Hello, everybody. Welcome to CD Projekt Group's conference, where we'll briefly wrap up last year's performance. I'll walk you through the presentation together with Piotr Nielubowicz. Michał Nowakowski will join us for the Q&A session after the presentation. Let's start with slide 2 , where you will find a short summary of what has been happening at the company since the beginning of last year. It was a year of major changes. Our transformation process, which we've called RED 2.0, kicked off in 2021, and throughout the past year, touched almost every aspect of the company's life. In terms of organizational changes, we've introduced the agile methodology in the game development process.
Right now, 17 agile teams are in place, 10 of which are engaged in developing the Cyberpunk expansion, while the remaining seven are setting up our internal core technology center that will serve our future games. The Cyberpunk expansion is being developed largely with the use of the agile methodology, and we plan to work in the same framework when developing the new Witcher, the new game in the Witcher franchise. Our strategic goal to develop in parallel through two AAA projects starting in 2022 has been achieved. Although the team working on the Witcher project will continue to recruit new talent. Our organizational changes have recently led to the appointment of two new board members, Jeremiah Cohn, Chief Marketing Officer, and Paweł Zawodny, Chief Technology Officer and Head of Production at CD Projekt .
Last but not least, we continue to focus on the needs of our team members. In 2021, we retained the voluntary remote work model and undertook many activities to improve well-being and working conditions for the team. We also established RTRs or REDteam representatives, which are an advisory body to the board consisting of team members elected in a popular vote. Finally, we rolled out whistleblowing procedures and enhanced our internal communication. In terms of personal and professional development, we provided coaching webinars, and we are constantly expanding our training portfolio. On top of that, as we are competing for talent globally, in 2021, our team members received significant pay increases by 23% on average. In 2022, we are planning to continue this trend. Now let's move to slide 3.
Last year's top priority was fulfilling our commitment to quality with regard to Cyberpunk 2077. We worked hard and delivered 13 updates for the game, which include a wide range of enhancements. This work culminated in the release of Patch 1.5, which brings further gameplay improvement on consoles and PCs. It also includes a dedicated next-gen update which enables Cyberpunk to exploit the additional features offered by new consoles. We are happy that the February release has had a positive impact on the perception of the Cyberpunk brand, in the gaming community and has received positive ratings on Metacritic. Now, please have a look at slide 4. Up until now, gamers have purchased over 18 million copies of Cyberpunk 2077 globally. Over 55% of this represents PC sales, while PlayStation and Xbox sales account for 27% and 18% respectively.
We are fully committed to the Cyberpunk franchise and intend to develop it further. Moving on to slide 5. As mentioned, we've recently released a new set of improvements for Cyberpunk, and we are also working on the next update, 1.6, which will be out in the coming months. Afterwards, support for Cyberpunk will continue, but our focus will gradually shift to the new exciting endeavors in both Cyberpunk and The Witcher franchises. Right now, the bulk of our team is working on Cyberpunk 2077 expansion that is targeted to be released in 2023. With regard to our other plans, as you can see on the chart, the number of developers working on new projects is growing steadily. This number includes the developers currently working on the new game set in The Witcher universe, which we recently confirmed.
Of course, game set in The Witcher universe. Moving on to slide 6. To bolster our future development capabilities, in 2021, we carried out 2 acquisitions. In July, we acquired the Digital Scapes studio, which then became CD PROJEKT RED Vancouver. While in October, we concluded a deal with Boston-based The Molasses Flood. CD PROJEKT RED Vancouver is working on our current projects, the Cyberpunk expansion, as well as the new Witcher game. While The Molasses Flood continues to develop its own project based on one of our IPs. We continue to recruit talent at both studios. One of the key aspects of the RED 2.0 transformation is a much stronger focus on technology. Let's have a look at slide 7. Signing a strategic long-term partnership with Epic Games enables us to use Unreal 5 to develop future CD PROJEKT RED games.
This move will allow us to concentrate more on creative direction, areas outside of engine development. At the same time, it will provide us with a solid long-term foundation to build and expand open world story-driven games. As a result, we expect the development of future games to become more efficient, predictable, and stable. Moving on to the next slide. Unreal Engine 5 will power our next game in The Witcher universe that we have already started working on. As we've announced, with a new installment of The Witcher game, a new saga will begin. Now let's move to slide 9. We are super excited to return to the world of The Witcher, which we love so much. We are really happy that the gamers are excited about it, too.
