A peculiar interpretation. Has Remedy announced the million-unit milestone being reached for any game (I don’t know myself, but at least not in the case of Control)? If sales were truly under a million, the AW2 figures would be very anomalous compared to other recently released games on the Psnprofiles and Exophase platforms.
As an example, the previously mentioned Spider-Man 2, which reached 5m in sales at around 40k on Psnprofiles, meaning 125 players per 1 Psnprofiles user. Using the same formula, Alan Wake 2 has over 1.3m players on PS5 alone. Even with a generous margin of safety, you’d think total sales would still be well over 1m.
This is just my own speculation, but I’m mainly puzzled by these absurd conclusions just because Tero hasn’t reported the breaking of some self-invented threshold.
It is quite funny how people here talk about publishing sales figures at a specific point in time as some kind of gaming industry norm. There are surely as many practices for publishing sales figures (whether in units or euros—a distinction that is even more significant today than in the past, as monetization can be achieved through means other than just unit sales) as there are developers and publishers. Some report something immediately, some after reaching a certain milestone, some once a year, some quarterly, and everything in between.
For example, even Larian Studios hasn’t reported Baldur’s Gate sales since the Early Access data. I suppose it hasn’t sold anything since then, since they don’t want to disclose the numbers?
By the way, it’s worth remembering regarding PC that, in terms of units, Alan Wake needs to sell less on the Epic Store than it would on Steam to reach the same revenue in euros, because Steam takes a 30% cut versus EGS’s 12% (if they even take that much for games they publish themselves?). The game has, by the way, been in 1st or 2nd place on the Epic Store since launch.
I had to double-check if that’s actually the case. I wonder if you accidentally looked at the figures for the original AW, because the claim doesn’t really hold true.
You are right, my mistake, I did indeed misread the figures. Nevertheless, the numbers look unreliable. At the very least, sales would need to be very high in November for Wake’s ratio to look somewhat credible. That remains to be seen, as the charts are not yet available. Here are also a few other figures:
Not at all. If someone had said a year ago that Alan Wake would win more trophies than the Zelda sequel, I would have considered them crazy. Of course, Zelda might have been hindered by the fact that it was released almost a year ago. We’ve seen the same at the Oscars; usually, films released in October–November are fresh in the memory and collect more awards.
The Man Without a Past was nominated for the Oscar for Best Foreign Language Film in 2003. I would say that this is a much more significant international recognition in the field of entertainment. A truly great achievement.
Game sales figures at this early stage certainly provide a direction for the cash flows generated by the project. Of course, for AW2, as long as the project hasn’t recouped, these flows are 0. Otherwise, game sales figures only provide a rough indication. If a game had a physical release, announcing sell-through numbers wouldn’t accurately reflect the revenue generated, as one would need to know the share of physical sales, various storefronts, etc. Then, throughout the year, there are different discount campaigns, leading to a constantly changing average selling price for the game.
Sure, AW2 could be made to sell 10M units if the price was set to €1.
Should Remedy then provide guidance for the future or disclose current generated revenues? Well, for Remedy, it’s likely that the royalties generated are currently €0. What about disclosing how much has been recouped? This, in turn, would better reflect the current situation, but we still wouldn’t know the unit sales in this case—especially since payments to the publisher come in lump sums. So, would they report recognized revenue for the project or theoretical revenue, etc.?
Regarding this guidance, it’s been strongly pointed out here how difficult it is to forecast game sales (and consequently, the generated revenue). Based on this logic, why is such guidance being demanded from Remedy?
Assuming some kind of forecasting models are built, what is the confidence interval for guiding unit sales or revenue?
Is 1-sigma enough (guidance wrong 32% of the time), or should it be 2-sigma (wrong 5% of the time)? This has an incredibly large impact on the forecast range, and I don’t believe it would benefit anyone if Remedy were to guide, for example, AW2’s first-year sales between 1–4M units or, say, €30M–€120M in generated sales, which would result in royalty guidance for Remedy of €0–40M. The tighter the guidance is set, the more likely it is that the guidance will be exceeded or missed, resulting in unnecessary profit warnings (negari) or positive profit surprises (posari).
