Good afternoon, everyone. Welcome to FedePROVE's Conference Call dedicated to H1 of twenty twenty. My name is Adam Kijinski, and I will run this call together with Pyotny Lyubovich and Michal Novakovsky, who will join us at the Q and A session in the second part of the call. Let's start with the presentation that sums up the first two quarters of twenty twenty. It's available on our webpage, fedefroyek.com.
Firstly, a short sorry, firstly, a short COVID update. We keep working from homes mostly and will continue to do so till the end of the year at least. It's not a perfect setup for a creative company, but we kind of got used to it. At the same time, we remain proactive in supporting the needs of our team. We've also recently introduced our latest COVID prevention protocol created and supervised by medical experts.
Please move on to Slide three. Cyberpunk is in its final stage and all our forces are preparing a global release on the November 19. As previously announced, the game will be launched on Xbox One, PlayStation four and PC. It will be also available on Stadia, although the launch date on this platform is yet to be announced. Moreover, thanks to the backward compatibility, Cyberpunk will instantly play great on the next gen consoles as well.
Now please jump to Slide five. The key moments for Cyberpunk were hands ons that we organized in June. Despite pandemic circumstances, we managed to invite over 100 journalists, YouTubers and bloggers from 15 countries to play our game. That was supported by 60 interviews and resulted in hundreds of articles and previews. Please take a look at slides six and seven with just a few samples of these first impressions and magazine covers.
Let's go to the next slide, so number eight and nine. Also in June, we started reviewing more features of Cyberpunk and Digital Events events that we've called Night City Wire. In the first two episodes, we covered different life paths, weapons, music and brain dance gameplay. There are a few more Night City Wires to come with the next one coming up in September. Now please go to the next slide, cell number 10.
You probably have seen it before, but it's updated with the addition of the trailer released in June, the last bar. And again, the difference in viewership compared to the most viewed trailers for Witcher three is huge. So we keep building the hype. And on the next slide, number 11, I'm pleased to share the most recent achievement. Cyberpunk has got five awards at Gamescom, making it the most awarded game at this most prominent European gaming event.
And the last thing before financial, please move to Slide 12. We've announced our first movie project, the anime series called Cyberpunk: Enter Hunters. It's co developed with one of the best Japanese anime studios, Trigger, and will be aired on Netflix in 2022. Okay. That's all from me regarding the recent key business events.
Please move to the next slide to number 13 and let's dive into the numbers. Piotr, the floor is yours.
Thank you, Adam. Let's start from Page 14. In business terms, the first half of this year was very good for us. Our total sales revenues reached PLN $364,000,000, which is nearly 70% above the result of the first half of last year. Year.
Most of this revenue came from sales of our own products over PLN237 million, over two times more than last year. This was driven by The Witcher three, including The Witcher three and Nintendo Switch edition and Gwent, which had the best six months in its history. Our product sales were accompanied by respective cost of product sold of PLN 15,000,000, comprising mostly depreciation of expenditures on development projects for Gwent, Gwent, the Witcher three switch edition and Tron breaker. This position stayed at the same level as last year. Also revenues from sales of goods and materials grew nicely by over 70%.
This was thanks to the growth of sales of GOG and revenue such as by Sedi Projekt Red on sales of physical components of our games, both Cyberpunk and The Witcher. This also includes the activity of Sedi Projekt Red store, which commenced mid-twenty nineteen. The cost of goods and materials sold also grew mainly driven by the costs related to relatively low margin technical sales of physical components at Sotheby aircraft and in proportional increase on GOG's side alongside their increase in sales. All in all, even though this year, unlike last year, we had no revenues from sales of services, which were related to extraordinary cyberpunk promotional cooperation with our publishing partners, our gross profit on sales this year increased by over PLN100 million and exceeded PLN 250,000,000.00. Operating costs for the first half of this year were slightly higher sorry, operating costs for the first half of this year were slightly higher than for the previous one.
The main growth drivers are salaries and provisions for bonuses dependent on our financial results, which this year were much better than a year ago. Needless to say, marketing, both of Cyberpunk and Gwent, took an important share in our selling costs as well. Finally, our net profit for the period between January and June this year reached PLN147 million. That's nearly three times more than a year ago. Most of this result was delivered by to the prior threat, which reached a net profitability of 50%.
