Hi, everyone. Welcome to the stream for our Q3 2020 report. Hello, Alex.
Hi.
How are you?
I'm good.
Yeah.
How are you?
I'm good. I'm a bit depressed. We had some new corona advice in Sweden yesterday.
Very strict. We as everyone else, of course, are seeing a lot of impact from this, but we are going to do our part. We try to sit far apart, for instance.
Okay
Get over this as soon as possible. That's not why we're here today. We have some great numbers, I think, to share with you.
We do.
Let's kick it off.
Let's kick it off.
Q3, the royal quarter, obviously, because we released our game, Crusader Kings III. Our revenues were up 75% compared with the same quarter last year. Very happy with that, if we look at year-to-date, so that's January to September, 77% up compared to 2019.
compared to the same quarter last year. If you look at the year to date, it's up by 77%. We're of course super happy with these numbers, and very proud. The revenue year to date is close to SEK 1.4 billion. I think that's where we're seeing great progress there. If we move to the next slide, this is very much thanks to Crusader Kings III, a game, a franchise I should say, that we have been developing over many years, 16 years since the first one was released. The third one was released 1st of September this year. We had high hopes for the game, very high hopes. We felt very good, of course it was amazing to first of all get a Metacritic score of 91. Metacritic is the combined review score from professional reviewers all over, really, in our field.
Even more fantastic, I think, is that our fans, who now have made almost 21, not quite, but almost 21,000 reviews on Steam. When we look at the average score there, it's on 92%. That's of course fantastic. It's such a great reward to see that something that we love is also loved by everyone who supports us and plays our games. That means that a bit more than a month after the release, so early October, we crossed 1 million sold games on Steam. A very big milestone for us. We have also launched the game on Game Pass with Microsoft for PC, and that was the first for us to do it on this scale with a brand-new game. A bit scary and very exciting.
We of course are also seeing an influx of players who have not been in as much touch with Paradox as the Steam players from before. That's a really interesting part of this game for us. I should mention that this building franchises over time, which we've done in the case of Crusader Kings, is really something we try to do with everything. It's part that's why we think it's so important to own our own IPs and to build on our own IPs. Even a small and not always amazing release, early days, builds towards the future and towards a franchise over time. As we have such long games and want to support them for so many years, it's really key for our business model. All in all, we're super happy with this release.
If we look at what else is in the numbers for the quarters, we started the quarter with the end of the Steam summer sale, a couple of days there in July. We have launched only one DLC this quarter, which was "Distant Stars" for "Stellaris" console. As you can see in the reports, we see a substantial contribution from consoles. We're very happy about that, so we are also looking at the future, what else we can do on console going forward. We have, of course, the next generations of both PlayStation and Xbox came out now, so that's also very exciting and drives interest for the console in general. A big part, of course, of the revenues is all of our players. It's the only part of our revenues, really, all of our players.
We have 4 million active users and players of our games, and we have more than 14 million registered Paradox accounts. The accounts are important for lots of reasons. Since we sell our games through third parties like Steam or Microsoft or Epic and many others, we want to have a direct connection with our fans, and we want to be able to communicate directly with them. We've been building our ecosystem for a long time, and we will continue to do so. This is really the foundation of how we build for the future, together with the games. What we are also doing in parallel is of course trying to build services and features that are interesting for the fans and help them to enjoy the games more. We had a cancellation of an externally developed project. This happens every now and then.
It's part of what we do, really. We think it's very important to be able to start projects and then also cancel them if they don't work out fully. It happens all the time. In this case, it was a game developed by a third-party studio that we had not yet announced that we canceled. That affected the result with SEK 28 million bottom line. That also brings us to the next thing, which is that we have, during the quarter, changed our amortization model. We, CapEx, capitalize all the development for a game, whether it's a first party or a third-party studio that's developing it. All that money is then depreciated over time once we release the game. Previously we have done equal parts for 18 months. One eighteenth of the CapEx per month.
