May 19, 2020 will go down in history for CD Projekt RED (CDPR) but also for the entire Polish gaming industry.
On that day, CDPR became more valuable than the industry titan Ubisoft – the biggest European video game producer and distributor, a company with global reach.
CDPR’s market value amounted to EUR 8.04 billion compared to Ubisoft’s EUR 7.85 billion.
This is a stock exchange success that was unimaginable even 5 years ago. No one in their right mind would’ve dared compare CDPR to Ubisoft back then.
This is not CDPR’s only success recently. A few months ago, it became the most valuable Polish company on the Warsaw Stock Exchange by overtaking giants such as Orlen and Bank PEKAO. CDPR remains in first place even today.
This is an important illustration of how important the gaming industry has become for the Polish economy.
There is a risk associated with CDPR’s success over Ubisoft, however. Although their games are excellent and the company is trying to diversify its sources of revenue, it is still a “hit or miss” company. Its success depends on one, maybe two products.
Although their next title, Cyberpunk 2077 will likely sell like hot cakes, it only needs to miss the mark by a couple of million copies and CDPR’s entire stock house of cards may collapse.
CDPR’s model is based on one important product, which is now Cyberpunk. If it sells well, congratulations, but if it does not, then they’ll confront a spectacular crisis.
The entire number of people hired by CDPR amounts to 1100, located in three studios in Poland: Warsaw, Wrocław and Kraków. The company has three brands: the Witcher, Cyberpunk and Gwent.
Compare this to Ubisoft, which has more than 40 development studios around the world.
It employs 16,000, and its flagship brands include Anno, the Settlers, Heroes of Might and Magic, Assassin’s Creed, Far Cry, Rayman, Splinter Cell, Rainbow Six and many more.
Ubisoft does not grow as spectacularly as CDPR on the stock exchange, but that means their drops will also not be as severe. The French company can allow itself some missteps because its portfolio is diversified across many brands. Their profits aren’t as easy to generate, but their broad structure lessens impact and increases stability.
If Cyberpunk 2077 turns out to be a failure, although highly unlikely, then the entire CDPR group will be in trouble.
Moreover, the company’s falling stocks would bring down other Polish developers with them, which is why many other Polish developers are helping CDPR in making their newest game.
Title image: CD Projekt RED logo – mythical Slavic creature, source: CD Projekt RED.