Hi, welcome everyone to Paradox Deep Dive. We are so happy to have you with us today, both you who are joining us from our Stockholm office and you watching the stream from around the world. We have prepared something truly special for you today. Together, we're gonna dive deep and explore Paradox Interactive from the inside and out. Our business, our strategy, and growth. The things that makes us unique and the things that makes us stand out. We have a full schedule with lots of sessions and speakers. We divided them into these three chapters. After each chapter, there will be room for some Q&As, so please send your questions to our investor relations email, ir@paradoxinteractive.com, and we will cover it at the end of each chapter.
We hope that you're excited to take this exclusive peek under the hood together with us, let's just jump right in and open up the first chapter here. This is where we're gonna let you in on our growth strategy and show you how we plan to seize the opportunities ahead. The first speaker is someone who says that, "I just wanted to make the games that I like to play." He found a group of like-minded people who shared the same drive. Publishing their own games and other titles as well gave them the funds to invest in other games that they believed in. Over 20 years later, he's still in business to do just that, and here he is today, the CEO of Paradox Interactive, Fredrik Wester. Welcome.
Thank you, Paula, for that nice introduction. Very good to see you all here. Thank you for joining on the stream as well. Actually, I'm gonna change my presentation to start with. This is me. I'm gonna change how I wanted to start because I got the question, "Why are you doing this deep dive into Paradox Interactive?" I know some of you analysts, I'm not gonna mention any names, you've drawn your own conclusions already, so I'm not gonna elaborate on that. Whenever that happens, I get a lot of text messages as well, so it's always a good refreshing way to know that we're in the media.
A common question I get when I'm on a cocktail party, which happens very rarely by the way, say you're at a barbecue instead, is, "Should I invest in Paradox Interactive?" Is a very common question I get. It's very hard for me. I'm not an investor by myself. I'm not a very good investor at least. I never give any advice to anyone. I always say that if you're in it for the long run, I definitely think you should do it. I definitely think you should give it at least a chance. The main reason we're holding a presentation here today is that for a long time, since I came back as CEO, even before that, we've had a lot of questions about how Paradox works, what are the forecasts.
We're not gonna give you any forecasts today, by the way. Wanting to look under the hood of what we're doing, how we're thinking, the abstracts, the strategy, et cetera, and we have been a bit of a black box in the minds of people. Even if we've created a good company over time, you can see it growing from the outside and you still don't really know how we're working on the inside. In the name of transparency, we wanna give you the best possible presentation of how we work, our thoughts, our ideas, our strategy on how to grow and how to make a better company. What should you expect from Paradox? Speaking in an abstract way again. There are three things you as investors should expect from this company.
It's top line growth, good EBIT margin, and a stable cash flow. Those are the three. Not one of the three, and not two of the three, but three of those three. It's gonna look different between quarters. Some quarters are gonna be better in one aspect. Another quarter is gonna be good in another aspect. Over time, these are the three things you should look for. You shouldn't judge us as a company by the promises we make. You should just judge us by two things, the reports and the numbers that we deliver, and if you believe in the strategy that we're presenting here today. Those are the only things. I'm also super happy to say from our perspective that the rumors of the death of the games industry are greatly exaggerated. That was a bit funny, wasn't it? Yeah. Good.
We'll start with just running into it. Paradox Interactive is built brick by brick, as you can see here. Go back to 1997, where the company Paradox Entertainment was founded. You can see that we release games at a certain pace. It's not a lot of games every year. These are not all the games. These are some picks that we have. Some of the core titles, if you like. We release sequels. We release games built by our internal studio, which are, for example, Crusader Kings, Europa Universalis, Hearts of Iron, Stellaris, et cetera, Victoria 3, and the latest one, we move this one, Age of Wonders 4. That turned out to be a great release for us as well. We're super happy about that.
Combined with that, we have some other releases that are externally developed, like Magicka and like Cities: Skylines as well, that you all recognize. Normally we produce a sequel when we need it from a technical perspective, and I'm gonna dig a bit deeper into that later on as well. We're not doing it mainly for commercial reasons because if you take a game like Hearts of Iron IV, it has 4x the number of players monthly today than it had the month on release in 2015. Almost forgot when it was released, June 2nd, 2015. If you look at the business model, we have changed and adapted over time. We started out, we are physical distribution through partners.
We licensed out, sent a gold master, basically disc, to a distributor who would copy this into thousands of different units and ship it around. We started our own physical distribution together with Atari, early 2004, and kept on doing that for a long time. We still do some own physical distribution as well, even if it's less than 2% of the total-- or 1% of the total revenue. We partnered up with Steam for digital distribution in 2007, and already in 2010, around here, more than 50% of our revenue came through digital. We developed our premium DLC model starting with Crusader Kings II, and had a game that was kept alive and just kept on growing as well up until we released Crusader Kings III, eight years later.
We are also now looking at not only a premium DLC model, which is still the primary driver behind our revenue and growth, but also new value propositions like how do we present new things that our gamers want and that we can actually produce for them? That is basically the brick-by-brick approach that we've been using ever since the foundation back in 1997. If you wanna measure if a video games company is healthy or not, you should follow the MAU, the monthly active users. That will tell you a lot about do people play their games or don't they?
You can see here, when we started measuring for real, we had the analysis before 2017 as well, but we started at around 2 million, and we're quickly, or not quickly, but somewhat quickly approaching 6 million at the moment as well. How does the revenue curve look if you compare it to the MAU curve? Well, as long as you keep focused on the core business, it will stay really good. When you start looking at other things, it might dip a bit, but we're actually back, and we're following the trend, which is very positive given the recent releases as well. We haven't got all the numbers, like Age of Wonders 4 is not in here, for example. Again, our absolute top KPI is monthly active users because if the users are there, it's much easier to do business.
Right? Makes sense. When we're gonna summarize how we're gonna grow into the future, we summarize it in three different ways, three different legs, if you like. We call it dig in, stock up, and break out are the three ways to grow. Some months are gonna be great for one of those, some months are not, so it's gonna vary in between the quarters, even in between the years. There's three stable foundations, I would say. If you look at digging in is focusing on the games we already have live, on the games that we already have in production, and the games that is the core of Paradox Interactive, mainly eight different brands or games at the moment.
Building this, the most important thing for us always when we do something is to add player value because if you don't add value, no one wants to buy your product. The core focus on all of these is how can we add more player value in everything that we're doing? The second, the way we do it now mainly is through what we call live game content. It can be DLCs, it can be music packs, it can be different ways to also monetize on this because we're not only adding this for free, but we also charge for it. A lot of it is for free for the people who only bought the base game.
If you bought, say, Stellaris when it was released in May 2015, it's a totally different game today because we've added so much free content to it, even if you bought it on a Steam sale at a very low price. It's a good value proposition for the gamers anyway in our perspective. We also have a couple of what we call new value propositions that I mentioned before. That's a new way to approach the market for us, a new way for our gamers to find value and maybe step into our games in an easier way because sometimes when you come late into a game, the amount of DLCs and the way to get into the game might be a bit steep, for example.
This is one of the examples we have of, this is the first time we're actually showing any numbers, you should really bring out your notebooks now. We've just been trying. We added in 2020 in January, we started with subscription for one game. It was Europa Universalis, I think. We added Crusader Kings II and Hearts of Iron IV. We've done basically nothing with this, just added it as a way to consume our game for $5 a month. As you can see, it's been growing organically, we are at the moment at around 100,000 subscribers a month, which tells us this is a healthy way for us to grow as well. This is a way that our gamers want us to present maybe the games.
In the future, who knows? Maybe subscriptions is also gonna be an integrated model in how we approach the games industry. You can see at least. This is not gonna move the needle a lot, but it's good as a test. It's mostly done with our left hand on titles that are a bit older. If you look at stock up, the second one, you can see that we also create new games, right? Cities: Skylines II is replacing probably Cities: Skylines, even if I think Cities: Skylines is still gonna be around for many years. It's a great game with a lot of content. As we said, we released Age of Wonders 4 that is having a really good first month. Not only sequels in the stock up proposition, it's also new IPs.
You've all seen Life by You that is developed by Paradox Tectonic in Berkeley, hopefully releasing in early access later on this year. I don't think we have a date for it yet. The Lamplighters League that is releasing later on this year as well from our studio in Seattle. It's a twofold way of working with, when we work here with new IP, we make sure that the studio has a previous track record in the type of game that they're doing, and we're basically going in the direction where the studio creative is really strong. Breakout is the way for us to find super promising games in the market and make them grow unproportionally big. These are two examples. Magicka in 2011 was produced by an eight-man student team from the godforsaken town of Skellefteå in northern Sweden.
Cities: Skylines in Tampere in Finland, by I think they were 14 people. Very low budget compared to the SimCity, for example, of the world. These are historical breakouts made by small teams that carry a strong creative vision, and we believe that smaller teams have a better creative vision than if you put 200 people together to create a new game. We strongly believe that the foundations of the game is being scaled over time, and not only as a splash release to bring in a lot of money in the first quarter, but it's gonna grow over 10-15 years, and that's how you create stable and reliable and profitable games with a great player value as well. That's why we started Paradox Arc.
Paradox Arc is our way to find and to locate and to start cooperation with those studios that carry the same creative vision as Paradox does. They share our way of looking at things. They share our way of the creative vision on how a good game should be. Paradox Arc, we cast a wide net. We go out wide, the big funnel, here are the numbers for that. At any point of time, we have 10- 15 games under considerations. We work really wide with all developers we can find basically that match the criteria of Paradox Interactive. A year, we invest between SEK 75 million and SEK 100 million , hopefully to a good return of investment. We cancel between 60% and 80% of all the titles that we start engaging in.
The big deal breaker is the player retention good? Does this grow over time? Can we make a healthy, good business model with a great player service attached to it, or can't we? That's the defining factor of which Paradox Arc is working on that. Paradox Arc is working a bit on the side of the rest of Paradox Interactive not to interfere with the rest of the business because everyone loves new games. Everyone loves to talk about new games, right? My summary is that there are no shortcuts to a solid organic growth, but we think we're on the right way there, at least. These are the steps on the road. That's all I'm gonna say for today because I speak too much on behalf of this company anyway, so I'm gonna let some other people speak as well.
Paula, if you wanna take over the mic now.
Yes. Thank you so much, Fred. Thank you. Wee. Keep on sending your questions to Fredrik and to the other speakers. We are going to cover them, thank you, in the end of this chapter. Fredrik, he just gave us the recipe for growth here. Now we're gonna examine how to pursue this potential. It all starts with the fans. The next speaker is someone that have had many different positions at this company. He started off as the first full-time producer, and he has also been head of studio, head of publishing, COO, and currently he is the chief of staff, and he is the second in command to the CEO. Welcome, Mattias Lilja.
Thank you, Paula. Hey, everyone. We're gonna take a look into what we mean by tapping our potential, and as Paula already gave it all away, it's about our fans mostly. Not very surprising maybe. What you see here on your, I guess, your left is a picture taken right off Steam Spy just as an illustration of the engagement our fans have compared to other strategy games. These are available of course. We know that we cater to a connoisseur audience who really know our games and know the company. We know they want more content because they say so when we ask them and otherwise as well.
We also know that looking back, let's say, for September last year, we released content for all our major games at the same time with zero cannibalization between them. There's room for us to produce more, to give the fans more, and we're not running out of ideas or running out of business that way. There's also. This is a highly demanding audience. You're gonna see more about that later today as well. A few anecdotes that might help to remember that is. We get sent pictures. Somebody says, "This tank that you're presenting is not the tank you think it is. It's a different tank. Look at the placement on the antenna." It could be, "This village that you placed in Poland in 1936 is actually across the border in Soviet Union.
You need to step up your game." They know what they're talking about. They know the games, and they know the subject matter, so they keep us honest. We get away with very little when it comes to quality. They decide what's good, and we have to live by that, and of course want to as well. They can also be, as I said, merciless on quality. We had a player who played Crusader Kings for several 100 hours and ended with a review, "Do not recommend." They do their homework. They're not sloppy, and that's, but that's how we like it, of course. How do we serve our fans in the best way with value? Well, we've identified five main drivers of this.
We are already operating in all of them, but at very different stages. We've come far in some, not so much in others. I'm gonna show you them and talk a little bit about each one. Hard to not be in the way of my own. Mods or modding is something we've done since the beginning. We give them access to the code. They can change aesthetics, game systems, entire games. They can take it all and do a total conversion mod into something else. We've allowed all that from the beginning. That and the complex gameplay is one of the reasons mainly why people can play our game for a long time. There's a lot of content, the fans are on board, the community's on board creating that.