Having analyzed for the past year or so the structure of how revenues come in, we've decided to change this to better reflect how the revenues come in for a game. For Crusader Kings, and games that are similar going forward, we will take 1/3 of the cost the first month, 1/3 of the cost month two to six, and 1/3 of the cost month seven to 18. That means that it's a fairly different model, but also reflects revenues better. It's not going to be for all games because a game, for instance, in early access does not have the same revenue stream, and the same goes for mobile. In this type of game, we will see it going forward as well. I should also point out what I always point out, that the revenue fluctuates over quarters. We don't release based on a quarter.
We release when we think a game or a DLC is ready. That means that you can't always compare quarter-over-quarter. It's much better to look at us over longer periods of time. Rolling 12 months, for instance, would be my recommendation. Other important things this quarter, we've mentioned it before, I'm wearing the jacket. We have acquired two studios. First of all, Playrion Game Studio. Playrion is based in Paris. It's a mobile studio. They work on a game called "Airlines Manager." The reason we think that they are a great fit for us is that it's in the management segment. That's a very big segment for us. It's also in mobile where we are always looking at expanding our skillset, and the guys and girls at Playrion are really great at this. The next studio, which is Iceflake Studios.
Iceflake is based in Tampere in Finland. We have been working with them for quite a while on the game Surviving the Aftermath, which is a management game in the survival world. It was released in early access on Epic a bit more than one year ago, we actually released it in early access on Steam in October. We're looking at a full release next year, sometime quite early next year. This studio is also, of course, an addition of talent to us in an area where we know a little bit more than in mobile, but still a place where we really want to grow. I mentioned COVID in the beginning. It continues to be a big topic. We still encourage all our employees to work from home in almost all of our locations. We continue to follow the recommendations from the authorities.
We feel that taking care of our staff and making sure that people feel safe and healthy is key here. We actually do a lot of both social and move-around activities. We also have a lot of seminars for mental health and how can you work from home and how can you lead from home, because of course, this is also quite a big strain on managers to never see their teams. The long-term impact, I've said this before as well, but especially in Q1 and Q2, we saw quite an uplift from COVID. It definitely normalized during Q3. We haven't seen any big bumps as before, but who knows? We will continue to evaluate this going forward, of course. We are also continuously seeing an effect on productivity. It really comes from two parts. One is that it is tougher when you never meet in person.
The other one is also that we are recruiting so many people. We're still in a very lucky situation. We're growing and we're recruiting, and it's definitely more challenging to build company culture and build an inclusive environment when you meet so little as we do today. We are, like pretty much everyone else in the entire world, hoping for us to find a vaccine and also that it goes away soon. We'll see. Last but not least, we have a really cool game coming up, Empire of Sin. We're launching Empire of Sin on the 1st of December. This is a strategy game, 1920s Chicago mob era during the Prohibition. You take on a mobster role, and you will build your empire in these times. The game is built by Romero Games. They're based in Ireland, in Galway.
We are seeing some really cool and good previews on the game. We're very excited about this and really look forward to the release 1st of December. That's it for me I think for now. Alex, over to the numbers.
Thank you.
Yeah.
Let's dig in. As Ebba mentioned, a new record quarter in terms of revenue. We managed to obtain SEK 495 million of revenues in the quarter compared to SEK 283 million the same quarter the year before. That is an increase of 75%. As we have pointed out many times before, making these year-over-year comparisons, single quarters is not always relevant because our business is not seasonal. You need to look what has happened in the quarters. On paper, these two quarters, Q3 this year and Q3 last year, are very similar. We have released one new game in both quarters, CK3 this quarter and Age of Wonders: Planetfall Q3 last year. Besides from that, no proper PC expansion, but this quarter one port to Stellaris Console of a DLC and last year's quarters, one port to Stellaris Console and one to Cities Console.
Looks kind of similar but, of course, the fantastic reception of CK3 made a big part of this difference. The large part. In addition to that, we should mention collaborations we have with Game Pass or Microsoft regarding Game Pass, as well as Epic for Surviving the Aftermath. Game Pass we had last year's Q3 as well, but not to the same extent. I think we had three games in the service at that point. Now we have much more, and especially newer games like CK3, that, of course, generates revenues that we didn't see last year. Operating profit, SEK 188 million compared to SEK 93 million same quarter last year. That is little more than doubling, 102% up. Very good.
