This is a bit odd - repackaged and slightly polished Surviving Mars? Surviving Mars, released about five years ago, is still sold for 29 euros; this one is bundled with a couple of add-ons and priced at 39.
Even though this is remastered, a remastering of a five-year-old game is unlikely to attract many buyers - especially since the original has received about fifteen add-ons.
Perhaps there wasn’t enough capacity for a comprehensive overhaul, in which case ‘Surviving Mars II’ could have been sold?
Scattered Thoughts on Paradox: The Case of Victoria 3
Lately, I’ve been pondering Paradox’s stock, and I even bought Victoria 3 with its DLCs for PC to “Lynch” it. I thought I’d share my scattered thoughts with you
Last year, Peka commendably described the problems of one of Paradox’s recent flagship games, Victoria 3. I think he even described his gaming experience with the game in more detail earlier in the thread, if I remember correctly. I won’t go over the fundamental flaws, but in practice, Peka’s experience summarizes the life of a Paradox investor, which consists of the following phases:
Paradox releases a new version of a classic game series as a buggy pile of burning compost
The loyal player base of the old game states: “It’s a cool game, but we’ll only play it when it works, and when a couple of good expansions have been added. The base game itself is a bit boring.”
Paradox does as commanded, and a couple of years pass
Result: Has the game improved and have players found their way back to the game?
Victoria 3 (originally released in 2022) can easily be said to have improved. The major expansion released in June, Charters of Commerce, is Paradox’s highest-rated DLC of all time. The top spot was finally relinquished by CK 2’s DLC, Holy Fury, released in 2018.
Before this, Victoria 3 had a significant and well-regarded DLC, Sphere of Influence, released last year. In addition, some individual nations and cosmetic updates were added. What kind of Fortnite skins, who knows. However: it can be boldly said that with the momentum of these two main content releases, Victoria 3’s playability has improved, and reviews have steadily risen. On Reddit, the average post is becoming positive, and on Steam, it has reached the “Mostly positive” level. Translated into English: the game is finally entertaining and playable. The game’s dev team celebrated this turning point with a cake:
Also, on YouTube, content creators’ Victoria 3 videos are gathering a healthy number of views in my opinion. The best videos are in the millions, but average ones are in the 10-100k views range. On Reddit, the subreddit’s follower count is around 150k, which significantly exceeds the follower count of the old game’s subreddit.
Perhaps most importantly: the game’s player counts have started to rise from the “dip” that followed its release. From the minimum of about 7,000 players in 2023 (excluding the first free trial), higher peaks have been reached with each DLC release.
After the peak of 26 thousand players for June’s Charters of Commerce, we have consistently hit 10-15 thousand players this summer. IMO, a pretty good performance and an improvement from the 7-8,000 player average of previous years. The most important thing is to get the maximum numbers to rise with each expansion.
Overall, the game could be described as having a healthy sub-community. In the long run, this is important, as this sub-community is often the engine of sociality that keeps people playing the game longer and buying newer expansions. Especially when it’s a state economy simulator like Victoria 3, which will never see the light of day in the mainstream
In my opinion, Victoria 3 is a good example of the typical early life cycle of a Paradox game. The studio has good experience and expertise in transforming broken nerd games into enduring gems.
On Stock Valuation and Catalysts
After the Q2 report, all analysts have likely fine-tuned their models and taken into account the release of EU V and Bloodlines 2 in Q4. When combined with Christmas sales (the busiest time of the year), Paradox should be heading for its largest revenue quarter of all time:
At the same time, EBITDA is expected to weaken. I assume this is due to rising marketing and development costs related to the aforementioned releases. After this, however, the company will start generating significant profit. For next year, a +10% revenue growth and about a billion in EBITDA are forecast with improving profitability. In 2027, revenue is expected to rise slightly further, but profitability to have improved even more. For me, that '27 forecast could materialize if the company would just focus on its core games, but we’ll see what indie garbage they decide to develop again…
Thus, with a good EBITDA → operating profit conversion, the company is valued at approximately 18x and 15x multiples for 2026 and 2027, according to consensus. Would a deserved level be around 20x…?
