Good day. Welcome to the CD Projekt Group financial results for FY 2020 conference call. Today's conference is being recorded. At this time, I will turn the conference over to Mr. Adam Kiciński. Please go ahead, sir.
Thank you very much. Good evening, everyone. Welcome to the teleconference dedicated to the CD Projekt Group annual results for FY 2020. My name is Adam Kiciński, and I will run this call together with Piotr Nielubowicz and Michał Nowakowski. The presentation is available on our webpage, cdprojekt.com. Let's get started. Please jump to slide three. Beyond any doubt, a long-awaited launch of Cyberpunk 2077 was, for us, the most important event that took place in 2020, and come to think, in our history. It's a tough task to summarize the project with just a handful of slides, given that we all poured years of work and our hearts into it. Cyberpunk launched on the 10th of December on PC, Xbox One, and PlayStation 4, and Stadia. The game is also playable on the next-gen consoles, thanks to backward compatibility. Let's move on to slide four.
Cyberpunk 2077 turned out to be a huge project in every possible way. The most ambitious one that we ever worked on, and also the most challenging, taking into account its scope and complexity. With regard to its scale, over 500 developers from CD Projekt RED, representing 37 nationalities, worked on the game during the most intense period. In total, there were over 5,000 people involved in the project, including the studio's employees, business partners, actors, translators, and musicians. Working in such a diverse environment was a great pleasure. It was a challenge as well, taking into account that the most of us spent the last nine months before the release working from home because of COVID. Using this opportunity, I would like to thank all the people involved in Cyberpunk, especially my wonderful colleagues from CD Projekt RED, for the great dedication and passion they put into the project.
Let's go to the next slide, so number five. We strongly believe that to reach audiences around the world and win them over, we should give players the opportunity to experience the game in their mother tongues. That's why we are proud that we've managed to make Cyberpunk available in 18 language versions, including 11 full voiceovers recorded by 2,000 actors. Please move on to slide six. The launch of Cyberpunk 2077 was fueled by a huge global marketing campaign that included various channels such as TV, outdoor, radio, printed media, and online, depending on the region. Cyberpunk-related advertising and other promotional content was released in 34 language versions in 55 countries. We achieved great results. Our global marketing campaign generated over three billion ad impressions between November and December last year.
On the next slide, so number seven, you can see that the scope of the project was naturally reflected in the size of its overall budget of PLN 1.2 billion. 55% of that was spent on direct development costs, plus the studio's overhead expenses allocated to the project. The rest is the total marketing and communication budget covered by both CD Projekt and our physical distribution partners. Let's move on to the next slide, so number eight. The hard work that our talented and ambitious team put into the development of Cyberpunk, as well as into the marketing campaign and the game's launch, resulted in our sales figures in the release window. As you can see, by the end of 2020, the total estimated number of copies sold to gamers reached 13.7 million. Please go to slides nine, 10, and 11.
Digital distribution accounted for 73% of total Cyberpunk sales in 2020, which clearly reflects the current shift towards digital, also reinforced by the last year's lockdowns. Platform-wise, 56% went to PC owners and Stadia users, with PCs accounting for the vast majority of that part. 28% of total Cyberpunk sales went to PlayStation users, with Xbox consoles accounting for 17%. The above breakdown was to some extent influenced by the suspension of Cyberpunk availability on PlayStation Store that happened eight days after the launch. Finally, let me say a few words about the geographical breakdown of Cyberpunk sales. We are satisfied with our presence in North America and Europe, which are our key markets. We are also happy with 12% share for Asia. Let's move on.
Having summarized the project and its results, I must say that from the creative point of view, we can be proud of the core strengths of Cyberpunk. A beautiful, engaging city, a gripping and exciting story, and multi-layered characters. From a business standpoint, with the Cyberpunk launch, we managed to introduce a new IP to the market and to the minds of gamers around the globe. With The Witcher franchise, we've got two strong pillars on which to build the future of CD Projekt. Of course, as we all know, not everything went as planned. It has been a huge lesson for us that we shall never forget. Now is the time to look ahead and move forward. Let's go to slide 13. Recently, we published the CD Projekt group strategy update. A fundamental aspect of that is the transformation that we've called RED 2.0.
This involves shifting to an agile work model, empowering the CTO, and devoting more attention to the well-being and comfort of our team. We are also consciously changing the way we communicate and manage our projects. On the production capability side, a big milestone will be the start of parallel AAA content development in 2022. Please move on to the next slide, so number 14. One of our priorities for this year is continuing to improve Cyberpunk 2077. We strongly believe that the game will prove to be successful in the long run. We are now focused on the game's performance and stability on all platforms, along with fixing bugs. So far, we've released several participant hotfixes that address some of the issues gamers pointed out and will continue doing so for as long as it takes.
As we announced in the strategy update with regard to Cyberpunk 2077, our plans remain unchanged. This year, we are going to release three DLCs providing small bonus content for games. Additionally, in the second part of the year, we are planning to release a dedicated next-gen edition of Cyberpunk 2077. Owners of PlayStation 4 and Xbox One copies of the game are going to receive a free next-gen update. A lot has been said about the Cyberpunk franchise. Moving on to slide 15 and 16. Let's focus on the other pillar of our core business, The Witcher franchise. During the last year, The Witcher trilogy continued to enjoy strong sales, exceeding 50 million units sold in its lifetime, including 30 million copies of The Witcher 3: Wild Hunt.