We've come quite far, we think, in this respect. We could do better tools for the modders. We could also perhaps help people with presentation like, "This is the type of game. You play like this. Maybe this is also content you wanna look at or mods that might suit you." Otherwise, we've come quite far. The DLC model, probably know that if you know anything about Paradox. CK2 really premiered this, and we run it on all games. It works really well. As I said, we cannot produce content fast enough for our fans, well, as long as it's good because if it's not good, they tell us in both verbally and by not buying stuff. It's very clear.
We need to keep up to their expectations on it, and otherwise than that, it's we have quite a lot of room there. Again, presentation is the thing. Our games live for a long time. Lot of DLCs. What do you pick if you're a new player? How do you find the content that you might want? That's also an area where we think we can do better, apart from making more. Multiplayer, again, one of those things that's been around forever in our games. We didn't support it a lot initially, but we've taken steps. Quite a lot of people play, and it's it's not mainly against each other. That could also be hard. Some of our games are inherently unbalanced.
Ottoman Empire versus Ulm, for instance, would be a tough match. People play together, so more co-op and of course also spectating. People watch when other people play, Here are things that we definitely could do a lot more with to make that easier to get into, easier to do, and more fun to watch, for instance. That's definitely an area. Multiplayer, by the way, it's harder to do on a live game. It's more suited to do on a new game, perhaps a sequel, where somebody really tackles it from the multiplayer angle. A lot of systems and other things need to be built from the ground up to really exploit this possibility. Paid UGC, this is, any type of content created by fans that, where we have a, let's say, a royalty split.
We do this in Cities: Skylines quite a lot today with Content Creator Packs, where fans do it, we curate it, and then it's sold, and we share the revenue. This satisfied the, of course, the makers of the content gets paid, which is good for them, so they can do more of it. The fans already want more stuff, we know that, so this is a perfect way of feeding into that. We, of course, supply the platform as the game and as part of the revenue share. Accessibility, again, one of those that we've struggled with from the beginning. We have really complex games, and we don't wanna dumb them down because fans don't want dumb games. They want complex games that are easy to get into.
Accessibility is probably where we have most way to go. Again, this is also a game, sorry, a feature that we probably do best in new games. You build it from the ground up. If you see the earlier generations of grand strategy games versus the later, you see Stellaris taking huge steps this way. The game is not a wall of info that you have to climb. It's more of a steep staircase, and we could probably keep leaning that even more. It's probably done best through sequels, new games, but you can do things in live games as well. Player value, we need to stock up on the right items. We need to have. Paradoxically enough, it's a lot about not releasing games. It's about killing stuff and killing it early.
Again, the core quality is not to release bad things, and the earlier we can stop this, something that is not going as we thought it would or hoped it would, the better it is. Our current kill rate. Taken from 2013, so in 10 years, it's about 47%. The mortality rate of games among games at Paradox is very high, about one in two see the light of day. Fred mentioned Arc. They have, of course, even more aggressive numbers for not releasing or not going to early access with games. This is key for us to remember that this is something we have to do. Usually, you don't see this, and you shouldn't as investors because we have to stop it early.
Sometimes you see it as a write-down, but that's of course a specific type of failure where we've gone quite far in a project before we have to realize that this is not going to work. 10 years, 28 released games, five what we call endless, I'll talk more about that. 15 what would be dubbed profitable, and then eight misses would be the thing. That would land us on a 71% hit rate from profit with profitable endless being hits and break even, we have a special category here called break even, but they also fall into the misses. We have higher expectations than getting our money back. An endless game is not born like that. They are launched and then worked on until they become endless.
It is a constant constant flow of us doing things, getting feedback from the fans, the fans pitching in with modding. Over time it becomes something that just keeps going. We can keep investing in this with good returns. We have the players with us. We have five of these games today. We also launched Victoria III fairly recently, and of course, Age of Wonders 4. They are profitable now, they're over there on the right end, because they're fairly young. They haven't been able to develop into endless. We don't know if they will. We have high hopes. We don't see any reason why they shouldn't, but it's gonna be quite a lot of work to get there, as always. The fans decide ultimately what this is.
Trying to summarize this would be that we dig in and stock up. We do more what works, we build more on that, and we focus on always on player value. We do that in a disciplined way, not getting carried away when things work and thinking that it's easy to operate when you're not at your best. We should stay close to that. If you look at 2022, this is a rough split between green is released, which I've referred to as live mostly in this presentation. Pipeline is the games in development. Arc, the 9% is the more experimental titles that Fred mentioned. This shifts quite a lot for us during the years. It's not particularly static.
Depends on long dev, development time for games. When they launch, of course, shift, things shift from purple to green. Of course, things from Arc might go either directly live as an early access game, but it might also be we see the potential here, we need to do something more with it, so we're gonna put some dev resource in it and release it. Both of those might happen over time. What we're trying to do is we're not gonna change how we invest in these categories, but we're gonna change the content mostly on the purple one, which is development.
We're gonna look deeper into what is our core, how do we work on sequels, and do things we're good at or better at, and take more calculated risks, especially than using Arc as the, "This is an experiment, let's accept that it is an experiment and try it over there where we handle risk better." This is what we think would be more, do more risk-adjusted return that makes sense over time for Paradox. Again, we get nowhere unless we have a high bar for quality and we make sure that we always hit the targets we have. Keeping an unsentimental view on what games get to live and launch and what doesn't is also it's gonna be key for us in the future as well.
Again, to become an endless game, which of course is the goal of everything we do, we don't always succeed, but that's always the goal, is the players who are gonna decide that. We talk to them, they help us out by making mods and other things, and we work together, and over time, we hope to get there. That was all, for me. Back to Paula.
Thank you. Thank you. Just as Mattias showed you, our focus on player value is relentless, and our players are the foundation for our very existence. Now we're gonna dive deeper into that. Who are these players? What makes them tick? Why do they love our games so much? Two people who can tell you all about that, and who sits on a treasure of qualitative and quantitative data, are Anabel and Stefan, and they can't wait to share some golden nuggets with you. Please welcome Anabel Silva Rojas, Head of Data and Analytics, and Stefan Eld, Head of User Research. Welcome.
Yes, thank you. We are here to talk about the PDX players. Before we start with that, we want to give a bit of introduction into what we do here at Paradox. My name is Anabel. I'm the Head of Data and Analytics at Paradox, and I lead a team of around 10 people working on our data platform and analytics and BI. Our focus is basically working with the game teams on understanding what our players are doing, how they're playing the game.
Of course, looking into player numbers and things like that. To get an even better understanding of the players, we work a lot with User Research and Stefan's teams.
Yes. My name is Stefan Eld, and I'm the Head of the User Research team. As Anabel said, you try to figure out what the players are doing, and then my team of eight researchers, we try to figure out why are they doing these things, what motivates them to play our games. In the next few slides, we will try to explain to you what we know about our players. We thought it'd be interesting first to look at some actual numbers and some stories from our players. Let's see, Anabel, what we have.
Yes. Some of the things that our players been up to in 2022. There's been a lot of murders, so 26 million murders in Crusader Kings, done both by players and AI characters. We also had a lot of Eiffel Towers built in Victoria 3. Then we have 95 billion citizens in Cities: Skylines. This is basically all our players' great cities that they've been building during the year, has a lot of citizens. Then 20 million wars won in Hearts of Iron, of course. Then last but not least, they've been colonizing the galaxy in Stellaris, so 27 million planets colonized in total. Yes, our players been up to a lot of things. Stefan, maybe you can share why.
Yeah. We thought it'd be interesting to sort of understand, so what is it they actually do when they play like this, the things they create? Why do they do it? I thought I'd share a few just examples of player stories. For example, we can have a player who says, "Well, I believe a lot in being a pacifist xenophile, and I believe so hard in this message. I'm gonna battle my way through the galaxy to make other people believe it too." That could be a typical Stellaris scenario. We can have people who go, "Well, when I have my enemies, I will torture them. I will torture them by reading poetry." You need to have a game that lets them do this, and that's of course is a CK game.
Some other people, they may be more inclined to running a business, so they may say that, "Well, I'm gonna become the most profitable and the biggest banana producer in Central America, and I'm gonna make sure I share that wealth together with my upper class." Typical Victoria scenario. If you're more so inclined, you can talk about intersections, roundabouts, windmills with other peers in order to plan how to make traffic flow in your Cities: Skylines game. These are typical stories from our players. It doesn't really explain who these people are, so we thought we'd show you a little bit more of that.
Yes. Starting by looking at some demographics, of course, our players are more diverse than this, but this is basically looking a bit on average and a general view of our players. Majority men, around the ages of 25- 35 years old. They have a higher education, so it could be academics or within tech, and employed. Most importantly, they have time to play. They have time to play, and as previously mentioned, they spend a lot of time playing our games. If you have this much time to play, what are you looking for? Our players are looking for a strategic challenge. This is something that they can plan ahead, kind of just take time to try to control the outcome of the game, experimenting and stuff like that.
Not something that is fast-paced or that requires a fast reaction time, but more something that they can spend time to plan and strategize about their games. Stefan, maybe you can go a bit into strategy.
Yes, because a strategic challenge you can find in a lot of different games. All players have their motivations as to why they are playing a game. What we have attempted to do is try to understand what the motivations are for these people. In our work, we have identified, I would say, six different player groups or player motivations. This doesn't mean that every player sits in one single category. They can be in several. All in all, we'd say that we have six different types of categories or motivations that bring people to play strategy games. Our games cater perhaps not to all of them, but I would say, we have four player groups at the bottom of the screen, and they are all playing our games, but they are the smaller groups for us.
For example, we have the bottom corner over there, we have the Chill and Create group. They are more looking for a quick burst of escapism. They want a quick play through. They want a game that is easy to pick up and sort of quick to put to the side whenever they have time. On the other side, we have the Peer and Prestige people, and they are more people looking for a competitive game where there's maybe a winning or a losing state, and usually play together with other players, so a multiplayer player. What we have come to realize when looking at the people playing our games, not surprisingly perhaps, is that we have what we call the Proficiency players, and we also have those who seek a lot of freedom in their games.
I have chosen to call these groups the Hardcore Specialists and, not surprisingly, the Storytellers. These two groups represent more than half of our player base. If we look at the Hardcore Specialist first, they're the smaller of the two big groups. What they look for, they look for a challenge. They want to be just playing a very complex game. There can never be too many rules. They love mechanics. If a game was a car, they'd be looking at the car and they go, "Really nice, really interesting. Let's open the hood." They want to see if they can make this car run faster or can I make this car run longer on the same amount of fuel. For them, it's all about understanding, how can I use this to my advantage? Min-maxing. They're not only happy with that.
For them, it's important that they can be creative in how they solve problems. They want to be able to run into, let's say, similar problems in separate playthroughs. They wanna be able to approach and solve the problem in different ways. Quite a challenging player to have. These players, they like to talk about, they like to think about the game and how they're gonna, you know, play the game as best as they can. They like to share ideas with each other, so they are active on various forums and communities. That's good for us because that means we can reach them to talk about all the fantastic things you can do with our games. Not very surprisingly, these are avid gamers, so gaming for them is an important activity.
You move over to the storytellers, for them, playing the game is all about immersing themselves into a new world. They wanna play and experience and tell long, epic stories. They are a bit like the Hardcore Specialist in that they want to experiment too, but not for the same reasons. The Hardcore Specialist, he wants to sort of see if can I push the engine here. They just want a vehicle that can take them wherever they want to go, so they need a car that can bring them out into the jungle or into a very crowded urban area. For them, it's more what I can do with the game. They want to push the story, the narrative of what they're playing. Also interesting is that these people tend to be less about communicating what they're doing. This is me time.
I sit down in front of the computer, I want to do something, tell the story for myself. It's a space for reflection, not to share and talk with others. We can help them get this as long as we provide them with an open world and narrative elements, they will be really happy. Those are the two major groups that we have. Demanding players, really good to have. What we haven't talked about is, how do they go about choosing which game they want to play?
Yes. Looking a bit on our game portfolio. Just a quick number, we can see that about 30% of our players own two or more PDX games. Looking a bit into what games they choose. We talked a lot about strategy. They like a strategic challenge, which I think our games provide. We do have a large portfolio, what we can see is that the game that they choose is based on their interest. If the players are more into history, like more historical settings, they might play something like Crusader Kings or Europa Universalis. If they're more into building and in more a present setting, they might choose Cities.