This result and growth we achieved in the recent months was obviously supported by some external factors like the COVID pandemic or Netflix series further popularizing the Witcher universe, but it's fundamentally the result of our consistent policy that pays off in the longer term. Please have a look at Page number 15, Sodapriag Group sales. This is the fifth consecutive period of six months where Sodapriag Group revenues continued to grow. And the main event, the Cyberpunk release, is still ahead of us planned for the current half of twenty twenty. However, revenue is just the beginning.
On the next page, number 16, I also visualized our profits for the last 2.5. Current releases, but most of the group employees are deeply involved into thinking, developing, preparing and planning for Cyberpunk, which leads us smoothly to the statement of our consolidated financial position on Page 17. A major change among our assets is visible on expenditures on development projects that grew by PLN97 million. The increase is mainly driven by our works on projects within the Cyberpunk universe, parallel to the depreciation of finished products, mainly Gwent, Witcher three, Nintendo Switch and Trendbreaker. There is also a new position on our balance sheet, other fixed assets that consists most EFT bonds we have acquired during the second half of this year.
Approximately one third is presented among fixed assets and two thirds together with devaluation of respective hedging transactions among working assets. Altogether, our financial assets, including cash, bank deposits, T bonds and respective hedging transactions increased over the first half of this year by $160,000,000 I will go into more details on that in a moment. Another visible change among our working assets comes from receivables. Natural decrease from the high amount as per the end of twenty nineteen linked to the intense end of year sales. On the equity and liability side, two major changes are visible.
Equity itself growth by PLN 155,000,000 mainly due to the profits of the period. Deferred revenues increased by PL 45,000,000 up to PL $2.00 6,000,000. This comprises mostly of licensing royalties associated with preorders of the digital edition of the PC version of Cyberpunk and the so called minimum guarantees for future royalties from foreign publishers and distributors, again, in relation to Cyberpunk. Both should become our revenue upon release of the game. Let's go to the next page, number 18.
We started this year with PLN $482,000,000 of cash and bank deposits. Our cash flow was based on great operational performance and net profits of nearly PLN 147,000,000 for that period. On top of that, open receivables decreased their balance by $75,000,000 which translated into additional cash flowing into the company. The next correction is related to the increase of the deferred revenues line, mostly advances on royalties for Cyberpunk. Our major investments this year were strictly linked to our core business and development of games and technologies.
We spent on that PLN140 million. All in all, our financial assets, cash, bank deposits and T bonds increased by 160,000,000. It's fair to say on aggregated numbers that all the new cash earned by the group was invested into T bonds keeping the balance of cash and deposits at the opening level for the year. Let's jump to the next page. One more thing, not directly resulted to our related to our past results.
Between the July 30 and the August 17, for thirteen days, we run our share buyback program. We bought 516,700 shares. The aim of the buyback program was to offer the bought back shares free from lockup to all participants of our recent incentive program in order to enable them to sell the shares and gain source of funds with which to finance their participation in the program and expected tax liabilities. Together with a brokerage house, we designed and recommended to our employees a coordinated way to market the shoots. We believe it's most fair to do this in a process similar but opposite to the previous buyback extended for up to fifteen working days, subject to a daily transaction limit of 15% of the daily trading volume.
Participants of the Motivation program declared the wish to transact approximately 490,000 shares, which is around 9.5% of the whole incentive program pool. Participants are entitled to amend their sell orders by changing the number of shares to be sold, changing their minimal sell price or canceling the order. So this amount may vary over the course of the process. To sum up, we, at Sledepraj, spent PL240 million on the buyback. However, PL129 million should be paid in or actually backed to the project by program participants.
Therefore, our corporate net participation via shares we acquired from the market should amount to approximately PL85 million, which is close to the value of the dividend we paid last year. All in all, thanks to this action plan, issuing new shares as part of the incentive program was limited by nearly 517,000 shares. The remaining part of the incentive program will vest by newly issued shares, which will carry a one year lockup. We'll progress with that in the coming weeks. That's all from my side.
Adam, the floor is yours again.
Thank you, Pietro. So what's next? Well, please go to Slide 21. Here you can see the very simple graph describing our promotional activities till the end of this year. The thickness of those four bars is symbolic, just to highlight that the vast majority of marketing activities are still ahead of us, with the most intense part starting in the November.
As I mentioned before, you can expect a few Night City wires in the next two point five months in digital line, among other activities. So stay tuned. Now I would like to come back to the Witcher world for a moment. Please go to the next slide, so number 22. Three years ago, our friends who had already released many small mobile games under the SpotCo label approached us with bold ideas.