As you can see on slide 17, 2020 was the third-best year in terms of revenues for The Witcher 3. We are convinced that alongside the newly introduced Cyberpunk IP, The Witcher franchise again proved to be a strong pillar for the future development of CD Projekt Group. On the next slide, number 18, you can see our plans within The Witcher franchise for this year. This summer, we are launching The Witcher: Monster Slayer, our mobile free-to-play location-based RPG that uses AR technology. As for the second part of the year, we plan the next-gen edition of The Witcher 3. It will be released as a standalone purchase for Xbox Series X, PlayStation 5, and PC, as well as free updates for everyone who already owns the game on PC, Xbox One, and PlayStation 4. Now it's time for a financial recap of 2020. Piotr, the floor is yours.
Thank you Adam. Let me now introduce you to the details of our financial results of 2020. First, the profit and loss account. Our consolidated group revenue succeeded PLN 2,138,000,000. Obviously, CD PROJEKT RED segment was a big part of that with nearly PLN 1.9 billion sales. Cyberpunk sales were responsible for approximately three-quarters of that amount. The presented sales are decreased by the amount of provisions that we set and which I will present in a moment. Cyberpunk was the cornerstone of our sales, but as Adam already presented, it's worth mentioning that 2020 was also the best year for The Witcher franchise in the last four years. Last year, GOG also had a great performance with over PLN 340 million in total sales. Please have a look at the graph on the next page.
A big part of GOG sales was achieved in Q4 last year and is attributable to the release of Cyberpunk, on top of the growth of the base GOG business. Next page, our profit and loss statement again. Our sales were obviously accompanied by respective costs of products, goods, and materials sold. In the case of CD Projekt RED segment, this comes mostly from the depreciation of our expenditures on development projects, mainly Cyberpunk, but also Witcher 3: Nintendo Switch edition, Gwent, and Thronebreaker, presented in cost of products and services sold. Depreciation of Cyberpunk is an important subject for 2020 and for future years, I will come back to this in a minute. For GOG segments, the cost of goods and materials sold represents royalties paid by GOG to its suppliers, including CD Projekt RED. Our total consolidated gross profit from sales reached nearly PLN 1,615,000,000.
At the same time, selling costs of this special year increased to PLN 408 million. Nearly half of this amount comes from our marketing activity, especially dedicated to Cyberpunk, but also ongoing marketing support of Gwent. Selling costs also include part of our bonus system dependent on financial results and maintenance costs of previously released products, especially Gwent for the whole year, and Cyberpunk after the release on the 10th of December. General and administrative expenses line, taking into consideration how intense the last year was, stayed at a stable level. Among expenses for the period, we also have the income tax. The amount presented in the profit and loss account includes three different elements, which are mutually compensating to a certain extent. Taxes paid locally, withholding taxes, and deferred taxes.
As far as local taxes are concerned, a significant part of our taxable revenue qualifies to an IP Box tax regime with 5% income tax rate. We were also entitled to use an R&D tax relief on other taxable revenues. On top of that, as far as the deferred tax is concerned, significant difference on qualification of revenues and costs into taxable profits and book profits exist in our case. To give you an example, we released Cyberpunk in December, and most costs related to it are part of the tax year 2020. At the same time, due to the release window at the end of the year and delayed reporting from our distributors, which didn't come until the end of 2020, nearly PLN 1 billion of CD Projekt sales could be invoiced and settled in 2021 and are part of our 2021 taxable incomes.
All in all, the consolidated net profit of CD Projekt Group reached PLN 1,154,000,000. To visualize this in a longer perspective, let's move to the next page. In financial terms, 2020 was the best year in our history. Taking into account the sentiment around the release and suspension of one of the major digital storefronts, we are aware that the situation after the launch of Cyberpunk 2077 is not directly comparable to what we had after the premiere of The Witcher 3: Wild Hunt. Big part of the team is now focused on improving Cyberpunk 2077, and this influences both the costs of 2021 and the timing of our next releases. A lot of efforts is also put into the next-gen editions of both The Witcher 3: Wild Hunt and Cyberpunk 2077, as we believe the next-gen compatible versions will be crucial for longevity of both games.
Let's move to the next page.
The promised depreciation model for Cyberpunk. Looking at the last six years of sales of The Witcher 3, deducting expansions as separate developments with separate depreciation schemes, we saw relatively stable sales for the years after the release. Taking into account different and differently placed in time turn of events planned for Cyberpunk, we assumed initial depreciation for December 2020 to amount to 40% of the total direct development budget. After that, for the next 5 years, we plan to depreciate it evenly at 12% per year, which is 3% per quarter. It's obvious to say that future sales will not be equal quarter to quarter. Sales will be influenced by new events, next-gen edition, Edgerunners anime series, and other activities. Still, when estimating the future, we believe it's fair to plan this part this way.
We thoroughly discussed it and came to a conclusion that today we have no means to better foresee the future. Time will show if the initial 40% and flat depreciation of 12% per annum was a good assumption. Let's move to the next page, our balance sheet. Assets side. An important line among the fixed assets, expenditures and development projects. Counting all the expenditures of last year and depreciation of 40% of Cyberpunk budget into P&L, the total amount has increased by 5% over the last year. Please have a look on the next page on the changes we had here. We started 2020 with 48 million PLN on expenditures of finished development projects and 337 million PLN on projects in progress. Over the last year, we booked an additional 280 million PLN for our developments. Obviously, a big part of that amount is attributable to Cyberpunk.
