Ah. Thanks for the correction. Nevertheless, this looks more like a cost-driven project than one where the game series would be seriously invested in.
2 Likes
For HOI 4, the latest DLC, No Compromise, No Surrender, was released yesterday.
From what I browsed through Steam reviews and Reddit comments, the reception was quite lukewarm 
A 30-euro DLC, which corresponds to 60% of the base game’s price, clearly did not satisfy the community’s desires on the price/content scale.
On Steam, the reviews are currently Mixed, and there’s no real change in player numbers. However, we’ll have to wait until the weekend to see the real effect.
This was a shame because, in my opinion, EU 5, CK 3: AUH, and this DLC were the “safe bets” that were supposed to bring money into Paradox’s coffers this quarter. Especially CK 3 and HOI 4 are significant products in terms of player numbers. Bloodlines 2 and Mars were, in my opinion, mostly… well
You can draw your own conclusions from the reviews here: Reddit
If there’s anything positive, EU 5 is Paradox’s second-best release of all time in terms of retention! Player numbers remain astonishingly good.
Back when CK 3 was released in September, it sold a million copies in two months (source: Paradox’s Q3 2021). At this rate, one could assume that EU 5 has already sold over half a million copies.
The graph shows the player numbers of Paradox’s main games, normalized to their release. CK 3 is first, and EU 5 is second.
9 Likes
Significant write-down for Bloodlines
Paradox Interactive has today decided to make a non-cash write-down of MSEK 355 of capitalised development costs for the game Vampire: The Masquerade - Bloodlines 2 in the fourth quarter. The write-down is made in addition to the quarter’s scheduled degressive amortisation of MSEK 346. At the end of the year, MSEK 40 of the capitalised development costs will remain on the balance sheet. The write-down is based on an updated sales forecast made 30 days after the game’s release.
Vampire: The Masquerade - Bloodlines 2 is a strong vampire fantasy and we are pleased with the developers’ work on the game. We’ve had high expectations for a long time, since we saw that it was a good game with a strong IP in a genre with a broad appeal. A month after release we can sadly see that sales do not match our projections, which necessitates the write-down. The responsibility lies fully with us as the publisher. The game is outside of our core areas, in hindsight it is clear that this has made it difficult for us to gauge sales. Going forward, we focus our capital to our core segments and, at the same time, we’ll evaluate how we best develop World of Darkness’ strong brand catalogue in the future, said Fredrik Wester, CEO of Paradox Interactive.
5 Likes
Victoria 3’s expansion production also continues at full throttle. Expansion Pass 3 coming next year:
4 Likes
Expected news. And Fredrik’s message is clearly “no more outside core competence.”
This is also a good reminder of Paradox’s rather quick removal of games from the balance sheet in general. The company capitalizes game development costs, down to employees’ bathroom breaks, on the balance sheet. When a game is released, these capitalizations are removed quickly.
Thus, the write-down comes on top of a roughly equally sized amortization, and almost the entire approximately 70MEUR development project disappears from the balance sheet in one quarter. 
”Paradox Interactive has today decided to make a non-cash write-down of MSEK 355 of capitalised development costs for the game Vampire: The Masquerade - Bloodlines 2 in the fourth quarter. The write-down is made in addition to the quarter’s scheduled degressive amortisation of MSEK 346. At the end of the year, MSEK 40 of the capitalised development costs will remain on the balance sheet. The write-down is based on an updated sales forecast made 30 days after the game’s release.”
Rarely are there comments on Shareville worth quoting here, but this comment about Paradox, in my opinion, summarizes the investment case well at the moment. The English version is an automatic translation.
Haven’t looked much at the company yet, but it seems like it’s priced to do roughly what it has done previously, and the downside is that they fuck up and the upside is everything else?
Har ikke sett noe særlig på selskapet enda, men virker som det er priset til å gjøre omtrent som det har gjort tidligere og nedsiden er at de fucker opp og oppsiden alt annet?
P.S. One more potential write-down case is in development, namely PA2.
9 Likes
The stock reacted with a few percent gain at the opening. Could this be a sign that we can finally bury these blunders and focus on the core going forward?
What caught my eye in Fredrik’s message was this sentence:
" Going forward, we focus our capital to our core segments and, at the same time, we’ll evaluate how we best develop World of Darkness’ strong brand catalogue in the future."
Could this be interpreted as the World of Darkness IP being for sale at Paradox? Did they get burned so badly that someone else can deal with this in the future?
The size of the write-down is well illustrated by the fact that in last year’s Q4, Paradox made approximately 311 MSEK EBIT. So, a pretty significant chunk is being wiped away from the upcoming record quarter.
Another point of comparison is Remedy’s Firebreak. They wrote down, if I recall correctly, €19 million, which is much smaller than Bloodlines’ ~€32 million, without mentioning natural depreciation.