They were dreaming of bringing the Witcher universe to a mobile augmented reality game based on geolocation with monsters, quests and stories hidden just around the corner. And here we have The Witcher Monster Slayer. The game is being soft launched in New Zealand as a first step of a series of public tests. We'll keep working on this promising project and continue building our studio's focus. The game will be released on iOS and Android, and we are expecting to reveal the launch date later this year.
And there is one more thing I would like to share with you today. Please go to Slide number 23. We've been working on this project for some time, and today we are happy to announce that our best game so far, Witcher three, will be released on Xbox Series, Series X and PlayStation five next year. Expect a full blown next gen bells and whistles version with great features of the upcoming generation. And of course, we'll release it on PC as well.
I believe that it will greatly enhance the longevity of this amazing game. That's all from me, and I'm passing the mic to Piotr again.
Thanks, Adam. The last slide, number 24. Recently, we called for an extraordinary general shareholders meeting scheduled for the September 22. The aim of this meeting is to vote two resolutions regarding our long term incentive program. As you may know, for the last general meeting, we proposed a number of resolutions and among them to refer to the next telepromic incentive program.
The first resolution gained the required number of votes and established the incentive program, so technically, we have it in force. The second resolution was to permit the issuer subscription warrant and new capital issue, which is one of the tools by which the new incentive program is to be implemented. Unfortunately, this one failed to gain the required qualified forfeit super majority of votes represented at the General Meeting. After the meeting, we gained the feedback from investors and found three major points to adjust in our program in order to meet the expectations. Vesting period is to be minimum three years.
The reference dates used to determine the market goal should start at the current date and not at the beginning of the year when the previous program ended. And discount to the excess of size price can be applicable only if mitigated by extra performance requirements. We applied the changes and proposed corrected resolutions to address all the three aspects. However, the status quo is what we know from our investors that one of the proxy voting agencies are recommended to vote for the resolutions and one recommended to vote again. We believe investors may be puzzled by the situation.
Basing on the feedback we received, there are three areas where our intentions potentially were not meeting the expectations. The first, the program must be sufficiently long term in its nature, and the vesting period needs to be a minimum of three years. The program and its goals are designed for four to six years with an option of earlier attainment if we deliver the four year profit target earlier. However, the changes we propose limited the earlier attainment of the goals and the program itself to a minimum of three years. The goal in such a scenario would be to generate net profits of a minimum PLN6 billion during three years.
It means PLN2 billion of net profit on average per year. It's an extremely ambitious goal taking into consideration that our best ever financial year, the year of release of The U. S. Three, our consolidated net profit reached PL342 million and the average profit for the last three financial years was 162,000,000 lots, 12 times less than the next three years aggressive premium goal of the program. It obviously requires huge acceleration from us.
I believe it's fair to say that our incentive program is based on very challenging targets and is designed for four up to six years with a minimum duration for three financial years. The duration of it is in line with our development cycle. Some confusion may be linked to the proposed warrants validity period, but in our program at the ground state participants will get entitlement, which can be compared to a conditional option. Participants will hold the conditional until the General Meeting accepts our financial results fulfilling the goals of the program. Once the goals are met, the company may either offer them shares acquired in the buyback program or warrants which entitle participants to claim for shares from a new EC.
Warrants in such case are just technical, formal tool to grant the rewards after the job is done and the motivation long term goal of the program is met. The second area, discount to the exercise price. The program allows a conditional 5% discount to the exercise price for reaching the premium targets. What do I mean by premium results targets? The standard results targets required to the project to accelerate from a company earning tens or small hundreds of million zloty per year into a company earning net in billions of PLN.
And the premium results targets required to generate at least from one sixth to one fourth higher or faster profits. The reward for entitled employees is a potential 5% discount in the exercise price. Again, I believe this is a fair reward for a much bigger results increase. And what is even more important, it's not a discount set for the sake of discounting. It's part of the whole logic of the program we created, and we continue with good results from 2012.
The third area, it was mentioned that the post market goal does not appear challenging. The market goal for our shelves is responsible for a minority of 20% of entitlement. It's not less challenging. I would say it's differently challenging than the results goals are, but this is intentional. It wouldn't make sense to set all goals equally difficult and materializing at the same moment.
If all goals would require the same effort and result, one goal should be enough to measure the success. We intentionally put a certain graduation of the goals. The market goal requires our share price to grow over the period of the program by 100% plus the growth of the weak index. Assuming the weak index grows by 30%, we want to be 130 on plus. If the overall market grows by 60%, we want to grow by 160%.