Although seven years have passed since the release of The Witcher 3, The Witcher IP remains strong, as confirmed by continuing sales of the existing trilogy of games. I'm proud to say that so far, our three Witcher titles have sold over 65 million copies, of which The Witcher 3 accounted for over 40 million. Just to quickly wrap up what we have prepared in our lineup on slide 10. You can see the list for our production plans for 2022. We'll continue working on Cyberpunk expansion, while at the same time developing a new game set in The Witcher universe. We'll provide further support for Cyberpunk. Our in-house development team will carry out the remaining work on the next-gen version of The Witcher 3. The Molasses Flood will continue their own development work on as yet an unannounced project.
We'll launch a captivating single player mode for Gwent: The Witcher Card Game, and will support both Gwent and The Witcher: Monster Slayer. We also run conceptual and research work for future unannounced projects. Let me leave you with a quick update on Cyberpunk: Edgerunners, the anime series that we've been creating with the Japanese studio, Trigger, and which is to be aired on Netflix this year. The production process is now complete, and we have recently advanced to the post-production. We can't wait to show the series to the world. Stay tuned. We'll have more information to share soon. Now Piotr will walk you through the financials. Piotr, the floor is yours.
Thank you, Adam. Now I would like to guide you through our results for 2021. Let's start with the consolidated profit and loss account. Slide 13. In total, our sales revenues reached PLN 888 million, which for both segments is naturally less than in 2020, the year of release of Cyberpunk. However, compared to 2019, which was the last financial year preceding the premiere of Cyberpunk, CD PROJEKT RED sales nearly doubled and GOG sales increased by close to one-fourth. Most of the sales in 2021 were based on our own products, PLN 691 million. Where Cyberpunk was the most important source of revenues, and most of its sales continued to come from digital channels. Revenues from sales of goods and materials amounting to PLN 190 million were mainly driven by GOG digital sales.
Cost of products and services sold amounted to PLN 107 million. In both this and last year, most of the amount comes from depreciation of historic expenditures on the development of Cyberpunk. All in all, we have already depreciated 52% of the Cyberpunk development budget in the P&Ls of 2020 and 2021. Cost of goods and materials sold came mostly from GOG and represent the amount due to the suppliers of games available on GOG platform. All in all, our gross profit from sales reached nearly PLN 638 million in 2021. Moving to the operating costs. In 2021, our selling costs decreased to PLN 299 million. The high amount in 2020 was influenced by our Cyberpunk promotion activity. This year it also included costs related to marketing and publishing.
However, a significant amount, over PLN 80 million, comes from our involvement in servicing Cyberpunk and working on all of the updates RED. We continue supporting Cyberpunk. However, service costs related to it should naturally decrease in 2022. Next slide. In 2021, our G&A costs slightly increased versus last year. Among others, we include in this position the remuneration of G&A teams, which as Adam mentioned before, grew over 2021. In G&As, we also present costs related to the incentive program settled in company stock. Recently, we changed our estimates regarding the company's ability to meet its earnings goals throughout the duration of the program. These offset historic costs related to 80% of entitlements based on the results goals. Overall, for the group, this led to a PLN 1 million program-related negative cost balance in 2021.
The change of assumptions does not refer to 20% of incentive program entitlements dependent on the market law. Costs related to these will continue to be recognized in future periods. Another factor that visibly influenced our G&A costs was related to the early research phase of our development projects. Costs of this phase are recognized directly in the results for the period and are not capitalized. The total amount recognized in 2021 amounted to nearly PLN 24 million, much more than in 2020 when most of our dev team worked on Cyberpunk. Next line, other operating expenses minus operating revenues. The amount increased in 2021, mainly due to two reasons. First, at CD PROJEKT RED in past years, we worked on creating our multiplayer technology.
In the wake of the recent decision to start strategic cooperation with Epic Games and to use Unreal Engine 5, which offers advanced multiplayer solutions, we ceased further development of our own multiplayer technology and created respective write-off in the amount of nearly PLN 21 million. The second amount comes from GOG, which revised past assumptions related to amortization of some of its client technology and decided to accelerate the amortization scheme, plus it decided to write off some of its licensing minimal guarantees, resulting altogether in additional non-monetary charges of PLN 15 million in GOG costs. Both cases refer to historic expenses and are of a non-monetary nature for 2021. All in all, our net profit for 2021 reached PLN 209 million. While GOG posted negative results, a net profit of over PLN 238 million was generated by CD PROJEKT RED.