During 2020, we finished projects with a value of PLN 589 million and reclassified them from work in progress to finished projects. Cyberpunk was responsible for 96% of this amount. The total depreciation of expenditures and development projects in 2020 amounted to PLN 259 million. Mostly Cyberpunk, but also Witcher 3 on Switch, Gwent, and Thronebreaker depreciation are counted in. The closing balance reached nearly PLN 378 million for finished projects and PLN 29 million for developments in progress. One remark regarding the value of development in progress. Obviously, over the last year, most of the team worked on Cyberpunk, and in this process, made sure that the game will also support future products we planned to add to the universe. Such costs are part of the Cyberpunk finished projects and will allow other projects to benefit from them.
The total value of projects in progress includes our multiplayer development and other projects unannounced yet. As you know, the initial phase of each product is always less costly than the final one, when many external costs like localization or heavy QA add to the budget. Moreover, this amount includes neither Cyberpunk: Edgerunners anime production done in cooperation with Studio Trigger, nor The Witcher: Monster Slayer planned for this year and developed by Spokko, which is not included in the consolidated results yet. Let's go to the next page, our assets again. The biggest change is visible in the receivables line. As the release happened at the end of the year, a big part of our sales was reported to us in 2021, and had to be presented as open receivables as of the end of 2020.
This increase, taking into account parallel growth of our liabilities, will fuel our cash flows in 2021. Regardless of that, our financial assets, including cash, bank deposits, and acquired T-bills, marked in the table with a star, increased by PLN 392 million, meaning over 80%, and reached a level of nearly PLN 875 million at the end of 2020. All in all, our consolidated total assets position doubled over the last year and reached nearly PLN 2.9 billion. Let's go to the next page, our equity and liabilities. First, equity. Again, it nearly doubled, and the main driver for this was our result for 2020. Going further, another important factor, the provisions, both long-term and short-term. First of all, provisions that decreased our Q4 sales revenues of Cyberpunk. There are two kinds of them.
Long-term sales provisions in the amount of over PLN 145 million relate to the expected licensing settlements with selected distributors that contractually are to be done after the full four quarters from release. One other short-term sales provision, over PLN 40 million, which relate to the adjustments of orders or licensing reports concerning Q4 sales, either already performed or agreed upon with distributors in the first quarter of 2021. In 2020, we also announced the Help Me Refund program that is being paid out in 2021. To cover these costs, we set a provision in the total amount of nearly 8.5 million PLN. On top of that, as every quarter, we set provisions for compensations mostly dependent on the group's financial result. All in all, 256 million PLN. The growth of this position reflects the growth of our net result in 2020 versus the previous year.
We also experienced some increase in short-term liabilities and decrease in deferred revenues, a consequence of such a big event as the premiere of Cyberpunk. We can now move to the next page, graphical presentation of our main cash flow drivers. We started 2020 with PLN 482 million of cash and bank deposits. During summer, we spent PLN 214 million on our share buyback program, and shortly after that, PLN 126 million of inflows related to the realization of our previous incentive program. This result includes three major cash adjustments. Our net profit for that period amounted to PLN 1,154 million. First, it included depreciation, and especially depreciation of our expenditures on development projects in the amount of PLN 254 million, which was a non-monetary cost.
Secondly, it included revenues for pre-orders and advances from distributors booked before the 1st of January 2020, hence correction for the change of deferred revenues in the amount of over PLN 113 million. Thirdly, due to the December release of Cyberpunk, not all of the revenues and costs included in our profit and loss calculation for 2020 were either paid to us or by us before the end of 2020. Hence, the correction representing the big increase of the total balance of trade receivables, less trade liabilities and provisions in the amount of PLN 574 million. This is the amount that will add to our cash flows of the future periods. Throughout the whole last year, we also kept working on our development projects. PLN 203 million was expensed in cash on that.
All in all, at the end of the year, we had nearly PLN 875 million in cash deposits and T-bills we acquired in during the pandemic time to diversify our financial assets. Taking into consideration the previously mentioned open balance of our short-term receivables, it goes without saying that our cash position further increased in Q1 along with Q4 royalty statements. This leads us naturally to the next page, our dividend proposal. Keeping in mind our current cash position, planned expenditures and investments, today the board of CD Projekt recommended to the general meeting to pay out a dividend in the amount of nearly PLN 504 million. We believe this is the most straightforward, instant and democratic way of sharing the success with all the shareholders on the same terms. That's all from my side. Now, we can move to the Q&A section.
Ryan, please open the line for questions.
Thank you. If you'd like to ask a question, please signal by pressing star one on the telephone keypad. If you're using a speakerphone, please ensure your mute function is turned off to allow your signal a chance to reach our equipment. Again, press star one to ask a question. We'll now pause for just one moment. We will now take our first question from Nick Dempsey from Barclays. Please go ahead.
Yeah. Good evening. Can you hear me okay?
Yes, we can. Hello.