Or if they're more into a futuristic, sci-fi fantasy setting or interest, they might choose something like Stellaris or Age of Wonders 4. They tend to choose the game based on their interest, not necessarily mixing games that are in different settings, but keeping with it those interests, basically. Looking a bit into how they plan their sessions or they play sessions. We said that they have a lot of time to play, and what they do with this time is basically planning their sessions with a clear goal in mind. This could be something like, for example, I want to be the biggest banana producer while making my upper class very wealthy.
Okay, I need time to do this and achieve my goals, I will time box my time and plan for achieving that. That could be planning your sessions around weekends where you have more time, stuff like that. Yes. They're looking for a strategic challenge with a clear goal in mind. What does our games kind of provide? What purpose does our game have in their play sessions?
Yeah. What we can see, what we talked about is that our players, they are quite invested in what they're interested in. They have very much knowledge in what they're doing. They have a very special interest that our games can help them work with. Our games can help them learn things. Even if you're quite well-versed in a specific area, quite often our games are so, I would say, broad and deep that you can always learn more things in your specific field. A lot of people come to play our games to learn things. We've also seen that we have a lot of players who come because they want a new challenge.
They've played other games, but they've heard about Paradox games. They're sort of curious about, "Well, maybe I should take my strategy gaming to the next level." That is exactly what we are. They come to us to try out new things. That could also be when we release new content, of course. That gives them another reason to come back and sort of see if they can excel at this particular theme. As we also mentioned, of course, if you're very knowledgeable about something, you tend to sort of follow and read up and watch things in this particular area.
We've also seen that a lot of people, they come back to play our games because they saw something on TV or they read something somewhere. They start making these stories in their head saying, "I wonder how would that work if I tried that out in EU or in Stellaris or something?" They have all these scenarios in their heads and they go, "This game can help me try to figure out how that would happen if I tried it out." That can bring them back to the games. Whenever we also release content, if you have an interest in that area, you go, "At last, I can try this out.
Ooh, now I have more to do in this particular country." That brings people back constantly to our games because they get to, sort of work even harder and deeper on their specific interest. Thanks to that, they come back regularly, and I think you have a couple of numbers on that.
Yes. Like mentioned, they return regularly. How can we see this in numbers? About 60% of our MAU are retained players. With retained what we mean is basically that you played during the last 30-day period, and also you played during the previous 30-day period. You played during two consecutive 30-day periods. We can also see that about 30% of MAU is reactivated players. These are players that have not played during that previous 30-day period, but been active in some other period before that. It could be that they're coming back for a release, a patch, a mod, update or something else that piqued their interest. About 40% have been playing for more than a year.
Players that have been active in our games for the past year or yeah, for the past year, has also been active, some way, some time before that as well. To summarize basically what we're talking about, our players like to have a strategic challenge. They like to plan their sessions. They spend a lot of time playing, and they also stay with us, and they purchase content regularly over time. I think that wrapping up our presentation.
Thank you.
Thank you.
Thank you, thank you so much. Please stay, and let's welcome in Fred and Mattias again because it's time for a Q&A session since we're wrapping up this first chapter here. For you who are sending in questions, keep on sending them in, and if we don't have time to answer all of them during these sessions, we will follow up every single one of your emails and reply straight to you after the show. Let's see. One of the questions here, in general, your strategy of returning to the core specifically about investing in fewer products overall, or what do you have to say about that?
I think we'll look for opportunities. We don't have a number of games we have to invest in. We don't want to invest. It will be few if we don't find good opportunities. It'll be more if we do find more, I think is the simple answer.
Yeah, it's a very good summary and we invest in a lot of different things. We keep a high kill rate because we only invest further in the games that are good enough for our portfolio. Hopefully a lot of games, but we will see.
All right. There's a question about the digging in, Fred, that you covered in your presentation. Which one of these aspects in the digging in do you believe will provide the strongest potential for growth? There's a question here.
I think that. We know that our gamers want us to produce more content for the games, and the content velocity has been lagging a bit. I think the most obvious and the lowest hanging fruit is increasing content velocity overall, across the board on all our games. I think that's the fastest way for us to grow on revenue and the safest way. There are many different ways to do it. If I can only choose one way to do it's obviously that.
Thank you. How much growth do you foresee coming from current live games vis-a-vis new titles?
We don't make predictions. We have high expectations of all of them. That's why they're in the portfolio.
Yep. There's a question about the player groups that you covered, Anabel and Stefan Eld, in your presentation. You focus there on two of the six strategy player groups. Any chance you will find further growth in the other audiences? How would you do that in that case?
Well, I would say first and foremost, like Fred said, I think we can still find growth within the two large groups that we have, so there's still room for growth there. Of course, when it comes to the other groups, I'm sure we can find particular areas in which we can do better. We mentioned the multiplayer, for example. That could be an area. We will of course look into the motivations that various groups are looking for to see is there something we can do there, low-hanging fruit or long-term fruit, so to speak. I think.
Growth in one or two smaller areas, but focus on the two big ones.
All right. People are also wondering about value drivers. By when do you plan to have developed far enough to have tapped into our value drivers? Can you scope the potential for us? Mattias.
Yeah, it's the same kind of answer. It's gonna be ongoing. We've come a long way. In some of them. Like modding, we're far along. Accessibility, multiplayer, less so, with the others in between. As we keep growing and MAU keeps growing, I don't think we'll run out. We might even find more than these five, but those are the ones that we're in the coming years are gonna focus on.
Thank you. Do we have any questions from anyone in the room here? I can see some hands over here. I will move over.
Thank you. Martin Arnell with DNB Markets. I have a question. How do you categorize a game going from profitable to endless? Sort of what's the hurdle for you in that category discussion?
It's not a hard number. It's if we can keep investing and having good returns and fans are happy what we do, we will keep doing that. That's the criteria for being endless. They are not the same. All of the five games are not identical. They're quite different in size, but they all share that. One way of looking at it, how effectively can we make content and how much do people want it? It's more the time horizon and as long as it makes sense to us, if that makes sense.
Just one question on Paradox Arc. What's the most successful game spun out of that project?
We started our first release was in August last year. That was Across the Obelisk that we think also fulfilled the criteria for being added into the general portfolio. The retention is good. Game is getting great reviews. I think we have 91% positive on Steam, and we think that there is room to develop this game further. We'll probably add that as well. We released Mechabellum last week on the 11th of May, showing some promise. I had hoped for a bit more, to be honest, but I think it's doing okay as well. We're gonna see more releases throughout this year. Hopefully, like I didn't mention any numbers, but hopefully we can add one game a year to the portfolio or so from the Paradox Arc.
Considering that we've looked at probably 70, 80 games during that year and signed probably eight to 10 of them. Just to give you a view of the hit ratio of the games that we see. Retention is the driving factor. The MAU and the retention will be the deciding factors whether we continue with the game or not.
I saw another hand raised over here, so let's get the mic to you.
Thank you. Fredrik Stenkil, Swedbank Robur. For these two new IPs that are coming this year, Life by You and Lamplighters, it would be interesting to hear how you think of them in terms of the five value drivers and also in terms of the player characteristics or the personas for those two.
Yeah. You wanna take it?
I can say something for personas. Yeah. Concerning the personas and the play types for these two games, they are of course a little bit outside what we have done historically. For Life by You, I believe that that is definitely a game that fits a lot of the things that we're talking about, a game that offers a lot of or endless possibilities in shaping your game. That's of course what we're looking for. Yes, these games are targeting somewhat a new play base for us, which is good because that forces us also to try to find players outside of our sort of normal player base. It's good for us.
Just adding a bit on like the things that we look at from like a data perspective is basically just tracking. We of course want them to come back. That's kind of been what we want to achieve with all our games. That's what we are going to be looking at, is that basically what happening with these players as well over time.
Right. In terms of those five value drivers with DLCs and modding and so forth?
Yeah. Life by You is designed as a platform for modding, and has potential, and we will probably do something along the lines of paid UGC there. At least lends itself to it. Again, execution dependent. We will try things and see what the fans, as long as they're with us on that. Lamplighters League is less, less, I think moddable. It's more of a single player experience. So it's more, I would say that's another step outside the what we usually do, but it's a, it's a strategy game or a tactical game that we hope people will enjoy. On, yeah, they hit different on the, on the drivers.
All right.
Hi. Simon Jönsson from ABG. You have talked for a long time about content velocity. Could you maybe explain a bit about, you know, the main obstacles for it and how you are tackling it? For increasing the velocity.
Is that mine?
You're looking at me. Do you want to say something?
You can start. I'll fill in.
All right. Okay. I'll start and you correct-
If I come up with something smart. Yeah.
I'll start and you correct me. Quality is always gonna be the thing. What can we create that fans want? The tempo itself is limited by
The value that we can create, I think is the main, the main hurdle. It's not a technical issue per se. Of course, games that have been live for a long time run into different kinds of problems. It might be tech debt, it might be what else is interesting here as we explored new things. It depends quite a lot on what game you're looking at. It's not gonna be the same answer for Victoria that's just live and doing post-launch support and also wanna do DLCs, and EU4 that's been going for 10 years and have done quite a lot, what's left there. It's not the same answer, depending.
We also have to be innovative in the way that we approach the market as well, so we don't get stuck in a model where we only produce the same thing over and over again. We actually follow what people are expecting and what people want in the market as well. That's where user generated content plays a very interesting role. That's also something we have to work with internally every day. I mean, if you just take such a simple thing as music, we didn't produce anything in that aspect five, six years ago, and we have a pretty big, you know, music production at the moment. Not that it moves the needle too much, but just to give an example. There are a lot of things to be done on it.
We've basically been producing big DLCs with everything included in that. We haven't elaborated too much on, for example, story-driven experiences, just smaller ones, not more graphic heavy ones. There are many avenues to take. I think it's a mix in between the two.
Just a follow-up. Do you have any examples of what you're, like, the most unhappy about, what you could do better in terms of the velocity?
I think from time to time our worst competitor is ourselves. That is always, there's always an unwillingness, and it's not, it's not unique to Paradox. It's with all companies I think and in general, but software and gaming companies in particular, that you see your own product every day and all you see are the faults with the product, and you're unwilling to let it go. It leads to a lot of delays, for example. I think that's a part of it, part of the problem, and, we need to stop competing with ourselves, I think, to a certain extent. Maybe you have something better on that.
I think that's the main thing. We've seen that they sometimes take longer rather than shorter to do, and I think, finding ways to releasing more often and maybe not always as big, I think. As along the line that Fred said, it's always hard to. We're fierce critics of ourselves, so that's teaching the teams what good enough means when we know what the fans want.
We're inspired as well by different companies. Like a lot of the online gaming companies, they're releasing stuff every week. I know that the Stellaris team is releasing from their Custodian team, for example, much more often than the others. Not things that we charge for, but just to keep the player base, like, updated and come out with new content. We can also learn from within the different teams. Different teams within Paradox has different things they're innovating and experimenting with to actually make us better as well.
Okay, thank you.
Thank you. We have a final question from this side of the room. Here we go.
Thank you. This is a question about the long tail. It was a very interesting presentation about the players average 25- 35, and also historical, present, and future fantasy. My question is, how long time do you see the average player be a customer and a player in each of these area? The question is then, of course, lifetime value of the players and how this have developed over time. When do you get bored or leave or do something else?
Yes, that's a good question. I can't share specific numbers. We do look at that kind of stuff for the games, and it's very different from game to game as well. Don't really have a good answer other than we are looking at that kind of stuff, and that the main thing that we are seeing is that players are returning back. The different thing, looking at things like lifetime, for example. What does lifetime mean? Like, we could have, probably have fans that have been playing our games since we started making games, right? Are we counting that long time period, or are we talking about one year or just a few months? Those, it's a tricky question, but definitely something that we are looking at internally.
I also think that we see players of all ages. 25- 35 might be the spot where people have a lot of time to play. It doesn't mean that they don't play when they're older, and we for sure know that people start when they're much younger. We have a fairly wide. You said this is the normal. Well, if we had to define a typical player, that would be it. We're not seeing any. We don't see this, the trading off or being weakened. Yeah.
The difference between the different type of games in this area.
We don't have that data right now, but yes, there are differences in the games, how they demographically, how they look.