Regarding CD PROJEKT RED, I would like to draw your attention to the fact that substantial costs were either driven by time-limited activity, like the Cyberpunk servicing expenses and early phase research costs. The latter are actually, in a way, an investment into our future products and services. Also, the multiplayer technology write-off was a one-time non-monetary charge. The three positions altogether amounted to over PLN 125 million, which is the equivalent of half of the segment's net profit. Regarding GOG, apart from the one-off events discussed above, its performance does present a challenge, and recently, GOG took measures to improve. As we communicated previously, GOG will focus more on its reliable core business activity, which means offering a handpicked selection of games with its unique DRM-free philosophy and gamer-first approach.
In line with this approach, there were changes in team structure and the company reorganized its operations. Moreover, at the end of 2021, GOG left the Gwent consortium. This means that it will neither bear its portion of expenses nor obtain the corresponding share of revenues associated with our consortium. From 2022, GOG continues to offer both Gwent and Thronebreaker to its customers, but financial settlement between CD Projekt and GOG are already based on a standard revenue-sharing model as for other digitally distributed products. The GOG team will not be involved in the live operation of the game. We believe that all of the changes will allow GOG to focus more on its core business and improve its financial effectiveness. Let's now move on to the next slide, number 14. Our provisions.
After the half-yearly presentation, we received many questions on the economics of the provisions, and this time I would like to present them in more detail. Join me for long and short-term provisions. Back in 2020, CD Projekt reserved PLN 194 million for potential returns and corrections of Cyberpunk sales and royalty reports. During 2021, based on received royalty reports and updates from retail as of the end of each quarter, we were adjusting this amount. For some of our distribution contracts, we created additional sales provisions together for an amount of PLN 43 million. This is the first green number on the upper left side of the table. Over the year, PLN 136 million out of all sales provisions was consumed. We also dissolved nearly PLN 101 million of unused sales provisions.
However, the dissolution of the PLN 101 million sales provisions came together with creating new cost provisions for nearly PLN 95 million. The red number in the right upper part of the table. Why was that so? Based on the evaluation of market situation, business decisions, and discussions with our distribution partners, in some cases, the settlements resulted in covering part of distributors' marketing and publishing expenses by CD Projekt instead of reducing CD Projekt's revenues. During 2021, we consumed over PLN 74 million of cost provisions and nearly PLN 80 million provisions was dissolved. One could ask, why we increased sales of cost provisions at the same time when we dissolve them? The answer is simple.
Over the year 2021, we re-evaluated the provisions as of the end of each quarter based on most updated market information, and we did it for each contract individually. Some resulted in changes in one way and some in the other. How did it all translate into our profit and loss account? The balance of created and dissolved sales provisions, marked green on the bottom of the table, increased our 2021 sales revenues by PLN 58 million. At the same time, the balance of created and dissolved cost provisions, marked red, increased our costs by PLN 77 million. All in all, the negative effect of cost provisions was higher than the positive influence of sales provisions by nearly PLN 90 million. This amount decreased our EBIT value for 2021. Let's now move to the next slide, number 15, our consolidated balance sheet.
In 2021, our balance of expenditures on development projects decreased by PLN 56 million. New expenditures on development projects of the year reached PLN 67 million, while depreciation of past projects in the amount of PLN 89 million, primarily Cyberpunk 2077, offset this figure. Additionally, an allowance of close to PLN 21 million due to abandonment of work on multiplayer technology was recognized in the CD PROJEKT RED segment. At the same time, our long and short-term other financial assets increased in line with our purchases of T-bonds as a way of diversifying our financial reserves. The total value of T-bonds, cash and deposits included in the positions marked with a star is summed up under the table to the amount of PLN 1,154 million as of the end of 2021.
This means that our financial reserves increased by PLN 279 million during the year. At the same time, our receivables decreased from PLN 1,275 million down to PLN 238 million as in 2021, we collected receivables open after the end of year release of Cyberpunk. Let's go to the other side of the balance, page 16. As of the end of 2021, our group equity had a value of PLN 1,894 million, nearly PLN 289 million less than at the end of 2020. The main reasons for this change are payment of over PLN 503 million dividend and the total comprehensive income for the period, increasing equity by PLN 214 million. Another major change among our liabilities is related to the provisions which we just discussed.
All in all, our sales provisions decreased down to PLN 0. Cost provisions slightly increased by PLN 8 million up to PLN 44 million. At the same time, provisions for bonuses, mostly based on our annual profits, decreased in 2021, down to PLN 45 million as the bonuses for 2020 were paid in 2021, and the bonuses expected for 2021 are proportional to the profits of the year. I haven't elaborated much on the expenditures on development projects. Now please go to the next page, 12. CD PROJEKT RED's expenditures on research, development and service of released games presented quarterly to better show the changes happening at the studio. The yellow part represents our total cost of servicing our released games, mainly Cyberpunk and Gwent.