I don’t know if others have noticed the same, but Paradox has quite effectively productized this “continuous subscription” into its main games. If you go to virtually any main game’s Steam page, you will see an advertisement like this:
Another example is Stellaris, for which the DLC, Infernals, was released a couple of days ago:
From Steam, you can almost best spy on which quarter sales will always come. And when one Expansion Pass (or whatever it’s called in each game) ends, the next one is released. This also happened in the case of Victoria 3.
8 Likes
Hello forum,
it’s nice that there’s investor discussion about Paradox in Finnish too; I’ve been reading this for a couple of years.
From an investor’s perspective, it’s excellent that Paradox keeps its balance sheet realistic and that the value of games, or lack thereof, is recognized and recorded. There shouldn’t be much room for doubt.
I’ve always liked the products themselves, and EU5 is, in my opinion, a huge success in terms of its functionality and as a game itself. Commercial success also seems promising based on Steam reviews and player counts, but I haven’t had time to do the calculations. The game’s forums are also very active, which is a good sign that the game is interesting and people even constantly come up with ideas for the devs on how to fix things. And these are also taken into account.
I see this as a significant asset; the PDX community acts as a free resource for development, and the company has realized the importance of taking this into account. Also, the reputation is uncharacteristically good for a game company from the consumers’ perspective, although I don’t have any data for this. A ‘Trust me’ assessment, so to speak. (excl. others’ screw-ups as a publisher, i.e., CS2 and the latest Vampires).
I am surprised, however, that the timing and success of massive Q4 releases are not reflected in the stock price. EU5 is certainly a future cash cow, and one would think that the uncertainty of its release success should have already been corrected in the stock price. Previous errors in these include, for example, the infamous Leviathan EU4.
The expertise is in GSG (Grand Strategy Games), so it’s really good news that they are focusing on these and leveraging their near-monopoly position in this niche gaming sector.
What are your thoughts, is the stock trading at reasonable prices? I would like to run some calculations for EU5’s success if I had more time.
One potentially negative detail from a player’s perspective: EU5 and Vic3 are very similar in spirit. I myself have given the latter almost 0 attention and it might stay that way, even though I used to like it a lot.
10 Likes
It just came to my attention this morning that Danske is raising its target price to 210 SEK and its recommendation from Hold → Buy.
Which, in my opinion, is odd timing, that as soon as the Bloodlines write-down was done, Paradox immediately became a super-top stock.
Copied from Nordnet and translated by AI below
Danske Bank raises its recommendation for gaming company Paradox from hold to buy and its target price to 210 kronor (180), according to the analysis.
The increase is justified by the fact that the important release of Europa Universalis 5 has developed well, and the game appears to be progressing in line with the analysis firm’s quarterly forecasts.
“Even more importantly, the success of this game has likely paved the way for many more years of success for the series and its ‘games as a service’ model,” the bank writes.
In addition, Danske Bank notes that DLCs (downloadable content for games) have been released for almost all of the company’s core series and that they appear to be performing well.
At the same time, the expected write-down of Bloodlines 2 means that the company’s situation has finally left its “junk period” behind.
This means that attention can be directed to the future, “which consists practically only of what Paradox is a market leader in: grand strategy and simulation games,” the bank writes.
Overall, Danske Bank states that the company “is now in its best position in a long time,” considering recent successes.
7 Likes
Again, a good reminder of Mr. Market’s moods 
P.S. Board member Mathias Hermansson bought more shares for 410,880 SEK https://x.com/InsynshandelSE/status/1994031678545596601
3 Likes
Indeed it is. I myself was waiting for it to drop to around 150 SEK before I’d be interested in investing. Instead, I continue to watch from the sidelines, as despite a significant write-down, the company surged upwards by more than Remedy’s market value on negative, albeit expected, news. The write-down could hardly have been much larger either. Based on its size, most of the development budget was certainly written down.
Still mixed feelings about this stock. It’s talked about as a quality stock, but almost everything done outside the Grand Strategy core has been senseless active destruction of value. Prison Architect 2 is still awaiting the same fate as Cities Skylines 2, Bloodlines 2, and Life of You. In a way, it’s positive that management has now, a few games behind the rest of the market, understood that perhaps this activity of publishing games outside the genre or 3rd party publishing is not the company’s best core business. In the development pipeline, PA2 seems to be the only one of these poorly managed 3rd party projects left, so in that sense, I think the CEO’s comment is a non-story, and I don’t fully understand the market reaction.
Fortunately, however, the EUV release seems successful enough to continue its dominance in its own core.
Although it is concerning that player numbers are significantly declining in a timesink-like game, the release has still been large enough that there is no immediate danger. Furthermore, Paradox has trained its player base, including myself, to wait to buy games later when the game has been sufficiently patched and some additional content has been released. The game will likely find its way into my own game library within 2-3 years, usually with a few additional content packs over time.