The same goes for profit after financial items, SEK 187 million versus SEK 93 million, and profit after tax came in at SEK 149 million compared to SEK 74 million the same quarter last year. Operating margins very strong again, 38% Q3 this year compared to 33% the same quarter last year. If we look at the full year-to-date, so far, we are at 37%. The profit margins after tax is 30% Q3 this year compared to 26% Q3 last year. Very solid and strong margins that we're very happy with. Equity to asset ratio. Well, there we have had the drop compared to last year. This is due to accounting standards regarding leasing. It means that we take our leasing contracts as an asset and as a debt.
As you might remember, last year, we did quite a lot of moves in Stockholm, in Delft, and in Seattle, and entered into new lease agreements, which meant that the assets went up and that the debts went up, so the equity to asset ratio went down a bit. Average number of employees, 596 through the quarter, and we ended the quarter at 606. Of course, we had a nice addition at the beginning of the quarter, which was to a large extent driven by the acquisitions of Iceflake and Playrion. We were at 472 end of same quarter last year, so quite a nice addition of colleagues during the last 12 months.
Hence this whole challenge of getting everyone on board and being a part of the bigger family when we're not in the office in the same way.
Yeah.
Also great.
Also great. Let's dive in a bit more into the cost side. First, we can look at the top line, the revenue. Here we see something that is a bit strange for Paradox. During the last four quarters, we have had a constant growth. Each quarter has been higher than the previous quarter for the last four quarters. If you look a bit earlier in the years, you will see a much more fluctuating revenue. I think that that is more representative for how it will be going forward. We were, of course, planning for a continued trend going upwards, but we will see, as we have had during the last three years, a much more fluctuating quarter-to-quarter development, I think, where we have high increase one quarter and even some decrease the next quarter.
It's basically a clear sign that we don't release based on quarters, we release based on when we think a game is ready to come out, right?
That's exactly why it looks like that. Let's look a bit more into the costs. We divide our costs into three main type: cost of goods sold, selling expenses, and administrative expenses, where cost of goods sold is by far the highest or biggest type of cost. Here we have all the costs for our studios, our nine internal studios now. All the cost for our external development partners. We say a bit rough that somewhere around half of our games are developed by external studios, so all these costs come in here as well. We have royalties on this item as well. We pay external studios when the games are doing good, we pay royalties to the studios. We also have depreciations here on the games and intellectual properties that we have acquired over the years.
The latest one was Playrion, where we got the rights to "Airlines Manager."The same, we acquired Prison Architect a year and a half ago, BattleTech through the HBS acquisition, and Age of Wonders. Also World of Darkness, we shouldn't forget, of course.
That all adds up. Then also we have quite a lot of tech development at our publishing unit here at Paradox Interactive. That tech unit is, since the beginning of this year, spending almost all its focus on developing functionality that is very close to the games. Therefore that is considered as a cost of goods sold now. If you look at all these three costs, they add up to some SEK 303 million. If you go back to Q3 2019, it was just below SEK 200 million. It's a 53% increase, less than the revenue, which is the important thing. This comes, if we remain a bit on the COGS line, this has to do with the fact that we are growing our business, we are growing our organization and doing more things.
Also, since we are recognizing costs for the development through the amortization that Ebba described, that means that when we release a game, the cost goes up because then we start amortizing on that game. Previously, when we amortized equal amounts during the first 18 months, it didn't have such a huge impact when we released a game. From this quarter, and it's probably going to look similar in future quarters, we will see a COGS, or cost of goods sold, that is following the revenue in a better sync, I would say.