The amount related to Cyberpunk declined in the first half of the year and was relatively stable during the second half, leading us finally to the release of Patch 1.5 and the next-gen version of Cyberpunk. At the same time, the proportion of the team, and therefore the total expenditures related to future product, products keeps growing. It's represented by both the green slice, early phase research costs, and the blue part, actual development of new projects. This is in line with what Adam was presenting just now regarding the involvement of our team. Finally, our simplified cash flow on slide 18. PLN 209 million net profit for the period was supported by nearly PLN 1,037 million reduction of receivables that we collected in 2021. Our liabilities, including all types of provisions, decreased by PLN 396 million.
In cash terms, we expensed PLN 155 million on development of new projects, while the non-cash book depreciation of historic expenditures on released products reached nearly PLN 87 million. The dividend paid out in the amount of over PLN 503 million was another important driver of our cash flow. All other flows and changes cumulatively are around PLN 2 million. Altogether, our financial reserves increased by PLN 279 million up to PLN 1,154 million in cash, bank deposits, and T-bonds as of the end of 2021. More detailed commentary on our financial performance can be found in our management board report. As we talk about our reports, I would like to draw your attention to one more. Together with the annual report, we've just released our first sustainability report.
I'd like to use this opportunity to congratulate Katarzyna from our IR department for coordinating this huge project. Thank you very much indeed. That's all from me for now. Thank you for your attention. Let's now move on to the Q&A.
Ladies and gentlemen, at this time we will begin the question and answer session. Anyone who wishes to ask a question may press star followed by one on their touchtone telephone. If you wish to remove yourself from the question queue, you may press star followed by two. If you're using speaker equipment today, please lift the handset before making your selections. Anyone who has a question may press star followed by one at this time. One moment for the first question, please. The first question is from the line of Nick Dempsey from Barclays. Please go ahead.
Yeah, I've got three questions, please. First one, you're pointing to just over 18 million units of Cyberpunk 2077 having been sold as of the 14th of April. We know we had 13.7 million in 2020. I'm kind of backing out somewhere between 3.5 million and 4 million in 2021, though that's clearly not perfect. Are we kind of saying that we're only at kind of 0.5 million-1 million, something like that, sold so far in 2022? Is that a kind of decent ballpark? Second question, when we're considering 2022 group revenues versus 2021 group revenues, what would make 2022 group revenues be higher than 2021? When I'm looking at it, we don't have the Cyberpunk 2077 paid-for expansion in 2022.
The run rate so far of Cyberpunk sales doesn't really seem to be ahead of the 2021 run rate, and we can see Cyberpunk on sale in lots of places. Potentially the average revenue per unit might be through the year lower than in 2021. What is there other than what I've just talked about there that could make 2022 group revenues higher than 2021? Yeah, just last question. You've announced that you're using Unreal Engine 5 for the new game in The Witcher universe. Can that make your development process faster so that you can get to a finished game earlier than you might have thought before you embarked on this change? Or is it going to be roughly the same?
Okay. The first question was about the speed of sales of Cyberpunk for 2021 and 2022. I'm sorry, but we were not revealing any precise data per year or per quarter. The last updated number we had before this conference was just 18 million copies, and it obviously includes accelerated sales thanks to the next-gen release. The second question was what will make 2022 results or sales revenues better than 2021? Here I have to say I'm sorry, but we are not guiding on 2022. Adam mentioned our publishing pipeline for this year and our production pipeline for this year. We will not be able to comment on what will make the sales higher or lower in the existing year.
I will take the third one. Definitely Unreal Engine is the proven technology, and it's very well developed and organized on the back-end side. I mean, toolset for developers, pipelines and so on. The production should be smoother, but not necessarily fast. I mean, it's hard to say now, but we expect that definitely the processes will be under better control and we'll be able, as I said, being more focused on a creative side. Bear in mind that we are talking about Unreal Engine 5 in which development will take our part as well together with Epic.
We are specialists of the open world RPGs and we'll work together on some areas of the technology, to make it perfect for this kind of games.
Thank you guys.
The next question is in the line of Omar Sheikh from Morgan Stanley. Please go ahead.
Hi there. It's Omar Sheikh from Morgan Stanley, actually. Evening everyone. I've got three questions as well, not dissimilar from Nick's actually. Maybe if I could start with the 2022 slate. You very helpfully gave us a, you know, comprehensive list of stuff that you're gonna be developing in 2022. Could you just tell us what you think you might be able to release during the course of the year, just to help us understand kind of cadence of releases? That will be helpful. In particular, if you could just touch on Witcher next-gen, just to kind of update us on where exactly you are, what you plan to do, and whether you plan to release that in 2022 as well. That's the first question.