Weak index is put into equation in order to allow correction for of the target for general macroeconomic changes resulting in overall changes of share prices on the Warsaw capital market. Words of the product is listed. Looking at our historical price performance, one could say that growing by 100% above the market is less difficult than to increase our profits 10 times. That could be true, but please take into consideration that our current share price is already calculating in future profits and incredible acceleration expected from the release of Cyberpunk. In order to further grow the share price by another 100% above the general market, we need to first deliver the expectations for Cyberpunk profits in the amounts we've never had and on top of that instill confidence in the market as to further growing 100% points above all other stocks measured by the weak index.
Our intention is to start next intensive program at the latest in October and grant entitlements in the program to key employees before Cyberpunk is launched. This incentive program is for the next four to six years and represents a continuation of two earlier incentive programs, which together constitute a continuum since 2012. It's expected by our team, and we know we needed to motivate and attract the most talented people to work with us. If any of you hesitates or has suggestions how to reasonably tweak the program conditions to meet your policies, please get in touch with us. We're open to discuss it and learn from each other.
Finally, I would like to encourage all our shareholders to attend the coming General Meeting and to support the resolutions. According to the local law, we need 80% of votes present in the General Meeting to vote for it. This Monday is the last day to register your shares to participate. Thank you. And let's proceed to the Q and A section.
And we've received the first question from Alma Sheikh of Morgan Stanley. Your line is now open. Please go ahead.
Good morning, everyone. I have three questions, if I could. The first one is on Cyberpunk. You mentioned that you've obviously reiterated that you are on track to release the game on schedule. But I wonder whether you could just tell us what is there left
to do?
And how would you characterize the risk of a further delay? That's the first question. And then related to that, you mentioned that you've got a next gen version of the Witcher coming next year. I think in the past, you've mentioned Cyberpunk may also have a next gen version published during 2021. I wonder whether you could confirm that that's still also going to happen.
That's actually just the first question. The second question is on the Witcher. I wonder whether you could just talk about we're almost through Q3 now. I wonder whether you could talk about the trends that you've seen for Witcher sales during the course of July, August so far and how that compares to what you experienced during Q2. That would also be helpful.
And then finally on Monster Slayer, I know it's very early days, but I wonder whether you could just give us some color on how the beta in New Zealand is going. And when you talk about the release date, are we talking about this year or next year? Thanks.
Hello. Adam Kuchinski. I will cover the first one. So yes, we are confirming. And yes, we are finalizing.
So actually today, we've started preparation for the final certification. So we're very close. Of course, we'll work on the title of the variant. I mean, that's kind of normal. It's a huge game, but as we said, everything is on track and we are planning to launch it on November 19.
Regarding Witcher three and next generation of Witcher three, actually, this project is developed outside with our proven partner, who delivered before four ks version of Witcher three and Witcher three for switch. So they already know our technology very well. So we ask them to prepare the next gen port. And as I said during the presentation, expect full next gen experience with great, great next gen feature, but it doesn't interfere with NextGen development of Cyberpunk because NextGen development of Cyberpunk will be done internally by the Cyberpunk team. And yes, we are confirming that Cyberpunk will be released in the next gen version, not the current that we have to differentiate two things.
The current version, which will be released in November, will be played from the beginning when next gens are released because due to their functionality. So it will be able to play the current generation games on the next gen. So from day one, you will be able to play Cyberpunk. And actually, the quality, you can expect a bit high quality than on the current gen. But the full blown next gen is planned for next year and it will be developed internally.
So I think I've covered the first one. Maybe, Piotr, you will cover you can cover the second.
Yes. Our sales in July and August. Each year, July and August is usually the quietest time of the year, comprising of two summer months, holiday months, and the sales are lower than either at the beginning of the year or at the very end of the year, pre Christmas time. Right now, everybody got used to the support from the pandemic situation and lockdowns. But what I observe or what I believe looking at numbers is that the COVID support was especially strong during the hard lockdown that was implemented in many countries, especially March, April till May.
And then most of the world got unfrozen for July and August. So this effect will no longer be visible in the same scope as it used to be before. The most important month of the third quarter is always the September, and September is in general still in front of us.
All right. And the third one, Adam, it's Jinski again. Regarding soft launch in New Zealand, it's too early. Actually, it's too early. And I'm not sure whether we'll discuss any details about those phases.
We are gathering data. It's a very normal practice that we'll try this and that and you can expect some most of launches. But it's a purely mobile game and has to be as perfect as possible before it's launched. So we have to go through all those phases. We have to gather all feedback and then implement it into the final product, which is going to be released later on.
As we said, the release date will be announced this year after we will have this feedback from sub launches.