Brilliant. I've got three questions. First of all, I wonder if you can help us out on the revenue per unit that CD Projekt achieved from Cyberpunk unit sales. I think you said in the past that digital revenue per unit for you would likely be roughly double the physical revenue per unit. Was that the case in the end? When I think about digital revenue per unit, for Ubisoft and others, we use something like €35, something in that sort of bracket. Why would it be different for CD Projekt when we're modeling that digital one for you? Second question, can you give us any indication of the unit sales of Cyberpunk that you've seen in Q1? Third question, just looking at the costs for 2021, I think you've been clear on lower depreciation. Selling costs should likely be lower.
Can you give us any other color on how we should model cost in 2021? Thank you.
Starting with the first one. Since the time of release of The Witcher 3, a number of things have changed. First of all, the easy part, the digital distribution. Historically, from all of the digital storefronts, the royalty was 70%. Recently, or quite some time ago, Steam has already changed their policies, and for revenues exceeding PLN 15 million, the royalty can be increased up to 80%. As Steam is the major digital distribution platform, obviously this increases the average revenue we get from a copy of digitally sold game. From all of the other digital distributors, the standard 70% is still in force. Secondly, the proportion between the physical and digital sales on Witcher 3 and Cyberpunk changed, I could say, the opposite way.
Right now, we sold much more in digital channels, and at the same time physical channels made minority of the sales, while in case of The Witcher 3 that was totally the opposite. You have to bear in mind that we publishing a game cooperate with physical distributors who execute the marketing campaign locally on each and every market. The cost of local marketing campaign is usually deducted from our royalty reports as part of the deductible costs in the royalty calculation on the distributor side. Therefore, the smaller part of the market dedicated to physical sales was supposed to cover the whole of the marketing of Cyberpunk, which was even bigger than in case of The Witcher 3. This naturally influenced the average income per copy on a physical sale that we achieved last year.
Obviously, most of the marketing costs were spent last year, and this will not be the case for the quarters to come. However, last year it visibly influenced the average revenue per copy we achieved on each physical copy of the game sold. We did not reveal precise dates, and honestly speaking, I didn't make myself a calculation of an average global physical sale price from the CD Projekt perspective, as it pretty much varies from territory to territory, so I'm not able to share this. The second question referred to unit sales in the first quarter. It's a very good question, but I would love to invite you to our first-quarter conference that will take place in approximately one month, and we'll be able to share more details on that. Probably not precisely in units, but in general, more details.
In general, I would say that the sentiment about Cyberpunk and the situation with the Sony digital storefront, the fact that we were cut off from a large portion of the market, which may have also indirectly affected gamers' decisions to purchase the game on other platforms, definitely influenced the sales. We are still looking forward to receiving most of the royalty reports from our partners, and full knowledge will be gained at the beginning of May. Third question was cost for 2021, lower depreciation, selling costs lower. Yes, that's kind of obvious. The depreciation was precisely given on one of the slides of my presentation. The selling cost will also be lower. As I also mentioned, the part of the team that works on improving Cyberpunk, their remunerations or all the costs related to their work will not be capitalized since this project is already released.
Such costs will go directly into our P&L. That will also influence our selling costs in 2021 and especially at the beginning of it. At the same time, the marketing expenses were mostly financed last year. We were not giving any more precise guidance, I'm afraid I cannot answer this more precise, giving any numbers. I hope that Q1 will be a good direction to show the current status quo for 2021.
Thank you. That's great.
We will now take our next question from Omar Sheikh from Morgan Stanley. Please go ahead. Please ensure your mute function is turned off on your phone. Okay. We will now take our next question from Robert Berg from Berenberg. Please go ahead.
Yeah. Hi guys. A couple of questions from me. The first is perhaps a bit of a leading question, but your depreciation schedule is very useful, at least for this year. It assumes just over a quarter of the cost versus 2020, 12% versus 40. What would be the reason that we shouldn't then assume that you would be forecasting a quarter of the revenues in 2021 for Cyberpunk versus 2020? Is there anything that comes on top of that, maybe the next-gen version of the game or other things? That would be useful to get a sense there. The second question, obviously, you have the next-gen version coming up. In terms of lead time on testing, gamer perception, could you give us some insight on what you've learnt from the release of the old-gen version, and what has changed for the release of the next-gen? Thanks.
Mm-hmm. Tobias.
Yes. Hello. The depreciation schedule is, as you see, quite, I would say, symbolic. It's really hard to predict future sales, definitely things we believe this year will influence the sales of Cyberpunk is further improving the game. The patches we release, that should also lead us to coming back to the Sony storefront, that's something we are looking very much forward to. Secondly, we also announced free DLCs for gamers, that's something we have in our pipeline for this year. Third big event for this year is this Cyberpunk next-gen edition for the second half of this year. That I believe should also have a significant influence on sales and the general atmosphere about Cyberpunk, if I can name it this way.
Hi, this is Michał Nowakowski. Regarding the second question, so I think it was about the next-gen and the time for testing, whether anything has changed in regards to December launch of Cyberpunk. Well, we are, as we've been stressing a lot up till now, we're going through a lot of changes inside the company, and of course, we believe we've taken a lot of lessons from everything that happened so far. Well, yes, of course, time for testing for CP next-gen shall be sufficient, and that's one of the top priorities we have in terms of that release.
I can add one more thing, Adam, on this end Partially, we are implementing those new, more agile methods to this process. Of course, this is just the beginning, but we try to work on constantly running game, and we try to judge the effect by screen. It's a first step into changing our methods, and next-gen addition, this is the first project where we are changing.