On the Cyberpunk run rate, Piotr, you helpfully, I think you just said that you've seen accelerated sales for Cyberpunk post the release of next-gen. You said you don't want to give us a number for December 30, December 31, so you don't know what 2021 numbers are. Can you maybe just say whether the acceleration is significant, and whether you expect, as you look into Q2, Q3, Q4, whether you expect the run rate to, you know, be the same or get better or get worse. I'm particularly thinking about the release of Edgerunners, if that can have an impact on the sales of the game in your opinion. That's the second question. Finally, I just wanna ask about headcount.
You talked in the past about, you know, ramping up developer headcount. Could you just give us a December thirty-first year-end number for the number of developers that you have? What are your kind of hiring plans for this year around, you know, whether it's in Vancouver or whether it's in Canada or whether it's in Poland. Just wanna get a sense of how much you plan to ramp up the developer capacity as you go through 2022.
Thanks very much.
Okay, I'm gonna start. This is Michał Nowakowski. Your question is, what will you be able to release in 2022? And then you got a little bit more specific about the next-gen version of The Witcher 3. We're not gonna be announcing new titles at this conf call, or the new releases or the new release dates. Of course, you know, the announcements are gonna come when they're gonna come and what is actually known out there, as of now is what we're talking about. Now, when it comes to next-gen, I'm sorry, launch of The Witcher 3, I think there's one comment I actually wanted to make. I've been looking at the headlines that popped up here and there over the internet.
I've seen one that really drew my attention, which is Witcher 3 next-gen delayed indefinitely. Which sounds like you know the game is in some sort of development hell, and I wanna state this is not the fact. In fact, I mean, there's been a lot of insinuations that you know we're gonna launch like June next year or something like that. That's completely not the case. Everything we're saying is we have taken the development of the game in-house. The game is gonna be finished in-house. We're evaluating our timeline. That requires a bit of investigation. That's all we're saying. Nobody's saying the game is delayed in some monumental sort of time gap ahead of us.
That's as much as I can say about Witcher 3 next-gen. I really wanted to emphasize that fact.
The second question about the acceleration of sales for Cyberpunk after the premiere of next-gens. I would call it kind of new release effect. Obviously, it was not an entirely new release. We prepared the version for owners of next-gen consoles who so far hesitated to buy the game that was released first and foremost for the old generations, and now they had the opportunity to do so. Will the second, third and fourth quarter be the equivalent to the release window? Probably not. Obviously the sales are continued, I guess proportionally to the number of gamers using PCs, old gens and next gens, both on PlayStation and Xbox.
Right now I would say it's a natural trend that we should be expecting after adding the two new next-gen platforms to the family. The second part of the question was whether we believe Edgerunners will also support sales. Yes, we hope it will make the Cyberpunk universe more popular, more reachable. We hope it will invite new customers who watch the anime series also to play the video game in the same universe. But right now it's obviously hard to estimate what impact this anime will have, but definitely we are looking for a positive extension of the Cyberpunk universe awareness.
Asking the third question, by the end of last year, there was always almost 700 developers in all our studios, and among them 630-something in the CD PROJEKT RED. The number of developers in the CD PROJEKT RED hadn't changed last year compared to the end of 2020. Bear in mind that after release, a year after release is the year, naturally, of the highest turnover. Even having this peak in turnover, which is natural, the same was after Witcher 3, we keep the same level of the team. For this year, we are planning increase, but it's too early to share what is the target. Recently, we were very active in GDC, and then we expect some boost in hiring.
We are implementing new policies enabling people to work from, not only from Warsaw, Kraków, or Wrocław. We have more locations, and that should help as well.
That's great. Thanks very much, everyone.
Thank you.
The next question is the line of Jamie Bass from Berenberg. Please go ahead.
Hi there. Sorry in advance. I've got three questions as well. They are relatively similar to Nick and Omar's, but, slightly different. First one, would you be able to say whether once the next generation of Cyberpunk came out, whether that, not only boosted sales in general, but did you see that there was a boost to the old generation sales from the marketing and that sort of thing? So old generation sales, was that boosted? Second question, kind of coming at the next gen Witcher question from a different angle. Would it be fair to say that the development of the, next gen update was relatively on track and then, you know, you had to in-house the production for, you know, given the circumstances and then there's just the friction of changing studios?