That is part of the purpose why we do this, why we have changed this amortization method. We want to match the period of the cost and revenues for the same resource. Marketing costs and administrative costs. Marketing and selling expenses is all the costs we have for external marketing, for our internal marketing organization, our partner management and everything. That went from SEK 14 million Q3 last year to SEK 50 million Q3 this year. This cost, as you can see, it fluctuates between the quarters. You shouldn't analyze the development of the costs by just looking at two quarters comparing them. You need to look a bit more over time. As you can see from the blue lines, it's growing slowly. Administrative expenses, that is everything else. Everything else that is not cost of goods sold and marketing. It's part of the offices.
it's us, it's HR, it's IT, and quite a lot of things. That has been going down even compared to previous quarters, that has to do to a large extent with the fact that a big part of our tech people at publishing that previously used to work with administrative closer functions now work with game closer functions. I think we can move from this chart further. This shows revenues as in the previous chart. Here you can see the same in the green bars. It has, during four quarters, going up. Before that, it has been much more fluctuating. You see the operating profit that has followed the revenues. We will see the same, or perhaps even more similar going forward, where the yellow line will follow the green bars to a large extent.
Again, especially if you look 2018 and 2019, there is quite a fluctuation of revenues and profits between the quarters. If you want to analyze and understand Paradox and try to figure out where we're heading, don't compare just to single quarters, even if it's this compared to the last quarter or whether you use the same quarter previous year. It's much better to try to group it together, as we have done for you on this slide. This is rolling 12 months or rolling four quarters, and there you can see a much clearer trend and a much smoother growth, both in terms of revenue and on profit. Cash flow. Green bars show the cash flow from our operating activities. That is pretty much all our kind of live games, the revenues we get from the games and what it takes to support them.
The yellow bars is the investing activities. If we start with the cash flow from the operating activities, again, a super strong cash flow with over SEK 200 million added.
Still a bit low if you consider "Kings." Or?
Well-
Leading question.
Yes. Thank you. It's a good question. Yes, we had a fantastic Q3. One could expect that the cash flow from our operating activities would be higher. We released "Crusader Kings" 1st of September. That means that all the cash from our distributors from selling Crusader Kings III in September, we had not received by end of Q3. Instead, we got almost everything at the end of October. We can expect a very good October from cash flow from operating activities. If we look at the cash flow from our investing activities, that is a record. Normally, what we have here every quarter is the cash flow from investing into game development. There we had SEK 154 million investing in Q3. That is a record if we just look at investment into game development.
In addition to the SEK 154 million, we have also invested in Playrion and Iceflake by doing those acquisitions. Quite an important quarter in terms of-
Yeah, absolutely.
building for the future.
Total equity and total non-current assets. The total non-current assets is very close to SEK 1.5 billion. This is mainly our capitalized development. It's also the intellectual properties to the licenses and game rights that we have acquired over the years and not yet depreciated on. It's also all these rent contracts that I mentioned earlier. As you can see from the green bar, it's almost one-to-one covered by our equity. This shows that we have very little debt financing our business. That is what I had planned to go through.
We have 1 million questions, unfortunately.
We have quite a lot of questions.
I'll start reading, and we can-
Yes
try to keep the answers quite short. First, how many copies has CK3 been sold during Q3? I mentioned it. We passed 1 million just after the end of the quarter, early October. Super happy with that. We also shared some stats a while ago, for instance, 25 million hours played. I can't remember how many murders. There's a lot of them and a lot of babies sold. You can find that information if you Google the press release from that. What are your favorite Paradox Interactive games? Well, mine, at the moment, I'm mainly playing Cities, actually. I'm back to Cities.
Mm-hmm, okay.
What about you?
I need to say CK3, of course.
Yeah?
Yeah.
Have you killed any babies?
No, not yet. Soon, maybe.
Soon. Okay. Somewhat on a more serious note, does Paradox Interactive plan on supporting more new releases with some kind of season pass? Alex, do you want to-
Yes.
Yeah?
We do. Season pass is when we bundle different DLCs together and sell them as one. This we did for Crusader Kings III, we also plan to do it for Empire of Sin.
You can already buy it.
Yes
preorder.
Yes, you're right.
We've done it for quite a few games.
Yeah.
The port I mentioned, which was the only kind of DLC we released during Q3, that was actually part of the third expansion pass or season pass that we had for Stellaris Console.