Will there be any kind of beta mass testing or unlike the prior release, or are you still kind of just everyone plays it for the first time on release?
No. We are not releasing the game to gamers before it's released. The game will be released to gamers on release date, but we have more external professional contractors responsible for testing. There are forces in place to run as much as needed.
All right. Thank you very much.
We will now take our next question from Ken Rumph from Jefferies. Please go ahead.
Hello. Sorry, unmuting. Thank you for taking the question. Two questions. Firstly, I just wanted to try and understand a little bit about the point about tax. I am not sure quite why you wouldn't have a deferred tax item to cover tax you're expected to pay next year. Are we meant to assume that the percentage rate will kind of move up to above the normal 5% or 10% rate next year because of this delayed effect? Anyway, perhaps you could explain a little bit more about that. Secondly, I appreciate that you're not giving forecast for the year. Whatever the level of sales this year was, what would you expect the quarterly pattern of that to be? What do you believe are the sort of significant events? Is it restoration to the PlayStation Store? Is it the arrival of more DLCs?
Is it particularly a kind of relaunch of the game alongside the next-gen version? Particularly on kind of the perception of the game, what's your strategy to get reviewers to look again at the game and perhaps revise the scores that they have given to it? At what point do you try and get people to look afresh at the game in its patched form? Thank you.
I'll take the first question. It was probably the most complicated tax calculation we ever did in our history, the result presented in the P&L comes, first of all, from the fact that we are allowed to use the 5% IP Box regime, which naturally significantly decreases taxes down to 5% taxable rate. Secondly, we also generated significant R&D tax relief. Accumulating the two allowed us to lower the tax for 2020, as long as we will be able to use them in the future, the 5% IP Box regime is naturally to be applied on future sales of our intellectual qualifiable properties. As long as the law doesn't change, we will be able to benefit. As far as the R&D relief is concerned, it has a certain value.
Once we consume the whole R&D generated relief, obviously the taxes will naturally increase in future. When, depends on the future profits, depends when this R&D relief that has a fixed value will be consumed by future taxable profits. As far as the defered tax calculation, it is supposed to absorb the differences between the book profits and taxable profits. In our case, cumulated with the effects of IP Box regime on some of the IP Box qualifiable revenues, R&D relief, and all other business we generated, led to this situation, and deducted by the withholding tax that was also deducted by our distribution partners on the royalty payments to us, led to this relatively low tax value in the P&L of 2020. In the longer term, it should naturally increase.
I'm not sure if I was precise enough to answer all your questions, but I believe that's all I can tell you at the moment.
Okay. It sounds like you're saying increase towards 5%, not necessarily above it, related to the gradual use of the R&D tax release, yeah? Subject to changes in the law and so on.
Once we consume the whole R&D relief, part of our incomes will be taxed 5% and part will be taxed 19%. The average in the longer term should be in between the two values.
Understood. That's great.
Like right now, it's below.
Thank you.
So, on the-
Hi, this is Michał Nowakowski again. I'm going to take the second and last question. For the question about the significant events that might influence the sales of the game, I think from what I heard you say, you pretty much identified most of them. Yes, I mean, the PS Store comeback could be such an event for sure, or the DLCs release could be such an event for sure. The next-gen edition, we believe could be such an event for sure. We believe that every drop of patches and fixes is to some extent such an event as well. In the future, there will be, of course, the expansions and so on will be such events as well. Your question was about the Cyberpunk only, or was it about The Witcher as well? That part I wasn't sure of because.
Oh, well, it was about Cyberpunk really.
Right. Okay.
a point about, is there a kind of concerted effort to get people to look again, re-review the game, kind of relaunch it at a particular point as well as the kind of steady program?
This I took as the third question. All right. The strategy here is actually pretty simple. I mean, this is to continuously keep working on the game and its content, to keep improving the player's experience and so on. This is the only strategy, really, I mean, to make sure that people have more good quality content to play with. This is something we're very keen on delivering in the months, and actually years to come. That's pretty much it.
Okay, thank you.
We will now take our next question from Matti Lehtonen from Bernstein. Please go ahead.
Hello, good evening. The first question on the number of developers. The pace of developer additions seems to have slowed down in 2020 from what it was in 2019, both absolute and relative terms. Could you give us a bit more color on the reasons behind that? Is it just a slower pace of hiring, or did churn affect that in 2020? If you could mention anything about how that's trending in this year so far, that would also be helpful. The second question on the share of PC units sold through gog.com. From the numbers for GOG, it seems like that might be quite a bit lower than it was for Witcher 3. Then finally, in the report you give quite a lot of detail on the publishing team that you have about the net revenue per unit.
Do you see the publishing team expanding in the future, for example, to take a larger role in global distribution and marketing? Thank you.
Hello, Matti. I'll take the first one. Adam on this end. Last year, the churn was very low as always before the release. It was, sorry, below 10%. This year, we don't know yet, and we will see by the end of the year. A year after the year of release, that's the natural window for transfer. Of course, we hire people not for projects. We hire people to work with us longer, the longer the better. When people are thinking about changing the studio after finishing the project, that's the natural moment for this. We'll see. After Witcher 3, it was close to 20% a year after we released Witcher 3. We don't know yet how it will be this year. So far, so good. We are still ahead of bonuses, so we'll see after.