Is that a fair way to look at it or was there more of a development issue behind it as well? Third question, on the transition to the Unreal Engine for the next Witcher 4, would you be able to give some color on whether, and I know you haven't given, you know, too much detail on what the development costs would be anyway for The Witcher 4, but compared to sort of your base case, expectations, would you say that there is a difference to the cost level you would be expecting for the overall development for the next Witcher, given that you're now using the Unreal Engine? Thank you.
Okay. I'll start with the first two. Michał Nowakowski . The first question was whether Cyberpunk next-gen release actually boosted sales for both generations. I mean, for the next-gen, I mean, it was the initiation of sales really. Of course it opened up the sales for PlayStation 5 and Xbox Series X. I think more of your question was more whether would it boosted the sales for the previous gen. It did of course to some extent also because you know the Patch 1.5 introduced a lot of new things and improvement and fixes to the last generation as well. Whenever you...
It was a major patch, so whenever you have an event like that, naturally, you know, some people will want to check on the game, see what has changed, what's new, and that was the case with Cyberpunk next-gen patch as well, for sure. The second question, I think you know I tried to shorten it, was what was the reason we switched to internal. Well, the reason was it was based on recommendations from the people in charge of development.
We, as a result of these, you know, recommendations we have decided to move the development of the Witcher 3 next-gen to our in-house team and, you know, finish the work on the next-gen Witcher 3 release ourselves. That's pretty much what we're saying. Thank you.
The third question was about how the new engine could influence the development costs of the next project. As for now, being at the beginning of the journey using Unreal Engine, we do not plan any significant influence of switching to new technology within that budget of the game. Obviously, we are at the very beginning of the journey using Unreal Engine, and we will know more in some time from now. As for now, the assumption is that it should not have significant impact.
Okay, that's great. Thank you, guys.
The next question is from the line of Matthew Walker from Credit Suisse. Please go ahead.
Thanks a lot, and good evening to everyone. Just a few questions, please. The first one is, how many customers so far have taken up the free copy of Cyberpunk next-gen? The second one is, any clues on when in 2023 the expansion might come out? And then on Molasses Flood, are they working on like a major AAA title or is that something different? Then are you still anticipating something like a 4% reduction in sales from Russia and Belarus? Thanks.
Answering the first question, I have to ask, are you asking about the number of gamers that downloaded free trial of?
No, I guess what I'm
The console version.
I guess what I'm asking is, the people that bought the original copy were promised a free copy of the next-gen version, when it came out. Yeah, I'm asking how many people have claimed a free copy-
All right.
Next-gen? Yeah.
All right. I can't provide you with a precise number, but we don't have this data actually precisely. I can't answer this.
Okay.
Mr. Walker, are you finished with your questions?
I just had the other questions, which was about when in 2023 we can expect the expansion?
Yeah.
first half of 2023.
Sorry. We stumbled here. Yeah, the second question was any clue when the expansion may come out. I am assuming you're talking of course about the Cyberpunk expansion. We're at this moment not sharing the release date for the full expansion yet. Of course, that will be announced when the right time comes from marketing and production perspective. That time will come for sure, but we're not sharing it just yet. We hope for your understanding.
Regarding The Molasses Flood. Oh, sorry.
No, no. Sorry. Please go ahead. Yeah.
Regarding Molasses Flood, the project is not announced yet, so we can't say anything more. They are working on the game within our IPs, one of our IPs, and that's it, what we can share, as for now. The last question refers to the decrease of sales from Russia and Belarus. It's hard to measure something we are not seeing, but as we reported some time ago, the sales to Russia and Belarus altogether for the past 12 months amounted to between 3% and 6% or 5.% something, as far as I remember. Depending whether you measure GOG itself or to the prior year, that's the size of our Russian and Belarusian sales revenues.
Okay. Thank you very much, guys.
The next question is the line of Ken Rumph from Jefferies. Please go ahead.
Hello, everyone. Maybe I have different questions. The first one was just a quick one. You'd commented on the, I think it was 23% average wage increase last year, and you said a similar progress this year. Did you mean another 23% or just another significant increase? Simple enough. Secondly, on multiplayer, you've written off some of the REDengine 3 kind of multiplayer-related development costs. What about the people, you know, the team who are working on that, which I think was a mixture of Wrocław people and also some of the Digital Scapes people, what are they doing? Are you restructuring that? Do they? It also seems that a multiplayer version of Cyberpunk is not in the offing.
That now seems like quite a distant prospect, a multiplayer mode of some kind, although something that you still want to do. Basically, what's happening with that team? Is it shrinking? Are they working on something that's very long-term? Finally, a couple of questions related to Unreal Engine. I had rather a different view talking to people at GDC that, you know, in the end it'll be great, but you could spend a couple of years getting used to a new engine. I'm presenting rather the opposite idea than it being quicker that, you know, how long do you think it'll take you to get to grips with a new engine? Secondly, as you observe, UE5 isn't really set up for an open world game. You're gonna be kinda co-developing a whole load of capability.
