Games: Polish way for success

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The exceptionally successful debut of BoomBit shows that the gaming industry is an interesting phenomenon of Polish economy. Unfortunately, there is still a long way to go before we can build powerful tech companies like CD Projekt and Asseco.

Continuation of good results of the Polish gaming industry

BoomBit – Tuesday’s debutant became the leader of the Warsaw Stock Exchange that day. This situation positively influences other companies that are considering listing on the WSE. It is also a signal that investors are still very optimistic about the video games sector – thanks to the fact that the quotations of companies such as : CD Projekt, Ten Square Games and PlayWay have been in a strong upward trend for a long time. Once again, the gaming industry in our country is successful, which confirms the positive trend.

Valuations are rising

BoomBit produces and publishes games for Android and iOS mobile systems. The team consists of almost 250 employees. So far, they have created several hundred titles, which have been downloaded over 550 million times. After the debut, the market valuation of BoomBit is approaching 300 million PLN. This is a good result, but the biggest in the industry, such as CD Projekt, are still far away to reach.

CD Projekt – the largest Polish company in the gaming industry, is valued at over PLN 20 billion. The second largest company in turn is Techland, although it is not listed on the stock exchange, so it is difficult to give its specific value. The aforementioned companies, Ten Square Games and PlayWay, have already exceeded the threshold of PLN 1 billion.

Hossa or bessa?

– Polish technology companies have a chance to become unicorns, i.e. companies with capitalization of at least 1 billion dollars. In my opinion, it is a matter of time, although it takes longer than I thought. The first company to prove that it is possible is CD Projekt, which motivates and facilitates the development of other companies in the gaming industry – said Sobiesław Kozłowski, Director of the Investment Advisory Department at Noble Securities. He stresses, however, that this scenario creates the risk of a bubble, referring to the words of a well-known investor, Warren Buffett: “Only the outflow will show who was sailing naked.“

In this case, it is worth noting that technology companies on foreign stock exchanges – especially in the United States – are being rapidly valued. Technological companies are the main driving force behind the boom that has been going on for many years. Valuations of many of them are measured in billions of dollars, despite the fact that the most of them does not yet have any profits to cover the success.

Snowball effect – companies with big successes on their account have much more possibilities

Our local market illustrates this phenomenon well on the example of CD Projekt – the huge success of the series of games about The Witcher, and especially part three, allowed the company to hire new employees, which translated directly into their processing power. Currently, their priority is to produce the game “Cyberpunk 2077“. – an even bigger and more ambitious title than the Geralt of Rivia series. In addition, in the meantime they have published the games “Gwent: The Witcher Card Game” and “Thronebreaker: The Witcher Tales“, benefiting from the popularity of their brand.

In addition to CD Projekt, Techland is also a very strong player and is currently working on the continuation of “Dying Light“. The first part was a great success all over the world, the series evolved from the previous Dead Island brand, which, however, did not achieve such a great success. Last year Techland invested around PLN 50 million in new game development. CD Projekt, in turn, spent a total of PLN 100 million on the production of video games and the development of new technologies.

The gaming market has no nationality

It is global in nature, companies sell the vast majority of their games abroad. This allows the chance for greater success, as well as forcing competition with companies from around the world, which is quite a challenge. Currently, the quality of the game itself is not enough, marketing is becoming more and more important. For example, Rockstar Games – the studio responsible for the series “Grand Theft Auto” and “Red Dead Redemption” devotes a large part of the budget strictly to marketing, which translates into colossal sales successes of their games. Their latest hit – “Red Dead Redemption 2” earned 725 million dollars in the first weekend. This means that it is the best opening in the history of the entertainment industry, so far no music album, film, game or book has earned more in such a short time.

Unfortunately, such a strong focus on marketing campaigns is beyond the reach of smaller companies, which is why they decide to cooperate with large publishers. In such a model works, among others, the aforementioned PlayWay, which invests in smaller studios and has many successful premieres, such as “Car Mechanic“, “Uboat” and “House Flipper”. 2019 promises to be a record year for PlayWay, as well as for Ten Square Games, whose game “Fishing Clash” was a great success.

The success of the Polish gaming industry is not synonymous with the success of Polish IT

More and more Polish gaming companies are enjoying their successes, but unfortunately they should not be identified with IT. In the broadly understood technology sector we will not find many domestic companies.

The Rzeszów-based Asseco is one of the few companies that managed to convince foreign markets with its proprietary software. Last year their total revenue exceeded PLN 9.3 billion and their operating profit reached PLN 797 million, which translates into an increase of over a third. Sales of proprietary products and services amounted to over PLN 7.5 billion, representing 80% of Asseco’s total turnover. According to analysts, medium-sized companies such as Comarch in Krakow and LiveChat in Wrocław also have the potential for global expansion.

The stock market and the economy of the country

When we consider that the stock exchange reflects the condition of the entire economy, we are created with a slightly optimistic picture of the country, due to the small number of strictly technological companies in the most important indices. – The ratio of R&D expenditure to GDP in Poland is relatively low, hence the small share of new technology companies in the indices of our floor. – comments Krzysztof Pado, DM BDM analysis department director. Marcin Materna, head of Millennium DM’s analysis department, has a similar opinion.

– I do not think that the index will become more ‘technological’ due to its composition. Companies producing games may have a chance, but they are a bit difficult to call technological, in my opinion they are closer to publishers or the media industry – says the expert.

The gaming market is a complex business that is constantly evolving – we decided to explore it to deliver accurate information about its state

Our company has been involved in market analysis and research for over twenty years. PMR’s team of experts has conducted a thorough analysis, which has resulted in a comprehensive report „Gaming market in Poland 2019” on the Polish gaming industry and forecasts for the future.