Yeah, true. That's, yeah, I was pointed that. Okay. Did giving away CK2 and making it free-to-play have a huge positive impact on CK3 sales? Yeah, it's a very good question. It's part of going into a launch of a new game, there are lots of marketing activities that are being done, and they all, at least the intention is that all of them support each other. Giving away CK2 for free was definitely a part of this. It's very difficult to draw a straight line, but as we can see from the sales of CK3, we are super happy with all of the activities that build it up together, and I also think it's a great way to ease into one of our games to look at one of the ones that are free-to-play. I would try it out if you haven't already.
Alex, how do you recognize the revenue from CK3 or any game? Does it all come in the quarter, or is it recognized over a period of time?
Yes-
Maybe cover both preorders then.
Yes.
Yeah.
This is a question that we have received a couple of them during the morning.
It seems to be important. Well, most of the games have been sold during September, meaning that the players have actually made their purchase during September. For the revenues from those purchases, we recognize in September. That is the base method. There are a couple of variations to that, and one is preorders that we have sold before September. The revenues of those preorders we recognize when we release a game, so in September. On the other hand, the previous question was regarding season pass. When we sell a season pass that includes revenues from future DLCs, we distribute the revenues from that season pass. We have received the money, we distribute it over the original base game or the period when we release the original base game and the upcoming periods when we plan to release the DLCs. And was it something about-- Yeah, so I can mention-
You mentioned it before the cash.
Yeah.
Revenue from Game Pass was the question, I think.
Because that is part of the revenues we have seen in the third quarter, comes from the Game Pass revenues from CK3. There we kind of recognize the revenues distributed fairly even over the period where we have the game available on the service. Compared to the sales we do on Steam, the revenues are much more spread out over time, so it's not that front-loaded. That's the way that we recognize Game Pass. A little bit about cash. We talked about cash regarding Steam. Regarding Game Pass, that depends on the contract. Sometimes we can get some upfront, sometimes we get it all at the end, sometimes distributed over some time.
That affects cash flow but not the result.
Exactly.
The result comes in the collection.
No, the result and revenue is distributed over time.
Cool. Okay. Are you satisfied with your games performance on Xbox Game Pass? Can we expect more of your titles in the future? Short answer is yes. It's always scary to go into a completely new business model, in this case, subscription. We want to do it because we think a lot of people enjoy our games that way. It's important for us that we then work on onboarding to make sure that people understand what it is they're supposed to do in the game, even if they're not super used to our games. That's something that we try to balance. We've been on the platform since it launched for PC in June 2019, and our plan is to continue to be on there. Yeah, that's the plan. CK3 again, Alex. The take rate on Steam, so basically the revenue share.
Yeah
in the chat as well. How does the revenue split for Steam work these days?
Yes, it's a very specific question, but that is exactly what it regards. When our distributors distribute the games for us, we kind of pay them by them keeping a share of the revenue. In the digital entertainment industry, 30% seems to have been the standard for many, many years, regardless of which platform you're on.
Yeah.
On Steam, up until two years ago, it was 30% flat. Starting October 2018, they have changed it. Once a game reaches SEK 10 million in revenues, the revenue share drops from 30% to 25%. For, of course, a game like CK3 that has sold that much already, we reach that lower take rate quite quickly. There is another take rate to reach for, and that is once a game has reached SEK 50 million, then it drops another 5 percentage points to 20%. When it's an internally developed game, this extra money comes down to the bottom line for us, so it affects results in a very nice way.
I saw it in the chat as well. One additional question is the revenue share to Steam included in the top line? It's not, correct?
Exactly. There are kind of different methods to do it. You could take the full gross number and then include the fee to Steam and the other distributors as a cost, but we don't do that.
No.
We take the net as a revenue.
Yep. All right. Next question. How did the experiment with Europa Universalis IV subscription pan out? Basically, we've had an experiment for quite a while on Steam where you buy the base game and then you subscribe to all the DLCs. It's going well. It was a quite small sample because we wanted to see if anyone wanted it. The people who wanted it tend to stick to it, so we deemed that it's successful. We will continue to iterate on it and continue to have that option available for people. We are also looking at if we can include other games in that setup as well. I would say it's mainly interesting for games that have a lot of DLCs, where maybe as a player, you want to try out a couple and either continue that way or decide which DLCs you like, basically.