I assume that you've therefore, you know, gained some preferential terms from Epic for effectively improving their product, if I put it briefly. Is that a fair assumption? Thanks.
I'll take the first one, regarding the wage increases. Yeah, for 2022, we expect similar wage increases that Adam mentioned during his part of the presentation. Obviously right now this is planned, so very precise percent will be possible to be measured closer to the end of the year. In general, we are planning to head into the same direction with wage increases.
Mm-hmm.
I'll take the second regarding people who have been working on multiplayer. Of course, all of them, taking into consideration some turnover, natural turnover, but there were no layoffs related to this. We are definitely for having multiplayer in our games, and we need those people to help us to bring it to life one day. No layoffs in this regard whatsoever.
Thank you.
On the last one, the Unreal-related questions. I mean, your suggestion was that it could take years to learn new things such as new engine. Of course, this can be true, but one thing I can tell is first of all, we actually have on board some people who have prior experience with Unreal, so it's not like the team is completely you know, unknown ground for the team. There's also quite a lot of specialists on Unreal. In fact, one could argue that it's easier to draw talent who knows about Unreal rather than to draw talent that is faced with one year learning curve of a proprietary engine, which was the case with us before.
Mm-hmm.
As for the Unreal 5 not really being set up for the open world game, that's actually contrary to what our internal investigation has told us. I mean, Unreal 5 is much better suited, contrary to Unreal 4, which was a little bit more challenging in that regard. Not impossible, but more challenging. Unreal 5 is much better suited for open world games. What Adam mentioned in his speech, I think we were trying to say something a little bit different there, is that we're actually gonna be chipping in significantly with what we can offer and add to the table, you know, for Unreal together with them, rather than we have to somehow hack Unreal Engine so that it can work in the open world game. That's definitely not what we're saying.
UE5, according to our expertise, is perfectly fine to run open world games, and we can, we feel together with them we can make it work, even better, you know, for our games. I hope that answers the question. Thank you.
Okay. That's great. I'll drop back in the queue. I have one more. Thanks.
The next question is the line of Matti Littunen from Bernstein. Please go ahead.
Hello, good evening. A couple of questions on product. The first one, a follow-up on multiplayer. Would you, now in sort of your new technology plan, of course, no you don't have to reveal anything specific about, say, the next Witcher game, but philosophically, would you be opposed to releasing a multiplayer version of the game at the same time as the single player one, or would you prefer to sort of do those as separate releases, going forward?
The second one, I suppose looking back at kind of REDengine 3, you know, sort of the process going from that to Cyberpunk, would you say that some of the stability issues with the engine would those have been greater when you were developing Cyberpunk 2077? Do you think that, you know, for example, affected the quest design of the game, the finished game versus what we saw in Witcher 3? Thank you.
Okay. I'll take the first one. I probably will take the second one as well, maybe, but I will need to ask a little bit more what is it you have on your mind? Sorry. On the first one, the multiplayer, are we philosophically okay with that being released separately altogether? I'm afraid we not really in place to, you know, comment on that. You know, once we reveal the plans, talk more about them, you know, we'll be happy to jump into conversation, philosophically and in real life, what it means for us. Here and now, I'm afraid I cannot go deeper there.
Now, as for the REDengine 3, I'm not sure I understood what is it you had on your mind, like, what did REDengine 3 affect how we designed the quests versus The Witcher 3? I mean, I'm not sure I followed.
Yes. I just saw some developer interviews from your developers.
Right
...talking about how they expect improved stability overall on a technical level from the Unreal Engine, which would make developing this sort of open-ended sort of structures of open world games easier. I was wondering, for example, you know, obviously you have lots of player choice in open world games and you've had that in the quest design in Witcher 3, but perhaps less so with Cyberpunk 2077. I was just wondering, was that one perhaps a bottleneck in development for Cyberpunk 2077, which you'd hoped to improve with the switch to Unreal 5?
I don't think this was the case really, to be honest. Plus, I actually probably wouldn't agree with the thesis, because the philosophy of the quest design, when you cut it to the bone, I mean, it was actually similar in Witcher 3 and CP. I understand the perception may be different for some people, especially if you read a lot of, you know, comments on the internet and so on, but that was actually not the case. No, I think again, I cannot jump into the shoes of people who were giving the interviews at GDC, but my impression would be that they were just saying that they expect smoother work conditions, and that's probably it. That would be my comment. Thank you.
