CD Projekt Red's Cyberpunk 2077 Launch Disaster Wreaks Havoc On Q1 Earnings
CD Projekt recently released information about their Q1 2021 and the results are mixed. The company experienced a 2% increase in sales, but 64.7% decrease in net profits. CD Projekt noted that their decrease in net profits is primarily due to the cost of fixing Cyberpunk 2077.
CD Projekt net profits equaled $32.5 million PLN ($8.84 million USD) for Q1 2021. This was lower than was initally expected. CD Projekt CFO Piotr Nielubowicz remarked, “Lower than usual net profitability is mainly due to continuing depreciation of Cyberpunk 2077 development expenditures, 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.”
The company also offered an explanation for the mere 2% increase in sales. They argued that they greatly benefited from the popularity of The Witcher universe in 2020. The Witcher television series on Netflix made consumers more aware of the franchise. This awareness combined with the global health crisis and the release of The Witcher 3: Wild Hunt on Nintendo Switch, lead more consumers to purchase the game. The Witcher was simply less popular in Q1 2021 than it was in Q1 2020.
They did not state how many copies of Cyberpunk 2077 have been sold, but noted that the game accounted for 60% of first-quarter product sales. However, some avenues are still closed to the developers. Cyberpunk 2077 was taken off the Playstation Store this past winter and is still unavailable. One representative stated, “The general situation as long as we are not back [in] the Sony store has not changed. One of the leading marketplaces for us is not available and we generate most of the sales on the PC/digital channels.”
Sony’s removal of Cyberpunk 2077 is part of one of the complaints laid out in a lawsuit against CD Projekt. Investors claim that the company did not divulge that the game would be nearly unplayable on consoles. They also argue that the removal of the game from the Playstation Store caused stock prices to drop by 15%. The combination of these factors led to “reputational and pecuniary harm.”
CD Projekt President and Joint CEO Adam Kicinsk recently commented that nearly half of the original development team is still working on the game. He insisted that the game will eventually “live up to what we promised.” They also announced this past December that players will be able to count on free downloadable content.
Images courtesy of CD Projekt Red.