CD Projekt has seen a 65% drop in profits year-over-year, but a 2% rise in sales in their first quarter 2021 fiscal report.
The report details how the company made zł197.6 million PLN (estimated $54.12 million USD) in the first quarter of 2021 (page 7). While this was slightly more than the “record-breaking first quarter of the past year.” As noted in the Group Q1 2021 Earnings presentation material (page 8) this is a mere 2% increase from the same period last year.
The report puts the reason for 2020’s success down to the lockdown orders in that year, increased recognition of The Witcher thanks to the December 2019 premiere of the Netflix live-action TV series, and revenues from The Witcher 3: Wild Hunt on Nintendo Switch (launched late 2019).
All of these factors subsided through the year, and led to lower revenues from The Witcher products. Even then, revenue from sales of Cyberpunk 2077 (“mainly digital editions of the game for PC and Xbox platforms“) offset any losses from that.
The majority of revenue came from sales of products (at zł145.8 million PLN, estimated $39.92 USD), a 6.3% increase from last quarter. This was “mostly compromising” of licencing royalties related to Cyberpunk 2077, ongoing sales of The Witcher 3 and its expansions, digital distribution for Gwent: The Witcher Card Game and Thronebreaker: The Witcher Tales, and royalties of the first two Witcher games and other CD Projekt Red franchises.
However, net profits are down 65% from Q1 2020, as seen in the aforementioned Group Q1 2021 Earnings presentation material (page 8).
“Lower than usual net profitability is mainly due to continuing depreciation of Cyberpunk 2077 development expenditures,” CD Projekt Vice President and CFO Piotr Nielubowicz said in a statement, “work on updating the game, and R&D activities related to future projects. These expenses are recognized as current-period costs and are not subject to capitalization.”
“We intend to live up to what we promised our gamers in January,” President and Joint CEO of the CD Projekt Adam Kiciński. “While we already see major improvements, a large part of the team continues to work on making sure that Cyberpunk provides even better entertainment to gamers.”
“At the same time, we’re rolling out initial changes related to the internal transformation of our studio. This is a long-term project, but we regard it as essential if we are to efficiently develop two large AAA projects in parallel.”
CD Projekt has had months of negative press thank to Cyberpunk 2077; numerous delays and leaked footage were not the end of the woes. One reviewer suffered a major epileptic seizure, and accused the developer on basing the Braindance headset off a medical device designed to induce seizures for diagnosis.
Despite high praise from initial reviews, users complained of Cyberpunk 2077‘s numerous glitches and bugs; along with poor optimization, and the console version having inferior graphics and more bugs. Even critic reviews that praised the game also discussed those issues.
CD Projekt Red stock value dropped by 29% in a week after the game launched. CD Projekt Red apologized for the game’s advertising and launch, and offered full refunds. However, two lawsuits were launched by investors- one in Poland also being an attorney. Recently, four class action lawsuits against the game consolidated for potential common court proceedings.
Both Sony and Microsoft stated they would offer full refunds for the game. Sony would remove the game from the PlayStation Store, but there were “no talks” of Microsoft removing it from theirs.
The company also shared their “Commitment to Quality” agenda, and FAQ trying to explain how the issues came about. The Polish Office of Competition and Consumer Protection (UOKiK) is also monitoring CD Projekt.
In a “Strategy Update for investors,” Adam Kicinsk, President and Joint CEO of Projekt Red, explained the companies’ future plans for growth, and changes. This included announcing the cancellation of the game’s stand-alone multiplayer, and future marketing and PR campaigns being closer to the game’s launch.
In spite of all this and the founders of developer CD Projekt Red predicted to have lost $1 billion USD; Cyberpunk 2077 sold 13.7 million units in 2020. Further, only 1.6% of Cyberpunk 2077 copies were refunded, with current and predicted future refunds only affecting 9% of CD Projekt’s total game revenue in 2020.
Cyberpunk 2077 is available on Windows PC (via Epic Games, GOG, and Steam), PlayStation 4, Xbox One, and Google Stadia. The game is also coming to PlayStation 5 and Xbox Series X|S in 2021, and players on PlayStation 4 and Xbox One respectively will be able to upgrade to the next-gen for free.