Great. Thank you.
The next question is from the line of [Chirag Bhatia] from Bank of America. Please go ahead.
Thank you for taking my questions. On the Unreal partnership, I just wanted to understand why such a long agreement, a 15-year agreement, with Epic for it, and was it just to do with the stronger multiplayer capabilities? First question. Second question, wage inflation has become, I guess, more notable for game developers in the industry. Do you feel as if transitioning your workforce to Unreal means there's more scope for competitors to hire your talent given how valuable the Unreal skill set is? Third question, did the launch of Elden Ring have any impact on the sales of Cyberpunk next-gen? Thanks.
I'll take the first one. 15 years is not that long, to be honest. I mean, when we think about our plans, it's normal that we have to take 15 or 20 years in advance. I mean, that's the normal term of planning. This is strategic deal, so I can't imagine shorter term than this.
Yeah. I will take the second question regarding Unreal Engine influence on risk of losing our talent to other developers also using this technology. Honestly speaking, we see the situation totally opposite. There are many more specialists around experienced with Unreal Engine than we can find out of CD Projekt experienced using REDengine 3. We rather see this as an opportunity for us to extend the team and have easier opportunities for hiring new team members. As for the third question, did the launch of Elden Ring affect Cyberpunk sales? While Elden Ring is a fantastic game, and we send congratulations to Miyazaki-san and his team, it did not really.
I mean, the games launches were separated by a year, and if you are meaning the launch of the patch, no. I mean, the patch.
did what it was supposed to do, the upgrade and, you know, the opening of the next-gen. I think the genres are so different. I mean, if you're looking for a fantasy thing versus more like sci-fi oriented, I mean, I think there's a place for both, all fans. Of course, you know, Elden Ring is launching a new title. We were launching a next-gen version of the title that has already existed in the market for, you know, for one year. But it did not seem to affect the sales in any way we could really, you know, measure or say, "Okay, if we did something else, it would have been X times better or something else." No, in our opinion, not.
Very fair point. Thanks very much.
The next question is in the line of Tomasz Rodak from DM BOŚ . Please go ahead.
Yes. Hi. Thank you for taking my questions. First of all, I have one more question regarding the impact of next-gen version of Cyberpunk on sales. You said that 55% of Cyberpunk units were sold on PC so far. I wonder if the sales currently is more skewed towards console users after the next-gen version was released. Maybe you could give us some percentage number, how it looked in the first quarter or in the second quarter. The second question is related to the write-offs you created. You created a write-off for the REDengine with regard to multiplayer technology.
On the other hand, during the previous conference, as you said, that you're gonna work on online elements to Cyberpunk. I wonder if that means that you gave up the development of online elements to Cyberpunk. The third question is, could you give us some light on the overall cost of Cyberpunk service that we should expect in 2022, maybe the first quarter of 2022 and in the later quarters? Thank you.
Hello, Tomasz. Regarding the precise fleet of platforms after the release of next-gens within Q1, we have no data to share in this respect right now. Stay with us for the Q1 results, and I hope we'll be able to share a bit more data on results and sales for this period.
I'll take the second one. We are just switching our activities from REDengine, our multiplayer works from REDengine to Unreal because having signed a licensing and partnership agreement with Epic, we gained access to multiplayer solutions available in Unreal Engine. As a result, we abandoned further R&D work on adding multiplayer features to REDengine. The corresponding to date expenditures were reassigned from fixed assets to other operating expenses.
Again, the question about financial elements of 2022 and future quarters, I cannot go into details, but as I mentioned during the first part of the presentation, the Cyberpunk servicing costs after releasing the Patch 1.5 and next-gen edition will naturally decrease. We will obviously continue supporting the game and still working on updating it. But first part of the job, we believe has already been done and was done in 2021.
Thank you.
There are no further telephone questions at this time, and I would like to hand back to Adam Kiciński.
Thank you very much. We have a question from webcast, from Emil Popławski. How many devs The Witcher 3 next-gen update may require to be completed? Not many. Fortunately, those staff, those engineers and programmers are those who can work on it. It's around 15 people. To a limited extent, it will also make use of external support. Taking over this project will not affect the development of any our next game in the framework of the previously announced Witcher saga. Yeah, it's a minor project. The second question is from Piotr Poniatowski. What percentage of developers working on other projects are working on the new game in the Witcher IP?
I'm sorry, but we so far have not been sharing this information, and I cannot answer the question right now. We are coming to the end. Thank you very, very much for joining us today for our financial year 2021 conference. Should you have any follow-up questions, please contact our IR team directly. Thank you very much. Bye-bye.