperation with Microsoft and an independent attempt to work with subscriptions say that at least the Swedes were satisfied with the Xbox Game Pass.
By the end of December, the MAU of all Paradox Interactive projects reached 4 million (annual growth of 30%). This is a record figure for the company. She had never scored so much before. The number of people registered in its ecosystem is now more than 12 million.
However, the company explains these figures primarily not by new channels, but by an increase in marketing spending. The latter is becoming an increasingly significant expense item for the company. Most of the money is spent on promoting future titles — Vampire: the Masquerade – Bloodlines 2, Crusader Kings III, Empire of Sin and Surviving the Aftermath, but already released titles are actively promoted.
Active investment in development along with marketing is one of the significant expenses of Paradox Interactive. In the fourth quarter of last year alone, the company invested 121 million Swedish kronor ($12.3 million) in game development. This is 34% more than a year earlier.
As Ebba says, such investments mean higher costs and lower profits in the short term. And this is clearly seen in the published financial report of the company. There is growth, but it is not nearly as significant as a year earlier.
Results for the fourth quarter of 2019:
- The company’s revenue for October-December amounted to 381.3 million Swedish kronor ($38.9 million). This is 13% more than in the same period a year earlier (then the dynamics was 51%).
- Paradox Interactive’s operating profit reached SEK 163.5 million ($16.9 million). We are talking about growth of 11% (a year ago the dynamics was 69%).
Results for 2019:
- Paradox Interactive’s revenue for the whole of 2019 amounted to 1.2 billion Swedish kronor ($122.7 million). This is a 14% increase compared to 2018 (a year ago the dynamics was 39%).
- Operating profit amounted to 473.5 million Swedish kronor ($48.6 million). This is a 4% increase compared to last year (the dynamics was 34% a year ago).
By the way, a significant part of the company’s revenue in the fourth quarter was brought by five games (they are listed in alphabetical order, not by share size): BATTLETECH, Cities: Skylines, Europa Universalis IV, Hearts of Iron IV and Stellaris.