All right. Thank you so much. Lots of interesting questions. This is when we wrap up the first chapter of this program. We'll take a quick break, and when we come back, we're gonna talk about how what goes into making these games. We'll be right back. See you in Welcome to Paradox Deep Dive, where we are exploring the inner workings of Paradox Interactive. We just wrapped up the first chapter, where we looked into our strategies and the fundamental relation to the players. Now, we're entering chapter two, and this is where we're actually gonna look into what goes into making these games, bringing these great ideas to life. The first panel today of chapter two is going to ask itself how to find the fun in the challenging and the complex.
This panel and the next few panels are gonna be moderated by Marcus Hallberg, our communications manager here at Paradox, who actually put this program and this day together, and I'm gonna leave it over to you, Marcus, to introduce the panel.
Thank you. Now that we've gone through our corporate development, it's time to dig into the nuts and bolts of Paradox. Something that is at the very center of our game development is our game pillars, ALICE, which summarizes how we think we can find the fun and the difficult. To discuss this, I have three of our senior game directors with me. Please welcome on stage. Thank you.
Thank you.
So without-
Test, test.
Without internal hierarchy, we have Daniel Moregård, Previous Game Director of Stellaris.
Used to work.
Is this on?
Yeah, it's on. It's for.
It's on.
Okay.
And-
Yeah, I used to work on, Stellaris.
Yeah.
Exactly.
Now working on an unannounced title.
Yes.
Lennart Sas, Game Director for Age of Wonders 4. Big congratulations. Also studio manager of Triumph Studios. Last but not least, our own creative, Chief Creative Officer, Henrik Fåhraeus. Welcome.
Thank you so much.
Instead of going deeper into your pedigrees, I thought we'd run right into the topic, and let's start with our slogan. We make the games, you create the stories. What does that mean in your work? Wanna go first?
Sure. Yeah. No, I can do that. I think it's a great slogan. I think it perfectly encapsulates what makes us special. We make replayable games that you can come back to and be surprised every time, experiencing new stories. We don't make games that are based on a plot like a movie that might be entertaining once, that's fine. We make games you wanna play forever, essentially.
Yeah.
We applied that slogan directly to our latest game, Age of Wonders 4. This was the first game that we developed fully in cooperation with Paradox Interactive. Yeah, it's basically as game directors, you like to be, you know, sort of in charge, right? You, it's your, you're projecting a particular view on your game. This is really about making the player central, because my fantasy for world domination might be different from your fantasy of world domination. It's very useful, and it gives three advantages. Like, one is ensuring that we appeal to a wide variety of users, a very diverse set. Secondly, it helps with replayability because you can try different stories to generate different stories, not just a finite story.
Thirdly, the structure that we built ensures that it's highly expandable. You can just keep on adding new elements that allow us to generate new stories. That really drives the growth of our games.
Yeah, definitely. 'Cause, like you said, you know, like all these alternatives you have of things you can do in the game, it really empowers the player to tell their own stories. We aren't designing stories that we want to tell other players, or players, like many other games do. We don't have a certain type of plot or a certain type of story that we're trying to convey, but rather we build these tools that allow the players themselves to sort of have fun and create their own worlds and their own imagination, and like forge that into their own player stories. I think it's really a powerful tool and, for us it's really been something that really sets us apart.
For our games, I think it's made us very successful with what we do because we're able to capitalize on that really well.
Yeah. No, it's our art, basically.
Yeah, exactly.
Our art form is creating those systems that create these stories for people.
True.
To use a bit of industry lingo, this refers to emergent narratives, which is a holy grail for us as a company and, of course, as an industry. What, in your experience, is most important or critical when trying to facilitate those player or emergent narratives?
Yeah. It's something I've thought about a lot. I've held talks about that as well at the GDC. You know, for me, at least for what works in strategy games, it's the struggle between independent free agents. Like, this can be AI agents. They're pursuing their own goals, competing over the same limited resources like the players are. In that conflict, if they can express their personality and their opinions of each other and you will have emergent stories essentially. It's one way of facilitating that in strategy games.
Yeah. It's like this, just to make it more clear exactly what emergent stories is. Emergent stories are stories that emerge from the players engaging with the game. These are not stories that we have created, but it's rather, circumstances that happen to the player, and therefore they emerge. It's, it's really fun to see these kind of things where we are putting in these individual puzzle pieces in our games, and then when the players are engaging with the games and playing with these AI actors that Henrik talked about, for example, there could be, you know, narratives or stories that emerge that we've written, but then it changes the whole, the whole, like, what it all, the overarching story is about, and that's really what kind of stories that do emerge.
On a higher level, there's a really interesting narratives that can really be created from these smaller pieces in ways that we have not designed or intended or even thought about, which is really cool to see when the players have these amazing moments of these random events that happen. Yeah.
For that to work, you basically need to create, like, a huge amount of systems that all interact. Sometimes we call that a logic soup, and it's for the player to decide, like, with which systems do they interact with more. Like if you are a more diplomatic player, you want to engage more with diplomacy systems. It's also tied to the war system, like, that has an effect on the diplomacy system and so forth. All these interactions between all these little machines create new narratives. I think one of the next pillars that we're gonna talk about, which is the living worlds, like a huge part of creating those emergent narratives, right?
We'll get back to that later.
Yeah.
Save some of the good stuff for the end of the panel. I'm gonna be a little bit reductive, but in a sense, our games are quite sandbox as we give the players a high degree of freedom and tying into the logic soup, how do you set and follow a wish-vision that on one hand encompasses all the opportunities you want to give the player, but on the other hand is also a smooth and cohesive experience in our sandbox?
Cool.
Let's go.
Yeah. I mean, it's all about the player experience. The systems are there to give the players an experience and, say again, it's a strategy game. I wanna take Skåne from the evil Dane. You know, how can I do that? Well, I can declare war. That's one system. I can do it through intrigue by murdering the Danish king perhaps, and letting my son inherit. I can do it through diplomacy, buying it or something, right? These are ways that different systems serve the same goal for the player, but in different ways so that they can sort of live out their fantasies.
I think also, like, what you said there with or, with the original question, I think, something that's also, like, difficult on, like, how to get there is just we just need to some degree trust our own intuition or, like, what our vision is and how close we are to getting to that vision and, like, what the player experience should be. It's a lot about just, like, having that experience, talking to, for example, beta testers and so on, talking to team members, continuously playing and testing the games, and trying to understand them as a player as much as you can. Having that connection with both, you know, your, or development colleagues, but also, beta testers and so on is very valuable for getting that feedback and seeing that you're on the right track.
Also not sort of being too tied to your own ideas, 'cause in the end, it's a sort of what the players like and what opportunities can happen that matter.
Player value first.
Yeah. Kill your darlings in case it's not actually making it better for the players. Like, those are.
Yeah.
There's no, like, formula how to do all of that. It's very difficult, but it's all about just having that sort of end goal in mind and having an open mind and trying to find our way there, sort of.
Yeah.
I think, also, like, a big part of it is creating those systems within a setting which is highly appealing and worlds as a place where the systems resonate with the player, right? They have an preexisting interest in World War II or in the Middle Ages or in fantasy.
Familiarity, yeah.
I think that really helps making these complex systems relevant to the user.
Definitely. I think having a familiar subject matter makes it a lot more inviting, which is also one of the pillars we have.
Yeah.
Which makes it a lot easier for players to get into, the games.
Sure.
I wanna dig in a little bit to the player experience and player feedback because understatement of the day, you all have very strong creative visions and opinions, but all of you also have your own respective high councils who also have very strong creative visions, our fans. How do you balance the creative idea and intuition you have with our fans' creative requests? I actually wanna start with you, Lennart, because you have an actual high council.
Yeah. We have a collection of highly engaged fans of our games, which we, pardon, which we ask to try out the game at a very early stage in development to ensure that we have particular ideas because in the case of, like, Age of Wonders, we make a sequel, but we want to ensure that our games are not stuck in the past. We need to find a very good balance between innovation, attracting a new audience, and realizing growth as we've seen with Age of Wonders four, and still keeping our old fans on board because in many ways they are evangelists of, you know, with the brand and of the game. They are, that's a big part of their life and they've been fans sometimes for decades, right?
We not gonna hide, like, the radical changes that we have in store for the game, so we pitched that to them, said like, "What do you think of these radical changes? I mean, we have got some stuff that you love, we know it that you like." We get feedback on them. Sometimes they like it, sometimes they don't like it. Some features we actually with Age of Wonders 4, we shipped regardless of a certain percentage of our core fans saying like, "Yeah, I don't like it because of these reasons," because we then are aware of what those reasons are, and we can anticipate on that. At the same time, if you think the upside is bigger, we proceed.
Yeah. No, I mean, it also plays into post-release schedules and what we do post-release. It's great to have a plan for the DLCs we wanna make, ourselves and so on, but it's also great to leave room for fan feedback and listen to them and communicate with them and make sure that we cater to their wishes as well.
Yeah, I think that's super important, 'cause I think as game developers, not just our company, but I think it should be applied to everyone, like, we should take responsibility and feel responsible for having a good line of communication with our fans and our communities. If that line of communication is not working somehow, you know, it's up to us to sort of improve that.
There's so much value to be had when you can have a constructive interaction with your community and with your fans and with your players, to sort of both being able to have a constructive dialogue about what they want, but, like, how they want it, when they want it, being able to talk about, like, most of these kind of things and just, you know, get feedback from all kinds of things about the game from the players.
Yeah.
Super valuable.
Maybe to give some kudos also to the UR departments.
Sure.
they are a huge part of this process. Like, it's one thing if it's talking directly to your core fans and listening to them, that's one part of the coin, right? The other point of the coin is doing research with a group of players that are maybe not your super fans and get their honest opinion and not just, you know, look at what they say, but what they do in game and look at how they actually experience the game by videotaping their play sessions. You know, we look at their expressions, might say something entirely different than what they actually type, you know, in their, in a, in a form, right?
Yeah.
What they're actually clicking at.
Exactly.
While.
Yeah.
Most of the fans, I think, are also silent. Like, they don't interact on the forums or as a community, right? They just sit there and play quietly y ou don't necessarily get access to their feedback unless you do things like UR tests.
That might be the largest group.
Yeah, exactly.
They probably are, yeah.
It might be the largest group. If you listen to the more vocal majority or the vocal minority in some cases, it might be misleading in terms of what the larger player base actually wants.
For sure.
You need to be aware of both sides or potentials.
Thank you. Let's move on from those broader questions and dig in a little bit more on our philosophy. Just as a help, we'll not go through them all here, but we have five game pillars that describes the experience Paradox tries to give. I'll ask this to you. Why do we actually need them for our whole development organization, and how do you work with them on a day-to-day basis? Cool. Yeah, I think you can derive them from our slogan, really. You know, we make the games, you create the stories. We sat down and thought, you know, how can we create a mnemonic for that people can remember, both our employees, and how can we speak about ourselves? These pillars describe our business and who we are, the games we make, and what we're good at.
They help us keep us on the straight and narrow, if you will, and maybe not, venture too far into territories that we're not very good at.
Yeah. We can look at games we made in the past, both successful and less successful, and, like, look at these pillars and see correlations. Like, this is less successful because it was less inviting, or it was less successful because the living world was not very engaging, so on, right?
Yeah. It's also, like, what are our strategic goals and how do we achieve them?
Yeah.
We want games that are infinitely replayable and can be monetized forever, essentially. How do we achieve that? Well, through this. How do we create fans out of players who are engaged and love us? Hopefully, again, through the pillars. You pointed towards cerebral, which is an interesting one. Can you give, all of you, give a rundown of what that means in a game like Age of Wonders, Stellaris, or one of our historical grand strategy games?
Sure.
You wanna go first?
Yeah, cerebral is of the mind. That means that we make games that do not require players to have twitch reactions, like primal reactions, but thinking games. That not just about, like, do I develop a strategy that wins, like a chess game, but it also applies to the player's fantasy, for example, and role-playing, that it happens in the mind, right? Just like you read a book, you know, there's something happening in your head which paints an entire structure, and I think that's really key in creating these experiences as well, right? Those power fantasies and those map games that we make, they come alive in here for me, that's a big part of it.
Really well said. I think it's, t hat's well said, you know, you can think about our games when you're not playing. We take them seriously. We take our fans seriously. We take the lore in the game seriously and history seriously, et cetera, you can really nerd out on that. You can nerd out on the equipment of World War II or medieval events or the units of Age of Wonders and the lore there as well and so on.
