Poland’s gaming industry: is it worth PLN 2.5bn or PLN 30.5bn?
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The gaming sector in Poland is a complex reality; how much it is worth depends on the aspect you consider. Poles’ spending on video games amounted to PLN 2.5bn (€578m) in 2018, according to our estimates. The combined revenues generated in Poland by gaming firms are considerably less than that. But the numbers get much bigger when we look at the valuations of Polish gaming stocks. The total market capitalisation of studios listed on the Warsaw Stock Exchange (or preparing to float) reached PLN 30.5bn in February 2019.
PLN 2.5bn of expenditure on games in 2018
Gaming is one of the fastest growing parts of the Polish entertainment industry. At the same time, Polish studios are increasingly making their mark on the global stage. The sector is a complex reality, and how much it is worth depends on the dimension you focus on. Let’s start with the Polish gaming market, defined as consumer spending on video games. According to our estimates, it totalled PLN 2.5bn (€578m) in 2018, having risen by 7% from 2017. PC and console games (and their add-ons) account for most of the market, but spending on mobile, social, and browser games is growing more rapidly – helped by high rates of mobile and internet penetration and growing popularity of free-to-play games with paid add-ons – and their market share could soon overtake that of PC and console, our analysis suggests.
Valuation of Polish video game companies
A different way of looking at the gaming space is to consider the market capitalisation of the Polish game developers listed on the Warsaw Stock Exchange. The shares of eight studios are currently traded on the main board of the WSE, and a further 20 are listed on NewConnect, the junior market.
According to our calculations, in 2017 the listed gaming studios plus Techland, which has been preparing for an IPO for some time, generated combined sales revenues of PLN 953.7m (€220.7m), down 3% on the year before. (This followed a 28% drop in 2016.) In 2018, we estimate that the figure increased by 3% to reach PLN 985.1m (€228m).
Two companies, CD Projekt and Techland, are largely responsible for the vacillation in the listed studios’ revenues. Both develop costly AAA games, and their results are therefore strongly affected by the timing and success of individual releases. Most of the other listed developers are smaller indie studios making games on lower budgets, many of which are free-to-play, and their revenues are more stable. Importantly, the listed game developers operate on a global scale. As much as 96%-97% of their combined revenue comes from foreign markets. Only about PLN 30m (€6.9m) is generated in Poland.
The Polish gaming industry is not confined to the publicly traded firms, of course. There are an estimated 400 or so firms in Poland who develop video games. Most of them are low cost indie developers. And most do not publish their financial results.
At any rate, if we take share prices as a guide, the Polish gaming sector is a much bigger beast: in 2018, the total market cap of the WSE-listed game developers was PLN 17bn, up by more than 50% versus 2017. By February 2019, it had risen to almost PLN 22bn. Add to this Techland’s estimated valuation of PLN 9.5bn – the company is likely to float in 2020 – and it rises to PLN 30.5bn. The eight firms traded on the main board of the WSE account for more than 95% of the total capitalisation. CD Projekt has an especially large share.
The community of gamers in Poland
The Polish gaming market, defined as consumer spending on video games, has been evolving in tandem with the expanding population of gamers and with their preferences. It is characterised by some distinct consumer trends. We estimate the number of people aged 15-55 years who play video games in Poland at some 16.6 million. In 2014-2018, their population grew by an average of 6% a year. If we narrow our focus to active internet users – arguably a more reliable guide – we get a gamer population of 14.8 million. It has been growing at a faster pace, exhibiting a CAGR of 9% in 2014-2018, driven by rising penetration of internet services and growing popularity of browser and social games, among other factors.
PMR survey: expenditure on games
Below we present selected findings from a new PMR survey in which more than 1,000 Poles were asked questions about video games.