There are many initiatives ongoing to minimize regretted losses. Obviously, that's one of the major HR tasks for this year. Of course, we are speeding up with hiring because last year we were kind of freeze hire, and that's the year of before launch, it's a time for be focused on finishing the game. Hirings were extremely limited. This year, we've already started to hire again and to grow the team.
I will take the second question about the share of GOG sales within our total sales. Honestly speaking, I do not remember the GOG share on release of Witcher 3, so it's really hard to compare. My intuition says that GOG was even stronger this time. However, that's only based on my intuition as I do not remember hard facts on that. As far as Cyberpunk, the hard facts are that GOG accounted for 9.6% of total PC sales. Within PC market share, GOG was at nearly 10% of the total volume that gamers purchased in 2020.
Hi. In terms of the third question, whether we are planning to take a more dominant role in the global marketing and distribution. Well, our role in global marketing was actually pretty crucial in terms of Cyberpunk already. We've been truly controlling from HQ and through our local teams all over the world, the whole campaign. Honestly speaking, instead of building maybe more local teams, there is not much more we could do more centrally, to be perfectly honest, in terms of marketing. Even media purchases were much more centralized than they were ever before. I think we're pretty much there in terms of that. Maybe minor tweaks here and there will be happening. Never say never to that, of course. In terms of distribution, well, all of the digital distribution we're handling direct anyway, and this has been the case for a long time now.
In terms of physical distribution, if this was your question, then we don't have plans to engage direct with the physical distribution. In that regard, we do plan to continue to rely on external partners for servicing any future physical units.
Got it. Very helpful. Thank you for all the answers.
We will now take our next question from Matthew Walker from Credit Suisse. Please go ahead.
Hi. Thanks a lot. I've got three questions actually. The first is, can you have another go at explaining the online elements that you're going to introduce and why they are different to multiplayer, but what they actually are and when? I noticed that you've got the bonuses and you've allocated the full 20% of net income as bonuses. It's a question on management compensation, really. Can you confirm that roughly half of that goes to the executive board or the executive team? Why you think that's appropriate given what's happened? Can you say, will you be rebasing your share scheme that you introduced a few months ago and had some pretty significant targets?
Those obviously look less achievable now, given what's happened to Cyberpunk. Will you be rebasing those targets downwards to try and retain management, or is that not something that you feel is necessary? Thanks.
Hello, Adam. In terms of online, well, we are not revealing the details of our plan. We just said that instead of releasing a big online game at once, we decided to, in terms of big teams and big budgets, to focus on single players. At the same time, we keep continuing working on multiplayer and to release it step by step, as online elements to our single players and to learn from each element. In a cycle, of course, ultimately, it will take more time, but we believe it's less risky way for us, considering that we should still push more on single players to prove ourselves again. I know it's not a precise answer, but that's what I can share now. For bonuses, I can take it as well. Yes, it's close to 20% and it was always like this.
I mean, nothing has changed recently, close to half of it goes to Management Board. Well, we were always compensated directly. It was linked directly to net revenues, which in our case, or I mean, we earn this money and, I mean, company earns this money, of course, but more net profits, more bonuses are. Actually, it was the case historically. Well, when we have results, we get bonuses and that's the contract we have. That's the only I can comment.
Are you going to be rebasing that share scheme and the targets for the share scheme in the future?
It's too early to say. It's early to say because, well, we can't do everything at the same time. This is a long-term incentive plan. We'll consider, I mean, after some time after releasing the result, we have to plan. We'll come back to this and we'll sit and process where we are and whether any changes in this regard are needed. We haven't started this process yet.
Right. Okay. Thank you very much. Thanks a lot.
Thank you. We will now take our next question from Chirag Radia from HSBC. Please go ahead.
Hi. Thanks for taking my question. Firstly, I just wanted to know if you could provide an update on the cyber attack, if there's anything that still continues to be affected from this. Secondly, just thanks for the details on the Help Me Refund campaign. Is there any further color you could provide on the total number of copies that were refunded for the game? Thank you.
The first was about cyber attack, right? The hack which happened.
Yeah
a month ago. The case is closed, I mean, on our end. The only consequence was that we were restoring our systems because there was no data loss in any regard. Everything was backed up, but we were restoring our system, and it took us, depending on the department, from two to three weeks. That was the real cost on our end. We can't share any details about the attack because now it's in the hands of police, but what we can say is that the vector of attack was to the loop in the third-party application. We were attacked to the third-party application, so none of our own systems were compromised. You can't prevent this kind of treatment.
Yeah. As far as the Help Me Refund action is concerned, I'm not sure if I understand the question properly. Does it refer to the total amount of payments going out that we are processing, or how many % of the payments we've already done, and whether we've already done that? Answering the first part of the question. We didn't reveal the precise number, but since we've already said that the provisions for that set in 2020 amounts to PLN 8.4 million. This also includes all of the costs of processing on the financial side of the transfers to gamers. It's relatively easy to calculate, taking the average global price of a Cyberpunk game. That it's an equivalent of approximately 30,000 requests.
As far as the execution of this action is concerned, what I can tell you is that over 95% of all of the payments have already been done. The last single-digit percent, below 5% is probably the most difficult part. Please take into consideration that we are refunding people all over the world, working with different banking systems, and it's not an easy task. As I said, absolutely most of this was already processed, and we are working to finish it till the very end.
Thanks very much.
We will now take our next question from Ken Rumph from Jefferies. Please go ahead.