Yeah.
The cannibalistic elves.
Yes. Yeah, it's really about that, like, the sort of puzzle and the imagination. It's like solving a puzzle, you know? What's the optimal strategy? How do I become the strongest nation in the game I'm playing right now? Like, how do I solve this problem? It's very cerebral, but then also with the goal that you have an internal goal for yourself as a player that can be this imaginative emergent storytelling that you're also engaging with. That's why it's very, very cerebral.
Going from cerebral and the sort of mechanical thinking of it and going into a little bit more of the storytelling aspects of this, which would be living world, which is a pretty interesting pillar because I'm curious, what does it mean to design a living world in the context of ones and zeros?
That's a really difficult one, right? Because we're trying to create a believable world that feels like it's alive, and how we do that is we create, like, a simulation with all these AI agents that Henrik talked earlier. We're trying to create this believable world and have these events and things happen within it that makes it feel like it's alive, so the player's a part of this living world and things are happening in this world without the player being directly involved with that. Things can happen independently of the player being involved directly. It is like living even beyond what the player is doing, the player can come back and interact with that living world. It's really about building a believable simulation that makes our games stand out a lot, I think.
Yeah, I think it's really what creates the replayability of our games if we do it right. It's about sort of simulating a world that is more condensed than our actual reality and more interesting all the time. Yes, it's about simulation to a large degree.
Yeah.
Yeah. Yeah, it is a huge challenge, especially for the historical GSG, because you take an era where people already have, like, this massive interest in, like World War II, that people know all about the landscape there.
There are many historians who like Hearts of Iron, for example, and they're simulating the entirety of the world for the years around and in World War II. It's a huge task. Being able just to go in and play one of these nations and then seeing how the rest of the world reacts to your choices that you make in that scenario, that's, yeah, that's an immense draw to players.
Yeah.
Every time you start one of our games, you start a new game in our games, it's usually your different alliances form, different things happen immediate in the beginning that is immediately gonna make so that if you just restart it again the same time five minutes later, it's gonna be completely different, like how it plays. There's so many things that goes into it that makes it really an endless sort of replayable experience.
Yeah, it relies a lot on chance and butterfly effects and procedural generation tools. That goes into systems as well, and so because all our games are a bunch of interdependent systems in some aspect. How do you balance or do you even wish to balance those systems? That's a good one. Balance is super good for the player experience, of course, because you feel if it's too easy, you know, you're not gonna be that immersed. You're gonna lose interest in the game and walk away. If it's too hard, you rage quit, stop playing.
Balance serves player experience, I think, at least for me.
Yeah. I mean, if it's not very engaging, either because it's too difficult or too easy, it, you're not put in a circumstance where you can try to solve that puzzle, right? You're not getting that cerebral experience. It feels like it's boring or that it's a chore. There's a really difficult balance to get the game balance done, you know, in terms of pacing, like how many different emotions a player is experiencing, different intervals, for example.
Like, it's difficult now or is it easy now? Am I tense? Am I relaxed?
Yeah.
Pacing, so.
I think that's the key balance, right? Between excitement and boredom, and that's the flow curve, right? You want to ensure that people stay between those things and have the sweet spot in between those two. I think that's what we try to achieve as game designers. When it comes to like, for example, balance in terms of symmetry, that's often something that we do not achieve. For example, in Hearts of Iron again, you can play a country like the Netherlands. Like, yeah, of course, you're underpowered, but then you can still play a particular scenario in trying to save the Dutch government by moving them to Indonesia, fight off the Japanese, and then come back and conquer the homeland. That's something you can do.
it's not balanced. I mean, you're weaker than the United States, for sure.
Yeah.
Yeah, that sort of thing is really cool.
Speaking on balance and the first experience, like personally, one of my first experiences with every Paradox game is about 10- 30 hours of numbers going red and things going wrong, and then I crawl my way to some sort of working understanding of what's going on. A very common feedback is that our approach to interdependent systems and high complexity is that it makes them pretty tough to crack and master. How do you design a learning curve to make this moving in process a little bit easier?
Well, I can say one thing immediately, and that's, in games like Stellaris where you start small or Age of Wonders, this is a much easier task, right?
Yeah.
Because you start with one planet, and then the systems are gradually introduced to you as you go along, so you ease into it. With our asymmetrical games, if you start as Luxembourg, maybe that could work. If you start as the Soviet Union, it gets pretty overwhelming immediately, right, in Hearts of Iron.
I think we've made some strides there in how we bring the player's attention to important events as are going on or situations. In CK3, for example, we have a system where the player is notified of opportunities and problems essentially that should be solved in a pretty good way. Those are some things we're doing.
Yeah.
There's more to be done, of course.
It's a really difficult thing to achieve. Some of the other things we're doing is creating like new systems that are more explicit in their challenges to the players, like mission trees or quests and so on. Like do this, get this reward, 'cause then it's, it gives the player something to grab onto, like a goal in the short term.
They just keep going from these goals. I think stuff like that is also something we started doing since a couple of years ago, and I think it's also helping.
Yeah, give the player direction, you know.
Yeah.
What can I do?
Yeah.
What. So.
Of course, we invest in like, very good like contextual help systems. One of the first messages that we put forward in Age of Wonders 4 is like, "Hey, you know, yeah, this is a complex game. We're not gonna lie about it, right? On your first session, just don't worry about it, right? Don't put the difficulty level too high and just create a faction that you want to role play, that you like, right? Go from that experience. Do something that looks good, you know, like a cool character, and then play with it, and then gradually you learn." That's the message we try to give because one thing we don't wanna do is dumbing down the game because people come to us.
Absolutely.
For the complexity. That's what they like.
That's a real risk. That's a good point.
I think that's all the time we have for this panel. Thank you so much.
Thank you.
Thank you.
I'll have you back on stage for a Q&A later.
Thank you very much. Interesting discussion there, among high councils and logic soups and all of that. I think it might be time to remind everyone to send your questions to the investor relations email, ir@paradoxinteractive.com, because we're gonna pick a few of those questions for the Q&A session, when we're wrapping up this chapter. It's time to move on to the next panel and dive into the more like the development side of this, making the games happen.
Yeah, we went hard on this headline. It's full of promises.
Yeah.
We've heard a discussion on the creative vision and design to make our games fun, inviting, and challenging. Now it's good time to dig into the material of that process, how to make it happen repeatedly and over a long time span. With me, I have a host of people who will help us discuss. Please come on stage. Thank you. That is not the first time this has happened during the event. With me, I have one of our co-founders and most senior game designer, game directors, as well as Studio Manager of Paradox Tinto, Johan Andersson.
Hi.
Rikard Åslund, who is heading up PDS Green, who's doing the home of Stellaris, and also had a hand in many of our titles historically. Last, but definitely not least, the person who holds our whole operations together, our Chief Operating Officer and head of studios and central tech and services, Charlotta Nilsson. Welcome.
Thank you.
Let's start this pretty broadly. We develop games for a very specific audience in very particular niches. What does that mean in your day-to-day jobs?
I can start. Being the chief operating officer means a lot. We set a strategy, and overall, we believe in small independent team. Setting the strategy and keeping focus on the priorities is super important. Having this player, the niche of players that we can cater to, I think is fantastic, and there is a lot of focus on playing our own games and liking what we do ourself.
I can just add to that. I think we probably have the most fun job of everything, like the combination of creativity and business in the same thing.
Yeah, exactly. We work with incredibly passionate people every single day, which is great and really enjoy. It's also fantastic to have players who really enjoy our products a lot.
All right. Let's start with paying homage to this promising title. I'd like to move on to discuss success or the success metric, which is a very, very broad term. Some of our endless title we've iterated on for more than two decades. I mean, the first Europa Universalis came 2000, which is your brainchild. In your experience, all of you, what is critical in the development of a successful game?
I would say that the most critical thing to be successful in a game is to actually cater to your audience, like, making a game that fits perfectly fine for, the players. You can't do that if you're not the player yourself. You have to be constantly playing the game, understanding the type of game you want to do, and else you can't be creative.
Exactly. It extremely important to understand what the players want as well, right? Not always what they say, but what they actually want, and to try to sort of gather that feedback both from internal play sessions, but also when looking externally.
Yeah. It's a significant difference between what people say they want and what they actually want. If you ask people, you know all the analogy of the cars and the dog carriage thingy. That's the same. You don't ask people what they want. You have to try to figure out what they want.
What's the tricks of the trade to figure that out? Because that seems like a pretty, in a system-driven game, that's a pretty complex topic.
I think we have a lot of system to actually work with that. One thing, as mentioned already, is that we play our own game and like it ourself, so understanding the DNA of these games. The other is that, as you heard from the Game Director sessions, and also from you, Johan, that having game director owning the vision throughout the development of the game, I think is crucial. As you can guess, with passionate people, we actually have as many opinions, sometimes even more, than people we interact with. The people in the teams, the people in the company, and our players, et cetera, have opinions, and they don't say the same thing.
Having the connoisseur feeling of what is the actual thing is crucial. That's something that in endless of discussion, we really make sure that we get there and develop that over time. We also have a number of mechanism that we work with. We think about peer reviewing. We talk about User Research, Analytics, et cetera, to really dive even deeper because we innovate, and that means that we try new things that we actually don't know if people like or not. We always are sort of on the edge of what we know. That's why we also really like to gather information.
We also spend some time talking to our teams, especially with the leaders on the teams to, for them to understand sort of the balance between the creative side, the business side, and organization. Striking the right balance for having a very successful product, which also makes it a lot easier, so we don't have as many struggles with the teams as you might imagine, when we try to balance between, what is good for the business and what is good, for the game creatively.
To add to the aspect of User Research and Analytics, we also look heavily on what people are writing, what do you call it, YouTubing and everything, online about what they think about the games we're developing and have developed as well.
Let's pick up on the discussion of value drivers that we had earlier in the presentation and go a little bit deeper into the material with you. I mean, it's safe to say players want more cool stuff or more content to play. Internally, I know you guys often discuss like a troika of innovation, rate of development, and quality of release. How do you actually balance those aspects when you set your studio plans?
The key here is that we try to look long term. It's quite common that we try out innovate for stuff that might look like we're doing it for now, but it's actually because we are planning for something two years down the line and trying to figure something out. When doing that, it becomes a lot easier to prioritize between what we think is most important for the game right now and what we think is most important for the business.
We've also had very long creative plans for the long tail of our games. I remember having like written five-year plans of exactly detailed creative visions for EU 4 back in the days. You can plan creatively in advance quite a lot. That helps.
Exactly. In those long-term plans, we also work a lot with various scenarios, of course, given that plans, of course, change constantly.
Yeah.
Yeah. I was actually curious when you said you had a five-year plan. How much of that actually made it into the final cut?
A lot. Like the way get good ideas were like we put out like a broad thing. We want to have a warfare focused one. We want to have a peace there. We want the economy focused and then you adjust a little bit. It's kind of funny like looking at back and comparing documents with 2013 and seeing like names and focus like, "Okay. Yeah, we made a Dharma one. Yes, we made an Emperor one, and we actually had that in the original plan.
Can I add one thing?
Yes.
With this innovation, it's for our different IPs. There is different plans. It's not, "This is the recipe, and we just copy that every time." There is a lot of innovation. We try new things that we never done before, and we do different things with different team. As it was mentioned in the previous group, we also learn from each other. We discuss a lot what is the learnings from one game to another to really see how we can benefit, and it's not always a perfect fit. It need to be valued. We, we share a lot of experience, and there is a lot of things that we try, meaning also that there is a lot of things that we cancel and say that, "Okay, this will not work. This is not okay.
Yeah. We're different human individuals. We have different skills. We have different backgrounds. We have different things. I mean, we worked together for 12 years. Yeah?
Yeah. Many years.
Many years. We're completely different skill sets and different things. Like Henrik Fåhraeus and Daniel Moregård and Lennart Sas talked previously, it's like we have something in common, but we work differently. We have different judgments and do things differently.
Speaking on sharing, we previously said we have an unsentimental view on quality, and I haven't been to an internal seminar where we don't mention quality. How do you actually define quality for our type of games? Any magic formula? You wanna start, Charlotta?