What I’m trying to say here is that, in my opinion, the stock reacted very sluggishly to the announcement of EU V’s Q4 release date. Usually, with these game companies, the release of big games is front-run in advance, and then on the release day, the gains are sold off. This pre-rally has not started yet, partly probably due to the uncertainty brought by Bloodlines 2 (in plain English: uncertainty = Swedish kronor thrown down the drain).
Currently, the company’s expected return is supported by, in my opinion:
realistic forecasts for the next year, which will bring revenue back to growth with the release of EU V
if realized, an increase in multiples
the upcoming release of a big game and the small rally it brings (somewhat speculative, but realistic)
Once Bloodlines has been released (and perhaps buried), the remaining games are quite solid → Mr. Market likes Paradox more?
Positive options for expected return:
Bloodlines 2 is not a negative ROI game after all
Q4 profitability surprises positively, as it did last year. Analysts usually have difficulties forecasting Q4 expenses for good reason
EU V is not a buggy pile of burning compost after all, but gets off to a flying start
The company has a very strong cash position, so a dividend of about 3% is expected in the spring. There would also be some room for an increase, now that net cash no longer yields such good returns from interest-bearing products due to falling interest rates
Having followed Paradox’s practices for a long time, I must immediately state that this description is completely true. That Charters of Commerce was also a damn good expansion, and there’s a universal consensus that it should have been included already at launch. I have since returned to Victoria 3 and bought all the add-ons, and I believe the game will reach Paradox’s best next year, as long as a couple more critical add-ons are released and the game is brought to a level where it is enjoyable to play. I probably wouldn’t ever invest in the company itself, because it’s always such a complete mess with new game releases; it never seems to go smoothly, and then those problems are patched up for years with paid add-ons
Exactly – the whole earning logic is based on creating a broad and comprehensive foundation, into which a huge amount of content is then pushed. It demonstrably worked in your case too
Furthermore, the best part is that players have largely accepted this. And as @Verneri_Pulkkinen dug up from some CMD or annual report, player retention is incredibly high, and the age group that plays these are wealthy family fathers, like me - except I’m not wealthy
And also, it usually takes one or two add-ons to turn the ship around. After that, the base game and always an add-on are sold because it’s an essential part of the whole package.
Edit. Additionally, in my opinion, it’s also good that the base case for all releases is that they fail and are “a terrible pile of compost”. You get to be positively surprised.
Thanks for the interesting discussion. However, I have to come here to grumble a bit, because like with game companies in general, Paradox’s valuation seems quite sour. A P/E of 30 for a game company that hasn’t managed to achieve significant growth in recent years and focuses on a niche segment feels, well, quite pricey. Even though the company is high-quality, long-lived, and financially stable. The game market and the battle for people’s free time are tough, and as far as I understand, the company hasn’t managed to attract huge masses of players outside of hardcore strategy gamers.
A bit of background: I’ve been playing Paradox games since around 2001, starting with the original Europa Universalis (whose CD is still in my cupboard along with others) and also playing the Hearts of Iron series. However, the most recent ones (i.e., EU4 and HoI4) have been played less in recent years, even though I’ve acquired both games and almost all expansions for the first one. HoI4 and Victoria 3 (which is the first Victoria I bought) have actually remained completely unplayed.
EU1 was released in 2000, EU2 in 2001 (around the same time as Svea Rike, and at least my CD came with it too), EU3 in 2007, and EU4 in 2013, from which about twenty expansions have been pushed out over the decade. It’s not self-evident, in my opinion, that even the most seasoned fans will immediately jump on board with a new Europa Universalis after spending hundreds of euros and hundreds/thousands of hours on previous games. And on the other hand, as a massive game, EU5 is unlikely to be easily approachable for new players.
I personally don’t believe I’ll buy EU5, at least not right away. Another wealthy heavy consumer of Paradox games in my friend circle has stated the same. Simply put, the games have become so complex and time-consuming with the expansions that I don’t easily find time for them. Previously, once you learned the game mechanics, it was easier to start a new campaign. And indeed, Paradox, like many other companies’ strategy games (cough cough CIV7), tends to push out unfinished products and fix the original game’s flaws later with DLC.