As @Konamixx pointed out earlier, in 2019, Remedy did a good job guiding sales expectations even though they weren’t obligated to. Similarly, in August 2022, Remedy issued a profit warning even though they technically didn’t have to at that moment; however, they issued the warning as soon as they knew they wouldn’t meet their annual guidance. Remedy could have easily stuck with the same guidance until January 2023 and only then announced they missed it.
This is obviously not an optimal situation for shareholders, but I don’t see a better way, as the gaming industry has certain inherent realities. The publishing agreement brought up by @Akee highlights the severe penalties for breaching this NDA. If these industry realities and NDAs were to prevent game companies from legally operating as public companies in Finland, it would be a major loss for the Finnish gaming industry.
Do you mean the same as Tero’s grinning back then regarding the Vanguard project?
This is really the limit, how people are already starting to draw bullish interpretations from Tero Virtala’s grinning. For those who have followed Remedy for a longer time, it has at least become clear that this is just the man’s style of doing interviews year after year. It cannot be taken as any kind of positive signal, as the failed Vanguard project also shows.
The numbers are skewed against newer releases as the feature didn’t go live until 16.nov. So for example Armored Core and Remnant will naturally have fewer stars as fewer people are playing them now, and the games are left unranked on their profile.
Didn’t you @Henkka previously demand precise forecasts for the cash flows of future game projects, even though these projects don’t even have a production start schedule or a release year known? And now, for a game that’s already been released, no forecasts can be made because it’s too difficult?
1–4M units this year would be quite a wild guidance, as it would mean that AW2 has sold very poorly so far (well under 1M units because of such a low floor), but Remedy would have massive optimism for post-TGA Christmas sales regarding the upper end. In itself, there’s nothing wrong with giving a slightly wider forecast range at first and refining it over time, if positive and negative profit alerts scare management that much. Right now, we don’t know if the game has sold 500k or 2 million units; instead, we have to make educated guesses based on alternative data. So, even such a slightly wider range would provide investors with more information compared to the current situation and allow for better decision-making.
This is a misunderstanding. A listed company is not allowed to sit on a negative (or positive) profit alert; it must be issued without undue delay as soon as it becomes clear that the guidance or the result expected based on previously published information will not be met. If this is bypassed, a situation naturally arises where outside shareholders are discriminated against, and at least on paper, things could end very badly for those responsible. De facto, of course, no consequences occur without a lawsuit initiated by the owners, because the Financial Supervisory Authority is only interested in banks and insurance companies
Didn’t you @Henkka previously demand precise cash flow forecasts for future game projects even though there isn’t even a production schedule or release year known for these projects? Now, for a game that has already been released, no forecasts can be made because it’s too difficult?
I don’t know about that, but Eka, one could retort to you with the exact same mentality, as you’ve been complaining here for several days about sales figures, even though you claimed during the game’s launch that the sales figures have no significance for the case.
Yeah, they don’t have much significance for the stock’s fundamental value, as cash flows from the 30s are already priced into the stock, when the multi-project model finally starts churning out larger quantities of games. However, those sales figures still impact the share price, so the publication of those forecasts would help investors make better decisions right now regarding buying and selling the stock.
I brought up that perspective because the difficulty of forecasting game sales has been criticized here, and I tried to point out that if this is held as true, then how can the company be expected to provide forecasts? Additionally, I aimed to show that, for instance, getting guidance on just unit sales doesn’t ultimately tell much, because it’s affected by average selling prices and various partnership deals, etc.
For example, if Remedy now guided that AW2 sales will be 3-4M units during the first 12 months and the guidance was not being met, this would very easily lead to selling the game at a discount to hit the guidance so that a negative profit warning (negari) wouldn’t have to be issued.
What timeframe is desired for guidance? Sure, if sales guidance for the next couple of months is wanted, fairly accurate ones could probably be given, but if we go, say, 12 months forward, those unit sales figures don’t really do much anymore.