I can start. It's easy to talk about quality, still people mean different things. What people easily recognize is the functionality. You want the game to work, that's, of course, fairly basic. There is two other things that is critical in this area. One is it need to be fun, that you can debate endless on what is really fun. That is crucial for our success. The other one is also the player expectation and making sure that meeting their expectation. Of course, then, our sales and marketing team is also crucial for us to make sure that we explain and tell them the right thing about the game. I think, this is actually a fairly wide area, especially since people mean different thing.
Yeah. I don't think the word quality can be defined on its own.
It's always tied into the two easy measurable things. Are people buying the product, and are they enjoying it and playing it? That's the only thing that we can measure and work on.
The key as well, Fred talked about earlier with, our goal is to have endless games that we can continue to develop on for a very long time. What that also means is that when we release a game, what we look a lot at is trends. Is the game growing? Is it declining? At what rate is it declining? It's usually a small decline right after launch. Then we look at those trends and try to think long term, like long-term plans, to see the growth that in for some of our games happens after some time.
Yeah. We're like, what is it? I don't know how many times more people playing Hearts of Iron IV compared to the launch.
Yeah.
It's been similar for a lot of our titles. I mean, we can always make a product and sell it at launch at high numbers. Marketing people are really great at those things. We want to sell that game for long and make more products for it.
worth mentioning, we have touched upon it earlier. We talk a lot about business because the love that our players can show us is that they actually buy our products, and we can follow MAU, the monthly active user, how well they play it. Not having this together with the transparency in the team to actually know and follow numbers, I think is one of our crucial things that we try to be very transparent with our team on how things going and what can be improved. It is critical to have the business tied to the creative when it comes to game.
I wanna touch upon the, Rikard, you mentioned that you had an iterative process for following trends. In the previous panel, we discussed learning curves, which is one axis of a broad term accessibility. What are you doing to improve games accessibility and onboarding of new players over time?
We are constantly working on that. One example of that is when we released Stellaris in 2016.
2016.
It was viewed as one of our most accessible games. These days when I have people talking about Stellaris, they talk about it as being one of our more inaccessible games when comparing to CK3 and Victoria, and so on. I think that is also indicator of that we are constantly at least getting better. It's still quite difficult because we have that complexity. Our players want that complexity. One thing that we are trying to do is, of course, that was mentioned in the panel previously, I believe, that we try to think about in which rate we introduce systems to the players.
We're also trying to make them understand that they don't need to understand every single aspect of the game in order to help them sort of get over that hurdle. Anyone want to add anything?
No.
No.
Let's move on and look back a little bit to look forward. Historically, we've been fast in on quite a few areas. The DLC model came quite early, digital distribution, modding, and so forth. Out of curiosity, what are you exploring right now?
Plenty of things. We're trying out quite a lot of things. I know you are a big advocate of AI, right, Charlotta?
Yes. The AI is of course big everywhere, but I actually think, yeah, the gaming industry is at a perfect place to use it in many aspects. There is a lot of updates, so we try and experiment in this area and use it to some extent. The updates in these areas are keeping us almost busy. I think there is a good potential here.
Yeah, not just talking about AI. We try to innovate, but the user experiences as well in the UI and learning curve, as mentioned before. We are new things that we're discussing there.
Yeah. We are continuing to look at different platforms. For example, console is still definitely on the table. We have subscriptions we're looking at as well, and then various other stuff.
Yeah, we're always looking at different business models and how we're tying in the business model together with the game design and trying out various things there.
I think this is crucial. This is part of the DNA of the team that we always try new things. What we say, especially on the live games that we have, that we innovate with the foot in the ground. We should of course take good care of what we know is successful, but we always need to innovate. This is crucial to offer something new to the player, but it's also to be able to serve in the future. In the future, people might prefer streaming, they might prefer other models, and we need to be there to be able to serve our fans.
I'll round off this whole discussion because I have time for one more question, I think, which is, like, it goes without saying great games are made by great people. All of you in your managerial capacities, how do you actually attract and retain people, talent?
Different ways, I would say. We are in a good position in that we have games that are fairly popular with people that spend a lot of time playing it and dreaming about working here. A large chunk of the people that we hire working on design related aspects are fans of the games.
Yeah, definitely. I think, you know, 10 years ago, it was maybe more difficult for us to recruit, but these days it's not, it's not that hard for us to find, the talent, we need, I think. This of course helped by the fact that we have a very, passionate teams. It builds an environment that's really, really enjoyable for everyone, including us.
Beside, having to work with your favorite game, hopefully, we also have fairly small teams, meaning that your impact on the actual outcome is really large, and we trust people into new roles and trying out new things. With us growing and trying new things, it's, really enjoyable for people and push the boundaries for what we can do.
Please, Johan, final remarks.
I just wanted to add again, we have the best work in the world, and I love my work.
We take recruitment discussion afterwards.
That is a nice way of ending it. Let's move on. Thank you so much. Please stay here for the Q&A session.
Thank you very much. I agree, we have the best job. Please join us Lennart, Daniel, and Henrik because we're moving into the Q&A session, wrapping up the second chapter. While they are coming back in here, let's start off with a question based on what you were just talking about, AI. We have a question here. AI is nothing new to games. It has already been mentioned a couple of times. In the context of emergent narratives, is the ChatGPT or other large language models a tool that will prove value for Paradox? In that case, how?
I mean, it is a fantastic opportunity that we're keeping a close eye on, of course. Some games have already starting dabbling with it. It's very early days. I don't think we can afford to not exploit it for purposes of emergent narrative. The problem right now is it can be rather immersion breaking if it says something a little wrong that completely takes you out of the experience. With care, absolutely, and also text to speech generation, fantastic. Having your characters in the game actually role-play the situation with voice and everything, it's amazing.
There are so many areas AI will affect, actually. I think we have not seen the end of it. There will be many sort of going from text to speech, as you mentioned, localization, more languages, being able to do that when we iterate and change, do a lot of changes. There is so many things that actually can be done.
Even now, just using ChatGPT and similar models to aggregate data and gather data for you in a presentable way saves so much time.
Yeah. It lies a bit. If you ask it for, like, 10 medieval games, it can say, "Well, kids played with trains." Wait, no, did they really? Oh, sorry, no.
No, you cannot trust it to be perfect. You cannot use it straight up. The AI is currently right now is a good tool.
It is amazing.
Thank you. Thank you very much. Thank you for all of your questions as well. Let's take another one here. You've been more or less alone in the grand strategy niche. Any fear competitors might arise?
Civilization, Total War. I don't know. Are they not grand strategy games? Are they not bigger than us?
It's a good question. We keep a tally of close competitors, both well-known and less well-known. Of course, something could come out of China or something completely unexpected at any point. We really try to create an economic moat and make it hard for people to duplicate what we're doing.
That's also a reason for being very innovative in how we work with our games to benefit of the platform we have. I'm not worried at all about the innovation here because we usually want to push the borders even more than maybe it's reasonable every time. We are our worst competitor at the moment. Also be able to hold down on where we can go because everyone want to do the absolute best for our players.
I think one great thing as well with our games when they have a long tail is the fact that don't only give us more revenue over time, but it's also the fact that these games become quite strong. By the fact that we continue developing on them means that we are actually defending the position they have on the market, which I think is also really good.
It's just we're in the same situation there that World of Warcraft was for many years. No competitor could easily unseat them because they had to copy everything they've already done.
There's also something called switching cost. If a player already invested so much in a particular game by buying DLCs but also installing mods or maybe even modding themselves, they are also, like, not just financially, but also emotionally invested in our brands, and jumping to another one is a huge sort of jump to make.
Thank you. Let's see. We might have time for one or two questions from the audience. We have one here.
Carl Armfelt, TIN Fonder. Just for Johan, if you look at the pipeline, I mean, given the sophistication in green lighting, is it easy to have a feeling if the pipeline is good, or is it more of a lottery ticket when you release a game, you know, succeed or not? Second, you know, Imperator, if you read the recent reviews, they seem to get better and better. Is it impossible or doable to kind of revamp and create a new roadmap for an already released title and go more to the endless perspective?
Good question. Yes. You said the word doable was in your question, everything's doable. Is it, I think it's all about the opportunity cost.
Yeah.
It's, is this better to do this than, spending resources doing something else? Probably not. Henrik?
No, no, I agree with that. You know, it's the best way of using our resources at the time.
The pipeline, is it easy when you work with this all the time and you're so dedicated to have a feeling if it's a good pipeline, or is it always up until release you see what people react, et cetera, et cetera?
I find that most of the times if you're listening to the community, and you communicate in advance with, development diaries and posting stuff and communicating with them, that in 90% of the case, they have a good feedback that helps you. It's when your vision and their vision is not perfectly aligned that you run the risk that the release is not stellar.
Yeah, I agree. I think you need to have a sort of continuity with releases, especially if you have a series of titles, that you don't let your existing fan base down, like we see a lot of in the entertainment industry, to be honest. We exist in a niche, and we need to take that niche seriously.
I can also add that it's I think we usually have a good sort of good feeling on sort of how something is going to perform, but of course, we never know until we actually have released. It's quite uncommon that we feel completely blindsided with the performance of a product.
Well-
Uncommon, I said.
Uncommon.
I was like, I was trying to figure out there's like was there any time we were, like, surprised or unsurprised by. Yeah, but I can't remember.
I think I can add that we usually consider our grand strategy games to be our safe titles, right? There's not a lot of risk with it because we've now been doing this for a long time. Even though maybe we don't hit the mark in all cases that we want all the time, like, we are pretty good at, like, fixing it long term, and then it's just like we talked about earlier. It's an opportunity cost, like what's best to spend energy and time on, and what value can we create from that. Yeah, I don't think we're the process for new things, is not so risky for especially the grand strategy things because we have a fairly good idea what we're doing, even though we take a lot of risks sometimes as well.
Thank you. That's where we're wrapping up the second chapter. We're gonna take a short break. Then we will be back with chapter three, where we're looking more into the financials of endless games and setting ourselves up for commercial success. You don't want to miss that. We will be right back. Hi, and welcome back to Paradox Deep Dive, you who are joining us from our office in Stockholm and you watching the stream. We are just opening up our third chapter today here, making the most out of what we create. This is where we're gonna have more of a commercial and financial focus. Specifically for this chapter, we expect a lot of questions from this audience. By now you should know what to do.
Send your questions to ir@paradoxinteractive.com, and we will catch them during our Q&A session at the end of the chapter. This is our final chapter of the day, kicking off with the first session, there will be a discussion on models, pricing, geographical opportunities, setting us up for commercial success. Once again, Marcus is back. Hit it.
So far we've gone into and discussed how we aim to grow, how we build portfolio, how we develop our games and DLCs, and what our player base looks like. In this session, we'll focus on how we make all our skills, assets, ambitions, and communities come together in actual commercial prowess. To discuss this, I have the best and brightest of our publishing team. Welcome on stage. Thank you. Scoot in a little bit there, so I don't block you. With me to discuss this, I have Marine Mazel, one of our senior marketing managers, recently working on Age of Wonders and other titles as well. Mattias Rengstedt, our head of sales, and of course, Johan Bolin, our chief business officer. To just start off, Johan, for those recently joining us, what does publishing actually do at Paradox?
Yeah. A brief introduction of what we do. We usually say that we do two things at the company. We make games, and we sell games.
We focus on the latter. We bring new games to market, and we build, we work with building and growing our existing live franchises.
In all of your respective roles, which are quite different from one another, what's special about publishing a Paradox game? Johan, do you wanna go first since you hold the mic?
I can sure do. What is special with us, you ask? I think, I would like to highlight three different areas. First off, this goes very much hand in hand with the type of games we make. We make deep, complex, and endless games, and this is the way we need to work as well. We are in it for the long run. We are always aiming for maximizing player lifetime value. For us, the release is really only the beginning. This is at least what we aim for. We have a year like this, of course. We will release a bunch of new games. We couldn't be more excited about this. This is a huge undertaking for us, obviously. We're in it for the long run, and the main focus is always our live franchises.
That's the first thing. The second thing I'd like to highlight is how we work. We do all these projections and forecasts internally, of course, as has been mentioned earlier, we can't really know how a game will perform before we put it in the hands of our players. This is very much the nature of the games we make. We want to keep you know, an agile, nimble organization, fast-moving. We put the resources where we make the biggest sort of impact, very much tied to that is we want to make sure that decisions are being made from the teams. We work from publishing, we work very close with the studio organization. We sit embedded, we work together wherever we can, these game teams are where the decisions come from.