I do believe that there is still room for growth in the Grand Strategy core, unless something happens in the market that would render Paradox’s monetization model unworkable. Internal cannibalization within the genre may also be a risk in the future, especially if consumer purchasing power challenges in the market continue. I believe that the Grand Strategy core has exceptionally strong player retention. These players are now middle-aged and will continue to play these games until they are 60+, even if the surrounding market growth remains slow or stagnant.
The Grand Strategy core provides a relatively stable and predictable foundation and security for operational cash flow, given the established IPs and back-catalog content for which sequels can be made at regular intervals. On the other hand, this and next year’s P/E of 30-45 prices in strong earnings growth for the company. Similarly, EV/EBIT is above twenty and EV/S is around 6-7, typical for a quality game company. For Grand Strategy, I think the multiples would probably hold true, but as long as everything else actively destroys value, it makes me wonder.
I may not fully agree with Verneri’s/Nordnet’s comment. In my opinion, even at the current price, especially after the rise of the past 2 days, a clear improvement in operational performance is baked in, for which the EUV release certainly provides a good foundation. However, few publishers can endlessly release games with a clearly negative ROI.
It may be that I am too traumatized by Remedy, but I get too many Remedy-like vibes from Paradox’s actions in recent years to dare touch this unless there are clear downward sentiment overshoots that would balance both company and market risks. Write-downs are part of the game industry, but games should not be written down during the production phase, and for Bloodlines 2 / Skylines 2, all signs were surely in the air that nothing commercially viable could come of it. Project/portfolio management on the publishing side has been incomprehensibly poor, but fortunately, this has been remedied by keeping the home base in order (EUV / Paradox Tinto).
Sell World of Darkness, minimize AA publishing activities, and quietly continue to grow the Grand Strategy monopoly position with good margins, maintaining a strong cash position for special situations (focused M&A when valuations are low and distributing profits to owners when valuations are high), and then the journey towards old or new stock price peaks can begin.
11 Likes
This is also funny, that Fredrik has expressed the company’s focus on its core competence for years in strategy and speeches, even though “legacy” projects in which there has been even a little faith have been continued. The write-down of Bloodlines 2, on the other hand, should not be a surprise, but a basic expectation. I myself only expected it to happen in connection with Q4, but now that I think about it more carefully, activated expenses must be written down immediately when it is obvious that they will not produce as expected.
In other words, nothing unexpected has happened!
Perhaps there is a psychological effect, as if a rotten tooth had only just been pulled out of the mouth.
Of course! The company’s reported result will be poor this year (too) due to write-downs.
But when legacy projects have been written down and forgotten, what remains is a strong core whose games make even 60% operating profit margin!
In addition, the game development philosophy has been refined. Previously, new things were experimented with big money (Life by You, BL2, etc.). Now, experiments are done with small trial money in Arc and scaled up if there is evidence, or support for the game is stopped if there isn’t. As happened recently with Millenium.
8 Likes
As I’ve been trying to figure out where future growth will come from, when soon all core titles have received their latest iteration (ps. Stellaris 2 will be announced next year, you heard it here first), then it will probably be found here, and this is a fairly risk-free way, as Verneri said. But it needs to be more ambitious than it currently is with Space Trash Scavengers’ Darfalls.
Bringing new IPs to the grand strategy genre has been difficult, and they seem to need several iterations to take off. All core titles have essentially needed a second iteration to take off (CK, HoI, EU). It would be interesting to see (with other people’s money, of course) what would happen if Imperator: Rome 2 were to come out.
3 Likes
https://www.videogameschronicle.com/news/how-do-we-get-them-to-not-call-it-bloodlines-2-chinese-room-co-founder-reveals-early-masquerade-doubts/\n\nDan Pinchbeck of The Chinese Room (TCR founder and ex-creative director and Bloodlines writer) commented on the Bloodlines handover. Paradox seems to have thought that the Bloodlines name alone would ensure a positive ROI. It has been clear from the beginning (midway) that this would not work out.\n\nAnd even if the name had been changed, it wouldn’t have been a winning move either.\n\n\u003e […] He was sceptical whether the studio could develop a worthy sequel to the 20-year-old original.\n\u003e \n\u003e “Right from the word go, there was one of the producers, then at Paradox, who I’m still friends with, who’s now with another publisher,” he explained. “We used to sit there and go and have these planning sessions of, ‘how do we get them to not call it Bloodlines 2?’\n\u003e \n\u003e “’That feels like the most important thing we do here is to come at this and say this isn’t Bloodlines 2. You can’t make Bloodlines 2. There’s not enough time. There’s not enough money’.”\n\u003e \n\u003e However, he claimed that due to the many interests from the various stakeholders, Bloodlines 2 became like “untangling an anaconda fuckball of competing priorities and what everybody wants and things like that”.\n\nThe interview timestamped to start when Bloodlines is discussed\nhttps://youtu.be/iyWDyNLAo1E?t=2916
2 Likes