My question is mainly, where would Paradox get new players and profitable growth that would justify what I currently consider a rather tight valuation?
I’ve been thinking a lot about this same thing, as the idea of owning Paradox again for a change has piqued my interest.
First, a correction on the valuation. Paradox’s enterprise value is about 17 billion kronor. In the thread, it has been envisioned, by me as well and still correctly in my opinion, that the company can normally generate 800-1000 million kronor in free cash flow, as the core games are astonishingly profitable (operating profit margins, if I recall correctly, +50%, worth checking higher up in the thread). And Paradox is still burdened by “legacy” offshoots, such as these Bloodlines and PA 2s.
Thus, the normalized EV/FCF would be around 21-17x, which is not excessive.
Paradox’s niche player base is both a strength and a weakness, perhaps more of a strength during this truly difficult time in the game market. Large games like GTA V (soon VI), Fortnite, etc., make the airspace tight for small game companies. Paradox’s core player base, i.e., men drawing maps, are not necessarily the biggest GTA fans, and therefore Paradox has remained well protected in its own kingdom.
But can that kingdom and its population really grow much in the long run? Undoubtedly, I am also cautious about growth, although at the same time it is supported by improving game monetization (DLCs and pricing) while the company presumably finds more map-drawers for itself.
An EV/FCF ~20x valuation for a business that generates +20-30% return on capital (PDX aggressively capitalizes game development expenses on the balance sheet, which is why return on capital is meaningful to look at) and grows even a little is not wrong, rather it’s in the right direction.
Here I must ask a counter-question: What guarantees that Bloodlines and PA Kakkoset will not be repeated? I’m not so much interested in cash flow, but rather the real bottom line in the game business because misses always happen. Without them, there will also be no success.
Perhaps my biggest fear when investing in Paradox is that European Universalis V will not become the promised prophet, but a colossal flop. It’s very easy for people to keep grinding a
Paradox has, in my opinion, shown with previous releases that the model works. There are always those who want to try EU5 immediately on release day, even knowing that it will probably be a buggy pile of crap. On the other hand, EU4 can still sell significant amounts for a long time, even years after EU5’s release.
I haven’t closely followed EU5’s development, but based on a few feature videos, Paradox is indeed boldly developing a new version for the game series. EU5 will have pop mechanics from Victoria, NPC mechanics from CK, and on the other hand, they dare to return to the mechanics of previous EU versions where the reforms in EU4 might not have been successful.
Overall, the complexity of the game seems to be increasing again, which is a good thing, but on the other hand, it naturally adds imbalance factors to the game. So, risks have been taken.
The biggest risk factor, in my opinion, is pushing the game’s starting year deep into the Middle Ages. Now, at least 150-200 years of game time will pass before EU’s traditional essential game mechanics like colonialism and the Reformation become relevant. This also has its good sides (a new scenario) but I think it’s a really big risk. Will players have the patience to play until the early modern era?
Perhaps I just haven’t delved deep enough into all the changes in the game compared to previous versions. But based on what I’ve seen so far, I can’t expect a colossal flop.
This is actually an interesting point regarding Europa Universalis. Is shifting the start year a fail or a flop (or even a success, considering we’re now going 80+ years further back than EU2)?
And now we’re going into the era of Edward the Black Prince and even earlier, to the era preceding the Black Death, meaning EU5 starts in 1337. 1444 felt like a super-turbo year: Byzantium still existed, and England’s collapse in France wasn’t yet a given. Additionally, the coalition restraining the Ottomans’ ambitions had taken a big hit.
This can be moved to a better topic if needed. Some also get the game immediately because it’s easier to learn step by step. What’s nice for the player in Paradox’s model is that once you master all the basic mechanics, additional functionalities are added to the game.