They know the games best, they know the audience best, they should make the calls, basically. The third thing I'd like to highlight, the third area is our community, our players, our fans. We are super proud of the very dedicated and, you know, engaged fan base that we have. We work close to them with marketing and sales. It can be everything from interacting with our fans in social media. It can be physically at the PDXCon, or we can even ask what DLC we should make next. We ask what DLC should we make, they say this, and we actually do that. These are the three areas I'd like to highlight on this question.
Mattias, please jump in.
Yeah. I work with sales, so partnerships and the distribution channels. From that point of view, I think it's the fact that our games are niche. I mean, they're niche and popular, so that opens up opportunities for us with players and with partners, so we can fill those spaces. I also work with commercial aspects like pricing and business models, and from that point of view that our games live for a long time. They live for many years. When we take commercial decisions, we always need to have a long-term mindset, and we need to think about the lifetime value. I think it's the fact that our games are niche and that they live for a long time, and I think that's also part of our moat.
Marine, please chime in.
Yeah. I work with marketing, for marketing, we have the same challenge as video game marketing across the industry, meaning that we worked with extremely complex product, the most complex entertainment product with 100 or thousands of hours of entertainment, a lot of people involved. as the panel before was mentioning it, we have very system-driven games and system-based games. That adds a layer of complexity. for marketing, we of course need to understand the essence of the game that we're gonna market to convey the appeal to the audience. For us, it's really paramount that we understand our games, right?
That we are able to transcribe their complexity and their appeal to our audience. That's something we know how to do at Paradox because we have this experience with these type of games, of course.
Okay. Let's stay with that topic a little bit because like we've been discussing what the relationship to our players means from a strategic perspective, from a development perspective. How do you build on it from a marketing perspective?
I think the strength that we have here is that we mentioned it several times before, but we have a very close relationship with our players, right? Even before release of base game, we have those dev diaries that are very integrated in our marketing campaign. We also have the forum where we gather feedback, where we understand the opinions, and that's something extremely precious. Before release, so we can, as marketing, kind of have a feel for how the game is coming up, how our player base is reacting. Even after release, we were saying before that our games are not born unless they become it, thanks to the community, et cetera. That's true. We maintain this relationship, we stay connected, marketing and the studios very closely, right?
We want to be close to the devs, we want to understand the games, so we have this capacity of adjusting, correcting course if needed, adjusting the marketing campaign, and have like really this synergy between the two things. We can do that because we are very close to the games that we're marketing, I think.
Thank you. Speaking of being close to the games or, and our players, in the last panel, we discussed a little bit on the different ways we try to experiment and be where our players are roughly. We've been working with different ways of making our DLCs and our games available. Which models are we working with currently, and what's our takeaway so far? Do you wanna start, Johan?
Yeah. what's been mentioned and what very much has built the success of this company is the premium sales and the DLC model. This is, I think it was introduced back in 2012 as Fred showed in CK2, and this has been very successful, works very well for our type of audiences, but also for our games. This still is a very successful model for us. The latest example with Age of Wonders 4, of course, releasing with a $50 base game price. If you're a, you know, a fan or wanna invest more, you can pay 90 and for the $90 premium SKU, you get additional content for the coming 12 months. You get like the four first DLCs included, I think, at a discount.
This has been working very well for us even only a few weeks ago. Of course we want to experiment. We don't know how the gamers and how the audience will interact with our games five years from now, let's say. We've been working with several other business models, quite a lot with subscriptions. Talking about subscription, there are several different subscriptions out there. We have partner subscriptions like Xbox Game Pass or PlayStation Now, for example, and then we have our own subscriptions that Fred showed the graph as well. If we start with, let's take Game Pass as an example.
With this subscription, you get the base game for free. You get the base game and then you try it out, maybe fall in love with it. You might continue to subscribe or you buy the game to own it forever. You can also buy the DLCs, so it's a great way for us to upsell to subscribers as well. This type of subscription has been a good way for us to find new audiences, basically. To reach audiences that we necessarily wouldn't have reached otherwise. We have our own subscription. We have it in a few of our games on Steam. This is working in an opposite way. You buy or you already own the base game, and then you subscribe to the DLC catalog.
This is a good way for hardcore players to get all the content within the sub-sub-subscription, but it's also a good way for new players to try some DLCs out. You buy the base game, you like it, and then you wanna buy some more content, and you know, you're being greeted with this long list of DLCs. Which one should I pick? Try the subscription out and then either continue or cherry-pick the DLCs you really like.
Is that for one of our live games, we might have somewhere in the range of two to four different models at work or different ways to pay for the content. That poses the question, how well do they actually chime with one another? Do you want to take this?
Yeah, sure. I mean, one game could be on several different platforms, and it could use several different business models, and we think that they are additive. We think that they have different advantages. Some business models are strong to reach new players, and some business models are stronger for driving DLC sales. We think that they complement each other, and we want to be where our players are, and we want to give them alternatives when they buy and play our games. We also want to experiment, like you said, Johan. We want to try new things. I mean, this industry is moving quite fast, so we need to be active and we need to try new things.
Going back to our first session, paid user-generated content stands out a bit because what we've discussed so far is ways to pay for content, and that is a way to enable it. What opportunities do you see in that field right now in our portfolio?
Yeah. Mattias Lilja was mentioning it at the very beginning. I think this is a very good way for us to meet the demand that we actually have for new content. This is a way for us reaching out to our very, very dedicated fans that make these mods. We reach out to them, we make some high-quality content together, and we package it as a DLC, basically. I think, what is it? 10:00 A.M. this morning, we released the latest packs with this business model. We call them Content Creator Packs to Cities: Skylines. This is again, a great way to increase content velocity.
It's scalable. We have this win-win model where also the creator gets paid for their valuable time. We do too, of course, as we have a revenue share model with them. I think we'll see it in more games in the future.
Thank you. I'll leave on that note because now we've discussed marketing and ways to pay, and that kind of naturally brings us to the question of what you actually pay for our content. Mattias, Paradox has a new or at least more structured way of doing pricing over the past few years. Can you walk us through your reasoning and takeaway so far?
Yeah, sure. I mean, we have worked more structured with pricing recently. First of all, our community is very important to us. Our relationship with the community is a big reason to why we have been successful and why we have been growing the way we have. When we talk about pricing, it's important that we keep our community in mind, and we want players to experience our content, and we want them to feel that the price that they pay is reasonable and fair. At the same time, I mean, players tend to spend a lot of time in our games. They put in many hours.
We believe that our content contains a lot of value, and we have been working more on balancing this value that we create with the value that we capture back to the company in terms of price. Consequently, we have increased prices across the franchises and also across markets, and we see good results from this. We see a positive impact on our top line and also our bottom line. We don't see any big drops in volume, so that indicates that we have pricing power, and this is something that we will continue to work on also going forward.
I'm just curious, and let's keep this one short. Because we force you out on the forums at least once a year to actually present pricing changes to our happy fans. How do you achieve that balance between value and content?
Yeah, I mean, it is difficult to balance value and price. Every game is different. There's no silver bullet that works across the entire portfolio. When we set the price, the value needs to be there. Decisions on pricing are taken close to the games. The teams are the experts in how the content should be valued. Pricing has been a bit higher up on the agenda lately. We have spent more time on this. We have discussed it more frequently. Yeah, this is something we will continue to work on also going forward.
All right. Since this is a short and snappy conversation, I thought we'd start off with a very precise question. All of you please jump in, but I wanna let Marine back into the conversation. Like, your job is selling our games, and we always wanna find new players. How and where do you find them?
Finding new opportunities for the game and new players.
Yeah.
I think what Mattias mentioned just now, the fact that we worked very close to the game itself, right? The product that a lot of decisions are taken by the teamWorking close to the product is a big plus. We also have quite lean marketing team. We all operate on the global level, so we have a very fast turnaround time, right? We can react quite fast. When we see opportunities rising, we can react fast and pursue them efficiently.
When you say fast, is it a corporate month or what are we talking about?
No, for Age of Wonders 4, for example, when we saw that the release was getting a lot of traction, we were able to unlock more budget for paid media quite quickly, and the team put together their plan and a few hours were necessary for that. It can be very fast.
Last thing, on this note, speaking of finding new players, all of you, are there any geographies that are particularly interesting to you right now?
I mean, we have seen a steady growth across markets for many years, especially in our core markets, which is Europe and North America. Of course, our ambition is to continue to grow in those markets. We also see an increased interest in our games in Asia. We are working with partners to find opportunities to try to accelerate that growth also going forward.
I can chime in as well. We also see growth with new business model. One business model might be more popular in the West, and another business model might be more popular in other geographies. Also, the paid UGC, as I was talking about, for example, the Content Creator Packs were released today for Cities: Skylines. There was one Content Creator Packs called Railroads of Japan, and this of course is a great way for us to activate, you know, influencers and reach markets more with more sort of quite high quality content. We can do these kind of activations as well.
Thank you. We've run out of time. You will be back for the Q&A session later. I'll leave to you.
Thank you.
Yes. Yeah. Thank you very much. I think I can take that one. We covered a lot today, but what's the sum of it all? It's time to look at all of these layers that we covered today from a financial perspective. Show us the numbers. The one that is here to give us just that is our CFO, Alexander Bricca. Welcome.
Thank you very much, Paula, and thanks everyone for attending. We have, I think we have 20 minutes of presentation roughly and some Q&A. You're gonna get what you all are waiting for, some oxygen, I guess. First, numbers. I'm gonna show you three things. We have heard Mattias and Fred speak about focusing on our core franchises, on our existing franchises. I'm gonna show you why that makes very much sense from a financial point of view. I want to show you three things. One is how our core franchises have grown over the last years in revenue. We're gonna look into one game, an example game, and see how the revenues growth over time in base games and DLCs. We're gonna include cost as well.
We're gonna look at a specific game project and look how the cost and revenue develops over time. Let's start with the game, how the revenues have developed over time for our core games. If you have followed us, you know that pretty much every quarter we have five franchises that is always on the top five grossing list of games. Stellaris, Cities: Skylines, Crusader Kings, Europa Universalis, and Hearts of Iron. With some few exceptions, when we launch new games, these top five games are always at the top five list. Those are our core games. Now, during this period, 2016 to 2022, there is only one of those franchises that has gotten a sequel. That's Crusader Kings, when we upshifted from Crusader Kings to Crusader Kings III.
Apart from that, all the other four games are in the same version since 2016 up until today. Of course, they have received several updates. Stellaris, as it was released in 2016, is not the same as it is today. It's a bigger game, but still it's the same version. Let's look what the revenues have developed like. Back in 2016, we had just released Stellaris in the spring, Hearts of Iron IV in the spring as well. Cities: Skylines had released the year before, Europa Universalis IV turned three years during the year. Fundamentally a very strong lineup. We did SEK 479 million in revenues, quite a significant amount of revenues as it should be from that lineup. Now, the question is, how has this revenue developed since then?
Have the games been able to maintain this revenue or has it dropped? Let's find out. 2017, it's actually up 25%. Continue. 2018, up another 25%. 2019, flat-ish, I think it was up 3%. 2020 up 35%, partly driven by COVID and work from home. 2021, for the first time in a long time, I think the revenues for these games decreased with 11%. We didn't come out with the content in the pace that we wanted. 2022, another 20+%. As you can see, the revenues have neither remained at the same level or decreased. They have actually increased quite a lot. From SEK 479 million in 2016 to SEK 1.1 billion in these six years.
That is in six years, that's 135% increase or a yearly increase of 15%. These are the four games that are in the same versions in 2016 to 2022. Without coming out with sequels or with any new games, these game have managed to increase with 15% per year for six years. Let's look what it looks like if we include also the core franchises that have received sequels. That would be during this period, for sure, Crusader Kings III. Victoria III is the jury's still out whether it's considered core franchise or not, but let's include it. It has received a sequel during this period, and it has the ambition to become a core franchise.
Back in 2016, of course, we had revenues from Crusader Kings II and Victoria II, so the comparative numbers are a bit higher, SEK 539 million. As you can see, the blue dot is what you see from in the previous slide. 2017, 2018, 2019, not much difference. It continues with the same increase. In 2020, then we come out with the first sequel, so Crusader Kings III comes out. There you can see now the revenue increase is quite significant. 2021, nothing special happens, and then in 2022 we release Victoria III, so yet another spike. Now it goes from SEK 539 million- SEK 1.6 billion plus.