Mm-hmm. Are you developing any new unannounced titles, Alex?
Yes.
How many externally developed titles are in the backlog?
Yes, we are developing both external and internal titles. We always do. We always try to develop more titles and bigger titles. Until we have announced them, we kind of haven't announced them, and we are not saying how many there are and when we plan to release them or when we plan to announce them. You just have to keep waiting until the announcement comes.
Keep your eyes on the price, so to speak. Okay. What are your plans in regards to PDXCON in face of COVID-19 and the industry's trend to move to more digital event format? Well, this has been a huge topic of conversation this year. We, of course, would have wanted to have a physical PDXCON. We love meeting up with everyone and having all the developers there and all our partners there, et cetera. Given that it's the 17th of November and you haven't heard anything, I think you can safely assume there won't be a PDXCON this year. I really hope to come back to doing something next year, but we still don't know.
We want to make sure that we have something to talk about, of course, but also that we can do it in a way that's good for us, but primarily also safe for us and you, everyone who wants to join. Okay. I have a question about Stellaris: Galaxy Command. How much of an impact is it having to cash flow? If it's not doing well, is there a downside risk to overall earnings? Sorry, Stellaris: Galaxy Command is our mobile game-
Yeah
for Stellaris, I might forget to point out. Mm-hmm.
At this moment, it does not have much impact to the cash flow. First, we have a negative cash flow, as you could see from one of the previous slides, during the development phase.
Once when we release a game. On the cost side, we don't have much negative cash flow. Normally when a game is successful, we have a very positive cash flow. This is a mobile game, so the expected kind of take-up rate is different. So far, we are not seeing a huge cash flow impact from this game.
The second question, if it's not doing well, is there a downside to risk to overall earnings? Yes. The plan with all our games is that they are going to generate a positive earning each game. The games that don't contribute to that don't contribute to the earnings. That is the main negative thing with the game if it, at the end, doesn't deliver. Of course, if it doesn't even generate enough profit to cover its own development cost, then we do these write-downs. That is very rare once we have released the game, but it happens. It happened two years ago.
Yeah
the last time I remember.
The new CK3 players, do you see them moving over to play other Paradox Interactive games as well? I would say it's a bit too soon to tell-
Yeah
because people are sticking to CK3 to a very large extent. We do see a large influx of new players, not least from the Game Pass cooperation. Of course, we hope to see them. Move over into other games. When we look historically, we can see that when we've had new games with big new influxes like Cities, for instance, or Stellaris, or even further back, Magicka, that over time, yes, they move into other games as well and start to play them. We have an amortization question here. What's the effect in September with the accelerated amortization? Can you go into more detail, Alex?
Yeah, a bit in more detail. We don't disclose single games, not revenues and not development cost, but I can explain the model a bit more. Previously, we took one eighteenth of the development cost, and now we take 1/3. Let's, only as an example, assume that the development cost to be depreciated would be SEK 50 million.
Yeah.
In the previous method, where we take one eighteenth, it would be little less than SEK 3 million per month to write off or to amortize. Now, with this new model, when we take 1/3, it would be SEK 17 million during the first month. The difference is SEK 14 million. If the game would be SEK 50 million, it would be a SEK 40 million impact of this new method. If it would be double, SEK 100 million, it would be SEK 28 million as an impact. Yeah.
What long-term growth do you plan for in the company as a whole? Well, we don't disclose that either, but we do disclose that we are on a growth path, and we intend to continue to grow. I think you can look at our CapEx volumes to see that we are investing a lot for the future and build for that. Back catalog weakness in Q3 year-on-year in PC, excluding Crusader Kings III from Q3 and Age of Wonders: Planetfall from Q3 2019. Is there a big difference, and is this a result of a new DLC's release in Q3 2020, or is that the potential demand was absorbed by a strong Q1 and Q2?
Yeah. Two things here. Yes, all our quarters are very dependent on us coming out with the content for the games.
Yeah.