I haven’t delved very deeply into the matter, even though there are plenty of previews of the game. However, I’m speculating from an inverse perspective: a general weakness of EU4 has been that the game often starts to be over after 200 years, even though there are still another 200 years on the calendar. Players rarely bother to go further than that, because it tends to become mechanical execution and “map painting.” Placing the colonial era around the mid-game could actually be quite sensible from a pacing perspective.
One big change happened last year: the CEO, who had started the sprawl, was fired, and Paradox’s original CEO returned as CEO. Based on this, I myself would believe that the company’s focus has sharpened again. BL is a sunk cost, because they could have called it quits a year ago but still wanted to finish the work, which in hindsight at least looks like a bad idea, but it’s unlikely that similar projects will be started there anymore.
The Paradox thread is unique in that one could actually discuss the fall of Byzantium, the fall of the Burgundian ruler Charles the Bold in the Battle of Nancy in 1477 and the subsequent disintegration, etc.
Yes, even though it’s been a while since Wester returned as CEO, game projects have extremely long tails.
I myself have understood that the focus is now much sharper. In previous years, abundant cash flow was allocated here and there too generously, and lessons have been learned from that.
Note, Paradox is still a company that dares to take risks in its games, meaning it doesn’t mean the company won’t try something quirky in the future. But it will probably happen in its own indie studio, Arc, with very controlled development efforts.
Among Paradox’s games, EU4 is, in my opinion, the best grand strategy game, and my expectations for EU5 are high. The Crusaders Kings and HOI game series are also very good. I think Paradox should focus only on these types of niche game series, but I understand that the game company has to branch out elsewhere for growth. Based on my own experiences, the EU, Victoria, CK, and HOI game series are indeed games for certain types of people. For example, everyone I know who plays these game series is at least interested in history. The games don’t fully open up to the player if there isn’t enough understanding of the context; for example, role-playing as Germany in World War II or a Danish Viking king is more fun if you know the historical course of events. These games also require patience and imagination and are not very suitable for “action junkies” who want spectacular action all the time.
It remains to be seen how Gen Z will receive Paradox’s grand strategy games, or if they will remain games for older generations. Nowadays, games are moving towards fast-paced action and competitiveness. The most popular game genres are probably MOBA and FPS games (COD, CS2, Dota 2, LOL). Paradox’s games are difficult to see as e-sports titles like Counter-Strike and Dota. Almost every game nowadays also tries to build some “competitive” dimension, e.g., a ranked game mode.
I personally like Paradox’s monetization model, meaning as much DLC or other purchasable content as possible. Nowadays, many games follow exactly this model; for example, CS2 and Dota are free-to-play games, but players want to buy skins / gamble to get cool skins for weapons or game characters. Personally, it doesn’t bother me that players are constantly being monetized, because it still provides evolving games and quality, at least in Paradox’s case. One can also choose not to buy an expansion, and the game is still good. I would say that this model is good for both the player and the company owner.
I don’t own Paradox shares myself, nor am I likely to invest in them. The gaming industry is not familiar to me in terms of investment. Based on its key figures, Paradox seems to be performing much better than our own Remedy, but its valuation is also deservedly higher.
Development of the game Millenia, published by PDX and developed by C Prompt, has ended. This game never came close to the potential it could have had. At launch, it reached a decent number of players for the genre, \~8000, but criticism focused on the game being unfinished and poorly balanced, and the concept never truly materialized.
The estimated number of owners was around 94,000 - 105,000. The game was released in 03/2024, so it wasn’t given a very long lifespan.
Paradox’s stock has been under pressure again for a change. Apparently, Bloodlines 2, at least from a quick browse of the internet, is not receiving a warm reception. That wouldn’t really be a surprise, because the game has been in “development hell” for years and the development studio changed midway.
If Bloodlines 2 flops and development ends, only PA2 would be left of the big “legacy” projects. If B2 were a success, it would be a huge surprise. Although, it would have to be a relatively big success, as I understand it, for the return on investment to make any sense. They’re probably trying to get some crumbs back here. It’s a bit like building a big-budget nuclear power plant that can’t be made operational, the builder has been changed, and the original client no longer intends to buy the plant, but hopefully someone will buy it for a small sum and convert it into, say, a rave cave center.