Hello again. Two questions. One, just following up on the refund point, and apologies if I missed it, I dropped off for a moment there. I see the sort of very small provision for the Help Me Refund process. Are there any other cash flows or liabilities kind of outstanding from refunds specifically as opposed to the contractual agreements you have to sort of pay distributors and so on that are explained in the accounts? Basically, is there any money to flow out after the end of 2020, whether it's flowed out yet or is yet to do so? Are there any significant sums? The Help Me Refund number in its own right is, as you say, very small. My second question, I think you'd said 530-odd people working on Cyberpunk at the peak and 700-odd developers implies a couple of hundred people working on other things.
I guess that includes multiplayer/online, so "Cyberpunk" in another form. Is that the correct math and what would that look like today? Thank you. What the split of "Cyberpunk" versus non-"Cyberpunk". Thank you.
I'll take the first one. As you know, CD Projekt directly is not doing any retail sales. All of the sales we do as CD Projekt RED are done via distributors. That's why vast majority or nearly all of the provisions were made for our contract settlements and cooperation with distributors. Help Me Refund was a very exceptional thing where we directly communicated with gamers, and it's the only thing like that we did. There is nothing more on top of it. Obviously, GOG is involved in retail business, and GOG has its own policies on returning games. In general, this is nothing substantial in terms of our revenues, and obviously the game is on sale in all of the PC digital storefronts. If any gamer decides to return it, this is taken into calculation of monthly royalty reports by every digital storefront.
The balance of it qualifies for respective royalty calculation. That's what I can comment. To put it briefly, nothing extra on top we see at the moment.
Yeah. I'll take the second, Adam. First comment, the situation is dynamic. We are in the phase of shift, but out of those involved in Cyberpunk, still vast majority is involved in Cyberpunk. Close to half of it, so the biggest part is still working on the game itself. Patching, updating, next-gen edition, because this is same process. Of course, we have branches, but next-gen edition is on our path, is in the same process. There are teams working on the next Cyberpunk content, and there is a fairly seamless for now team working on the next thing, and there is Gwent team as well, and there is Spokko team.
When we talk about total number of developers, we are talking about Gwent and Spokko as well. There is multiplayer team, which in some parts, it's not that easy to divide from the Cyberpunk itself, because some works related to multiplayer are implemented in single-player as well. It's kind of blended on the edge. But the team working on multiplayer is fairly not too big, but they'll continue working on things they have been working for over two years. I know it's a bit vague, but as I said, numbers are changing, and we are in the time of shifting things.
Okay, thank you. I'm going to ask an additional question, if I quickly may. That five-year depreciation schedule, what should we make of the fact that you choose five years? To be blunt, does that mean that Cyberpunk 2078, so to speak, comes out in the sixth year?
No, that's an assumption. In case of "Gwent," we decided for three years, and it obviously doesn't mean that we are going to end "Gwent" after three years. In case of "Witcher 3," we have results for a full five years, so it was also very helpful in modeling and checking the logic behind the scheme we set for "Cyberpunk." As you know, we keep selling our products longer, so it's kind of concept that we set for five years, and definitely depreciation of this Cyberpunk has nothing to do with any potential future product, that are separate assets, and they need to be depreciated, only depending on judgment or assessment related to this particular product.
Thank you very much. Bye-bye.
That concludes today's question and answer session. Mr. Kiciński, I will pass the call back over to you for any additional or closing remarks.
Thank you very much. Now we are starting to answer the questions which are in a written form on webcast. Right? I can read them, and then the first would be for Piotr, yes? The question is from Łukasz Płoszajski from PKO BP. What is the split of Cyberpunk marketing between covered by CD Projekt directly and covered by distributors and deducted from revenue?
Distributors covered more than a half of this budget, but still our participation, measured in percents, was visibly bigger than what we had for The Witcher 3. We were not disclosing precise data on that, so I cannot go any more into details, but I hope that's a pretty good guidance that I can give you right now.
All right. I can see there's another question about the returns to PlayStation Store. How far are you from restoring Cyberpunk to PlayStation Store? What is still missing? What is still required? That came from Konrad Krasuski from Bloomberg. The answer to this is we continuously work on various improvements and patches. All of that is bringing us, each time we release something, it's bringing us closer, of course, to being back on that store. Final decision is, of course, in the PlayStation's hands, and that's pretty much it for now. When the time comes, we'll share more news, of course.
The next question is from Piotr Łopaciuk, PKO BP. What was the Stadia share in sales? Piotr. Yeah, I will answer it. We were not disclosing, but obviously, most of the sales accounted to PC and Stadia come from PCs and from such important players as firstline team. The Stadia sale is obviously not to be compared with such a big portal like Steam is. Yeah, that's all I can say for now. Next question comes from Michał Wojciechowski, Ipopema. Could you comment on differences between sell-in and sell-through levels in fourth quarter of 2020? Were these differences significant, and could you explain how they impacted your revenue and price per copy in fourth quarter and first quarter? We didn't reveal any number on sell-in. We believe it's kind of irrelevant in this situation.
It's much more important from our perspective how many gamers have finally purchased the game. As far as the difference between sell-in and sell-through is concerned, any unsold copies are potentially to be returned to distributors. For such a situation, we set the provisions in our P&L statement in 2020 to compensate the difference between the two amounts. Obviously not entirely, because the game is still selling. When setting the provisions, we forecasted future expected sales, we looked in a bit longer perspective, the provisions are kind of compensating the revenues.