That's a 207% increase in six years, or 21% per year. I think this chart shows why we think it's such a great idea to really shift focus back on our existing titles. The good thing with this, apart from 21% per year being a very good growth, it comes with a very limited risk. These are all existing titles. There is not any new titles in making this revenue growth. With coming with new titles lies, of course, a title risk. The risk to generate this 21% is relatively limited. We're gonna see later on that also the investments to generate this growth is also, I would say, relatively limited.
Let's move on and see what the revenue development looks like for a game from launch because this is why these games continue to or manage to grow year after year. This is I'm not saying which game it is. You can guess. I'm not sure you'll be right. Maybe you will. What happens? We release the game month one, and of course, we get an immediate sales spike. Already in month two, it drops off. Month two generates a third of the revenues that you saw in month one. It continues like that. It continues. The blue line is base game. The orange line is the DLC. We haven't delivered any DLC yet, so that's why it's zero. The blue line continues down.
The revenue for the game continues down. It does that until we come out with the DLC. We do that at month seven here. I think quite a decent pace to come out with the first DLC. What happens? Well, of course, the DLC comes out, gets its own sales spike, just like the base game got its sales spike, not as high, but still a sales spike. Not only that, the DLC generates new attention to the game, it brings in new players. Those new players buys the base game. The base game gets a second sales spike when the DLC one is released. The DLC doesn't only drive its own revenue, but it also drives a revenue increase for the base game.
Just like with the base game, the second month of the release, it drops down. Then some six months later, we come out with the second DLC. The same thing again, the second DLC gets its own sales spike. It brings in new players to the game, that buys the base game. The blue line, the base game gets its third sales spike. Now we also have an existing DLC 1. Some of the new players that buys the base game also buys DLC 1. DLC 1 gets its second sales spike. You can see the orange line is if you compare the second bump at month 13 is it's higher than month seven, and that's because we have more content to sell.
It continues like that with DLC 3, DLC 4, and so on. There you can actually see with, I think that was DLC 3, there the DLC revenues is actually higher than the base game revenue. Let's zoom out and have a look at a slightly larger horizon. Now let's look at it at some six years, and we're also gonna look at it, we're gonna look at revenues rolling 12 months to get a better view of the trend. The first year you could recognize from the previous slide. You have the base game generating a lot of revenues and then starting to drop off when you come into the second year.
I think what is a clear trend here is the DLC revenues, they just continue to increase and increase. At that month 30, it's the same as the base game revenue. It surpasses it, and it outgrows it. After a while, we have more than twice as much revenue from the DLCs that we have from the base games. This is only half of the truth because a big proportion of the blue line is actually thanks to the DLC, because if we wouldn't come out with DLCs, we wouldn't generate that many new players to the same extent, at least. The DLCs are to thank not only for the orange line but also for the blue line. DLCs just continues upwards.
Base game sales, well, thanks to the DLCs, they are able to remain at a fairly stable level. Of course, it's not gonna be as much revenue from the base game as during the release year, but it, for this specific game, after three years, it's established at a very solid level, and it continues like that. If you look at the charts, both red together, I haven't done one for that, but you can see if you look at month, let's say 24, so that's two years in, if you add the blue and orange together, we are up here. The same if you look at month we are up here.
The first two years or you could say also year two and year three, the game manages to generate as much revenues as it does in the launch year. The launch year, which is normally a great year for any successful game, is being repeated. Same revenue second year, same revenue third year. It doesn't stop there, as you can see, because if you start to add the numbers together further to the right, you can see that the total revenue is actually going up. Let's just look at it accumulated over the year, over the same six years.
It's clear that both the base game and both the DLC continues to add revenues to the game. It is the DLC, as I've said, that drives this revenue. This is very good, we think, because the DLCs comes with fairly low investments. I'm gonna show you that in the next set of slides, but with also low risk because we don't have to invest in DLCs until we see that they are performing. Of course, you need to invest in DLC 1 before you can see whether it's performing or not, but you don't need to invest six years of DLCs. You invest one year of DLCs, and then you see if they perform or not. We are getting not only recurring revenues, but also growing revenues for many years with very limited risk and investments.
Now let's look at the investments. This is another game, I can say it's one of our core games. We start off the development, small team. Quarter by quarter, stage by stage, the development team increases, so the cost increases. Orange is cost of goods sold. That is mainly development costs, so it's mainly our internal studio costs. Some publishing staff as well, but mainly development cost. It continues like this quarter after quarter to grow. Let's zoom out. You've seen the first seven quarters. Let's continue. Quarter eight just continues like this. The years goes on, and now we're up to during the fourth development year. Now the CFO is getting anxious to get the game out.
We are continuing development, and when we're getting closer to release and having the game announcement, we start to have some marketing costs. You can see a little yellow bump there. Also, the development costs are picking up because now we go into the most labor-intensive phase of the game development, everything is picking up. Now we're at Q 19, hopefully the game is gonna come, and it does. In the 20th quarter, this game took five years to develop. We release the game. You can see the yellow bar is at its highest. We have the most marketing expenses when we release a game, perhaps more importantly, the revenue bar in green is significant.
If you look at the blue line, which is the profit, pretty much the accumulated profit for the game project, you can see that we are doing break-even for this game already in the first quarter. This is, these are calendar quarters. If the game was released in the first month of the quarter, it means three months. It could be a game that was released in the last month of the quarter, then we're doing break-even in just one month. You can try to figure out which game it is and then see which month it was. If you follow us, you know that we capitalize development costs up until release. These yellow bars, the COGS, that doesn't show up like that in our external reporting.
We will capitalize it, so it would pretty much, not zero, but a lot of the cost would be capitalized, and then we would take it when we release a game. Now I'm showing these numbers before capitalization and amortizations, so you can get a picture of how the investments are doing in time. Project breakeven first quarter. Let's move on. Let's see what happens after the game release. You have seen it for the revenues, but let's include the costs as well. Where were we? Q20, right? What happens? As expected, the revenues keep dropping.
You see the costs are pretty much continuing, that's because we're continuing to develop DLCs, and we are continuing to market DLCs or preparing to market DLCs. I think the orange bar is slightly too high from Q20 onwards because this was during a phase where we tried to increase content velocity by adding more staff. That is probably not the way to go, that's why the orange bars are higher than I would like them to be. Also, what I don't like with this game is that we are now in quarter number six, and we still haven't delivered the DLC.
When we do eventually, quarter seven after release of the base game. This is a different game compared to what I went through previously because I don't know if you remember the ratio between the initial sales and the DLC sales, or the sales when we released the first DLC on the previous slide. Here you can see for this particular game, when we released the first DLC, we got massive revenues, so almost as high. What's that? Like 75%, 80% of the revenues we got when we released the base game. That's, of course, perhaps worth waiting for. Now you can see that from that on, from that time on, now we have more content in the market.
We have a DLC, then the revenues are established at a higher, at a fairly much higher level. Revenues less costs makes the angle of the contribution line, and you can see it is healthy. It's going upward in a healthy angle. A few things here. One, this is one of our core games, and like most of our core games, they tend to become more and more profitable with time. This game has at this point, been alive for, what's that? 10, 11 quarters, not quite three years. It's still on the project lifetime basis. After being live less than three years, it has generated a profit before tax contribution of 47%.
If you just look at the last five quarters, we have a profitability of 64%. When I say profitability, this is fully loaded, a fully loaded project P&L. We have allocated everything down to corporate overhead to the games. This is the very bottom line before tax. There is no more cost left at the company to allocate. We are doing 64% on this game, and it is one of the top five games, but not necessarily the one with the highest profit margin, but it's up there. There are a few things I like about this economics. Of course, the obvious, 47% profit margin lifetime-wise and 64% profit margin if you look at the last year, or we're getting break even already in quarter one. Great.
There are other, I think, perhaps more detailed things to look at. One is that if you look at, when we are actually experiencing the cost for the base game, it ramps up just before the launch of the game. This is important because that increases the return rate, of course, on the game project. The other thing is that to continue to generate these high revenues in year two and year three, we need kind of limited investments, and those investments goes into make DLCs. As I mentioned, those are decisions that we can take when we know with very high, when we know pretty much for sure whether the game is gonna do good or not, whether the investments are gonna make good returns or not.
To try to summarize these three main pictures, I think, We are seeing that we are getting a substantial revenue growth from our existing franchises. 15% CAGR if for six years if we are not counting sequels. 21% CAGR for six years if we're including sequels. Very, very strong growth, I think. This strong growth comes with limited risk and limited investments. Risk because 21% yearly growth without adding new titles, so no title risk in this at all. Investments are made over time as we see progress. Of course, high profitability, I think it was 64% on the previous slide. I'm writing +60% here. I can say that last year, 2022, there wasn't one of our five core franchises that had less than 60% profitability.
All in all, I think why are we focusing so much on our existing franchises? We get a very strong growth. We get that growth with very high profitability and with limited risk, so it creates a very compelling risk/reward offering. That's it.
Thank you, Alex. Let's bring back the previous panel as well. Mattias, Johan, and Marine, come join us for the final Q&A session, wrapping up this final and third chapter of the day. First one here, how have the different trials of subscriptions been working out? Will subscription services be a part of launching games in the future?
I can take that one. As we were talking a little bit about earlier, as Mattias said, we see that these subscription services are additive. They complement each other. Some are better for reaching new audiences that we necessarily wouldn't have reached otherwise, some are catering more to the core audience. Whether we'll see more games with subscriptions, I'm sure we will. We have announced a couple already. Cities: Skylines II is going to join Game Pass when it releases and also The Lamplighters League. Yeah, I'll think I think we will see more subscriptions as well.
All right. Next question. How important is smaller storefronts for Paradox, like Amazon and Microsoft Store? Could you share some color on the smaller storefronts' future in the marketplace, both for Paradox but also in general?
Yes. I mean, we work with many partners, and many partners want to work with us as well. We have some partners that are very big and established, like Valve, where we sell on Steam. We also work with a lot of smaller partners as well. I think smaller partners is a good way for us when we expand into new markets and new geographies, that they can help us to support that, the growth basically, together with the big, big companies as well, of course.
All right. How do you view or balance risk vis-à-vis larger development budgets?
Well, we did a big change back in, now it's almost two years ago, when we divided the business, or the projects into two. The first thing we do is that we look at whether we think the game project is a high-risk or low-risk project. If it's a low-risk project, which are normally sequels to our existing strong franchises or. It doesn't have to be, those are probably the most likely low-risk projects. We're fine to go in with high development costs from the start because then we're happy to prioritize time to market and quality from the start because we are confident that these games are gonna be released and do quite well.
If we do the judgment call that these are high-risk projects, then we let the game develop through this New Games team, as Fred went through.
We invest much less during the early high-risk stages and we, for example, don't capitalize those costs until we have passed the most high-risk stages.
Cool. We have time for one question from the audience.
Yeah. Thank you. On pricing in the industry, when you look at your competitors' games and strategy games, et cetera, what do you think they have been pricing up their games in the last three, four years, and has it been accelerating with the sort of recent years with inflation, et cetera?
Yeah. I think if you look at base games and big AAA games, I think $70 has been more established recently, I would think. For us, like we said before, I mean, when we release the game, that's just a start for us, we will release content over a long period of time. Of course, the base game price is important for us, we need to look at the long lifetime of our games. Yeah, I think new AAA pricing is at $70 now, it was $60 before.
Do you think your, you said that recently you have been starting to look at this more and we understand from the outside some regions have been maybe mispriced due to different reasons. Are there any other, besides China, Turkey, and these type of countries, what are the other two, three avenues where you see the biggest discrepancies where you wanna be in two, three years, if you can?
Yeah, I think we have done a lot of work on our regional pricing, and that has been based on a lot of benchmarking to other publishers and how they price games in different regions. We have increased pricing basically across all markets, I would say, except for like U.S. and Euro and GBP. Yeah, we have been very active on our regional pricing, and in some markets the increases has been quite substantial as well. We have not seen a big pushback from the players. I think they have accepted the price increases that we have done, and now these levels has been established at a higher level than it was before.
That we will have with us, also going forward.
All right, thank you. If your question have not been answered during this Q&A sessions, if we have not had time to go through your question, we're gonna follow up with a separate email replying back to you. That's it for this time. We covered a lot today, everything from strategy to development and sales, and we hope that you enjoyed this exclusive peek under the hood with us and got a deeper understanding of Paradox and what we are all about. We're planning to host more events like this in the future. We have more content we would like to share with you, so please keep your eyes open for that too. That's a wrap for this time around. Thank you for joining.