If we don't come out with expansions on certain titles, it means that those titles are not going to sell a lot. If we have a quarter with no DLCs, we are not going to sell much. That goes for every quarter, and it goes for Q3 this year and Q3 last year as well. Neither of those quarters had any real expansions. I don't know if there is some kind of conclusion here that the so-called back catalog sold less this year's Q3 compared to last year's Q3. Again, we don't disclose this on a per game level, but I would not confirm that conclusion at least, I can say.
All right. Try to go through a few more questions here. Mobile, how's it going? We mentioned it before. We're investing for the future. Playrion was an acquisition in line with this, and it's not our biggest platform, and we don't think it will be in the future either. It is important as an addition to our games. Do you see any similar patterns in engagement from Q2 to Q4 as some lockdown measures are implemented, for instance, in the U.S.?
I think it's too early to say.
Oh, okay.
In end of Q1 and throughout Q2, I would say, we saw huge uptake on the gaming on the consumption side. I think we should not take that for granted that that will happen again.
Bloodlines, there's a question on how is that going. Bloodlines is definitely seeing impact from COVID-19, and it's a new genre for us, but we are continuing to build on this game, and it's definitely one of those areas where we build for the future. There will be more news about this at a later stage for sure. Does work from home also have an impact on DLCs, and should we, for that reason, expect less DLC in the upcoming quarters?
I think it impacts everything a bit, but perhaps DLC production is not the part that is impacted the most. Perhaps it's impacted a bit less because there you have a smooth team that has released on the franchise before. You could say that it's later in the development stage. I think the DLC production will be less impacted than the new game production.
We have some questions on cloud gaming. How are we looking at cloud gaming? We are working with several of them. It depends a little bit on how difficult the tech is to move a game to their back end. For some, it's the same game, for instance, for PlayStation's cloud version. It depends, but we are available on multiple cloud bases, and we want to be as well. As I said before, we want to be where our players are, so we tend to move to that. Why have we chosen to change our amortization schedule now? I think we responded to this.
Yeah, the timings. We see bigger and bigger games being released in the future, and then this becomes more of a topic, how you distribute the amortization over time. If we look back over 2018 and 2019, if we would have applied the same model during those two years, it wouldn't have made much difference.
Yeah.
Going forward, we see just bigger games coming out with bigger development costs, and then this is going to have a bigger impact. It becomes more important to match the revenues and the costs more detailed together.
All right. We have time for three more questions. Xbox has been mentioned a few times. What about the other consoles? We are on both the Switch, "Empire of Sin," for instance, will be on Switch, and also PlayStation. We are definitely there. Alex, the cash spent on M&A seems a bit lower than I thought. How much of the payment is deferred, or is it being supplemented by equity?
Okay.
That's a tricky one.
If you look at the quarterly report, towards the end of it, in one of the notes, you have fairly detailed explanations on how much has been spent on each of the acquisitions. I can say we pay all with cash and no shares.
All right. Last but not least, you have now sold SEK 80 million-SEK 90 million in 2019 and written down a substantial portion of your capitalized development. How does the pipeline look for 2021, 2022? When can we expect more information? Is it reasonable to expect the same amortization strategy for most big titles? As we said before, yes, we see that for similar types of games, we will do the amortization in the same way. When it comes to the pipeline, we will tell you when we are ready to tell you.
I would like to point out one thing. We have written down a lot, was the kind of opening to the question.
Actually, if you compare, yeah.
No, if we compare how big part of our capitalized development that has been written down, I think we are at 3.7% year to date this year. Last year was 5.4%, and the two years before that was 7% and 8% respectively. This just shows that this is a part of our business, and this is something that we need to kind of expect and actually embrace. Because it's so important that we do this.
We don't want to ever be in the situation where we have to release a game just because we couldn't afford to cancel it, basically. All right.
Time's running out.
Yes, time's running out. I think we covered pretty much all of the questions. Thank you so much for tuning in. We will be back.
We will.
with Q4 2020. That's not until February, though. 23rd of February.
Yes
I believe is the date. Until then, if you have more questions, you can always contact us on Twitter or other platforms, and thank you.
Thank you for watching.
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