On potentially unsold or over-shipped units to the retail.
All right, I'll take the next one, Adam, on this end . The question is from Maria Skitch from Wood & Company. First question is, does your shift towards agile model in the game development involve hiring new people experienced in working in such environment? Could you please share more details. Sorry, I lost. Can you show me the question? On the process, sorry, because I lost the question on the screen. There are three main forces involved. First, we are partially experienced in this area because we went through this in Gwent. Gwent is much simpler because it's smaller. Changing to agile in a team of 100 is much easier than in a team of 500. Still, it was successful. It took us roughly a year.
Those who were responsible are, at the same time, skilled in this, and then they are moved to changing the whole studio to agile, and they are heading this process. Our new CTO and Head of Production, Pavel, is experienced in this as well. We have some internal knowledge and experience, and this is the first pillar. One more thing. It was small part of "Cyberpunk," but there were a few "Cyberpunk" teams who have been working agile for quite some time. First, our own experience. Second, we have contracted for as long as needed external, professional, top Polish agile group. They are agile coaches, professional Scrum Masters, and they are helping us.
The third pillar is that we are consulting with big organizations who went through this successfully, and we are sharing knowledge and we have some insights on how to run this kind of process in a fairly big organization. Actually, this is the challenge. I mean, agile itself and the framework is kind of an easy thing, but have it effective in such a big group, that's challenging. Definitely, it will take time. It never ends. It's about constant improvement, we'll need a year or two to be there and to be in the stage one. As I said previously, we already started. Some teams working on next-gen edition are already working in sprint. First impacts are very promising. Michał, you can take the second one.
Yeah, I'll take the second one. Michał Nowakowski. The question is, are you planning any bigger marketing campaign to accompany the release of the next-gen version update for Cyberpunk? The answer is yes, we are definitely planning a bigger marketing campaign for the launch of CP 2077 for next-gen. It is a launch after all. However, if the question implied whether this is a campaign of a similar scale and size of what we had at the end of 2020, then the answer is no. That campaign was also focusing, you have to remember, on establishing the brand, and that goal has been achieved. This will be more focusing on informing the players about the fact that the game is launching on the next gen.
It will be bigger than our regular actions that would accompany, for example, a promotional activity in some digital store, but will definitely not be as big as the launch at the end of 2020 in terms of costs.
The next question, could you please confirm the percentage of 55% of PLN 1.2 billion budget for "Cyberpunk" being attributable to the production costs, of which 567 million related to development and the rest overheads allocation? Yes. First of all, this 567 million amount, this is the direct development budget, the budget that was required to create the game. However, in order to publish the game, we also need to spend certain amounts on overheads. All of the overheads within our company and are allocated versus projects.
Among them, you can imagine overheads like legal departments supporting the release contractually and all of the legal issues, the production departments, the business development department, and other team members that were part of this production and the release, not directly on the development side or not directly on the marketing side, however strictly linked to the whole process and the premiere of the game. Next question comes from Piotr Łopaciuk. What part of the team currently works on repairing Cyberpunk? Roughly what part of development costs will not be capitalized and will go into sales costs?
It's too early to talk about 2021. We don't want to reveal it. As it was already mentioned, a big part of the team is still working on improving Cyberpunk. That's approximately 40% of the team. That's the status for now. Over time, we believe this team will get smaller and less efforts on our side will be dedicated to improving, patching, updating Cyberpunk. As we said, we will work on it as long as necessary. That's not something we plan to finish in one or two weeks from now. We definitely want to make Cyberpunk as perfect as possible. Next question from Vladimir Pestov, VTB Capital. Are you planning to keep distributing dividends going forward of your planned investments in business development, M&A, hiring, parallel development, et cetera, leave little room for future dividends?
We would like to remark that we do not have a regular dividend policy. In the board's opinion, for a dynamically expanding company which focuses on a strongly competitive market segment, and whose financial requirements and earnings are both dependent on cyclical video game development projects and the popularity of such video game releases, the appropriate approach with regards to profit-sharing is to evaluate the group's financial standing, business plans, challenges, and requirements on a case-by-case basis, and that's exactly what we did this time.
Adam Kiciński, I can take the next one from Spencer Czerwinski, Santander. Keeping in mind the intensity of M&A transactions in the gaming sector, do you still maintain the option that you rule out the possibility of CDR being acquired by another entity? Nothing changed in this regard. We run our business independently. We have full competencies in running our business.
We don't see, as for now at least, any profits from joining a bigger group. We're not seeking anything in this regard. Of course, we think, as we said, we are more open to M&A, but on the other side. We are more actively looking for teams that can help to execute our strategy, and that's important. We are not for adding to the group third-party businesses and their results. It's rather about building the group to execute our own strategy.
Next question is from Grzegorz Suteniec, Puls Biznesu. Have you created provisions for litigation? If so, how much? If not, why not? Yeah, the answer is simple. We've disclosed all of the provisions we've made, and we do not have any provisions for litigation. We are at the very early stage. We are still before the motion to dismiss.
Please note that no amount of expected compensation from the other side was revealed in the letter we got. At this stage, we've consulted and analyzed this thoroughly, and it's not applicable to make any provision for the moment.
Thank you for your participation. You may now disconnect. This concludes today's call.
Thank you very much. Bye-bye. Bye-bye.