And regarding this guidance, surely for Q4, guidance could have been given that the expectation is for AW2 to recoup during Q4 or that it recoups during Q1, etc. It would give much more information to investors than just reporting unit counts. Of course, Q3 was on October 31, which is a relatively early stage to give even a good recouping guidance. For example, if Remedy had decided to guide that the expectation is for AW2 to recoup during Q1-25 and now in December it started to look like sales were clearly better than expected and recouping would happen during this Q4, then a positive profit warning (posari) would have to be issued. And there is so much variance here that it leads to either very wide guidance or frequent positive and negative profit warnings.
If I remember correctly, Incap was “notorious” for this, that quarter after quarter (or at least it felt that way to me) there was a positive profit warning (posari). One might ask oneself if this guidance is worth anything if investor sentiment becomes about expecting positive surprises.
I still believe that if the forum and elsewhere were drumming up that AW2 would only recoup in Q3-2025 and sales were worse than Control’s, or that now it was being drummed up that royalties are coming already in Q4, we would certainly get some kind of release from Remedy that would steer expectations in the right direction.
Yep, that’s how it should work in theory, but companies have been pumping out negative profit warnings (negari) on the final evenings of the period. Curiously, it comes as a complete surprise to the company on the final night that they won’t meet guidance, and then they obediently send out the warning immediately
This is a point for Remedy: they didn’t do that, but acted exactly as the rules say, publishing the info when they know they won’t meet guidance. There are many other companies (or boards in companies) in the stock market that, in Remedy’s situation, would have stretched this until around the Q4 announcement. This, along with that Konamixx example, at least for me, creates trust in the company’s management.
Edit:
As an example, guidance based on the Monte Carlo simulation I did for the forum’s view back in November 2022:
1sigma = 77M€ - 106M€
2sigma = 52M€ - 124M€
And this is the revenue the game’s sales generate for Epic, from which Remedy would only be paid after recouping. I think those would be quite wide forecasts. Sure, 1sigma is relatively close, but still, about 32% of the time there would be a negative or positive profit warning, which in my opinion isn’t very good guidance.
PlayStation’s charts continue along the same lines as October. Europe is doing quite well, but the US is performing much worse. It should also be noted that for competitors, sales are also split into physical copies. Based on these charts, it’s hard to see the game becoming a hit, at least in the short term, though the actual numbers are, of course, a mystery. Personally, I don’t see any way that two million will be exceeded this year.
Damodaran released an interesting post about the impact of key persons on a company’s value. The post uses Altman, Musk, and Munger as examples of key persons, but for some reason, Remedy and Sami Järvi were the first to come to my mind. The core of the post is here:
Key person valuation: You value the company twice, once with the key persons included, with all that they bring to it’s cash flows and value, and then again, without those key persons, reflecting the changes that will occur to value inputs:
Value of key person(s) = Value of business with key person - Value of business without key person
Since key persons involve significant risks, buyers usually want a discount on companies with significant key person risks, and this discount can be quite substantial, depending of course on the company’s stage of development and the importance of the key person to the company:
In appraisal practice, the effect of the potential loss of an owner, founder or other key person in a business that you are acquiring is usually captured with a key person discount, where you price the business first, based upon its existing financials, and then reduce that pricing by 15%, 20% or more to reflect the absence of the key person. Shannon Pratt, in his widely used work on valuing private companies, suggested a key person discount of between 10%-25%, though he left the number almost entirely to appraiser discretion.
I would like to ask @Atte_Riikola here, somewhat tongue-in-cheek, whether key person risks have been accounted for in the analysis? The gaming industry’s intense competition for top talent is mentioned, but what happens to cash flows if other types of key person risks materialize? At least from an outsider’s perspective, I have the strong impression that Remedy is very dependent on key persons.
Old Gods of Asgard merch is now available for pre-order through Spotify. I think I’ll grab the CD+LP myself. The timing is great now that HoD is very much in the spotlight, and it should just about make it in time for Christmas (delivery is promised for Dec 22).
Edit: It’s also available at least in the domestic Backstage Rock Shop and cdon.fi, so it has a surprisingly wide distribution. In fact, the payment made via Spotify goes to Backstage as well, and the price is exactly the same. Clothing can also be found on Redbubble.