Okay. And does Spokko have any other mobile games in the pipeline?
For now, no. They are solely focused on this project. And we are not discussing any further projects. But of course, they are not established just for this, but we are still focused on this one and focused on building the studio as POCO is fairly independent from our main studio and it's on purpose. And it's a lighter structure prepared just for mobile development.
Excellent. Thank you very much.
Thank you.
Thank you. The next question is from Matthew Walker of Credit Suisse. Your line is now open.
Please go ahead.
Thanks. Good morning. The first question is on digital versus physical. Is it still the case that you're expecting for the launch quarter roughly fifty-fifty physical, digital? And how do you see that going into Q1 twenty twenty one?
The second question is, when would you normally think about discounting the price either for a sort of Christmas 'twenty one sale or would you do a summer sale? So when would you move to a discounted price for the game?
And then
finally, how aggressive do you want to be on when you do launch the multiplayer, how aggressive do you want to be on monetization of multiplayer?
So first, the digital versus physical split fifty-fifty. If we we, in general, in our planning are quite conservative, and we put the fifty-fifty ratio. If we were to change it, definitely, the change would go for the digital side. But at the same time, the truth is that nobody knows what the digital sales will exactly be. You can, to a certain extent, plan the physical sales because they cannot be higher than the number of Stokipro you manufacture.
But in case of digital, sky is the limit. As far as the first quarter of next year results are concerned, hard to say. In general, the older the game gets, the more of the sales migrate to digital and physical is getting weaker. But next year will be a very special year with the next generation consoles becoming more and more popular on the market and this may also somehow influence the trend. So I would say not less than fiftyfifty, probably more on the digital side, but how much we'll see at the March?
This is Mihanna Vakoski. I'll take the discounts question. So if you recall with The Witcher three, it took us a long, long while before we actually went in the direction of giving any promotional discounts. And even then, these were not very large. And we do not expect anything else for the SailPoint two thousand and seventy seven.
In fact, we expect it's going to take us longer before we get into the stage where we're going to offer any promotional discounts. And again, when it happens, and of course, I'm not going to provide a specific time on this call, but when it happens, these discounts will definitely not be leap. That's pretty much it.
And the third one from my side, Adam Kicinski. Well, we are never aggressive towards our funds. I mean, we are we treat them fair and we are friendly. So of course not, we won't be aggressive. But you can expect great things to be bought.
And the goal is to design the monetization in a way that makes people happy spending money. I'm not cynical. I'm not trying to hide something. It's about giving a feeling of the value always. Same with our base games and our single player games.
We want gamers to be happy while spending money on our product. Same with microtransactions. So you can expect them, of course, and Cyberpunk is a great setting to selling things, but it won't be aggressive. So it won't upset gamers, but it will make them happy. That's our goal at least.
Okay. Thanks a lot.
Thank you. The next question is from Riley Li. Your line is now open. Please go ahead.
Hi, good morning guys. Thanks for the presentation. So my question would actually be around the monstrous layer. So I'm just wondering if you could provide like give any color on the basically development expenditure for the mobile game. So how complicated it is to develop a AR mobile game versus a traditional one?
And could you also maybe talk about some monetization strategies you have for the Monster Slayer game? Thank you.
All right. So this is
very special because
the very beginning was because we've met with great people and we had already known them for years. And actually, they convinced us that it was investing in this kind of project before we started the company with them because they have a 25% of the company, we went through the long test period, so they prepared prototypes. But and it's a part of our strategy. We want to be on mobile. We want people on mobile, but not as our basic or our core business lines.
But it's worth providing gamers with mobile experience in our franchises. So it's kind of a very lucky situation that without disturbing us from our main activities, I mean, big games, we are able to deliver mobile experience, which is created by experienced studios, experienced people specialized in this. I don't know if I answered your question, but that's the story behind. And monetization, it's too early. I mean, of course, the game is for free, but expect some monetization.
Besides, we'll test monetization as well in soft launches. But as always, as I said about multiplayer, Cyberpunk, it won't be too obvious. So expect no paywalls, no over milking game, but of course, the game is going to make profit.
Thank you, sir. Just to clarify, so basically the majority of the development of Monster Slayer is done by coal. And could you maybe provide some color on like how much is CD Projekt actually invest into the development of this game?
Yes. I mean, I would say that 100% is done by SCO. Of course, we consult them, we provide them with assets and licenses and so on. But it's their projects. So we want to be them responsible for this.
So it's created in Spokka, not in to the project.
Got it. Thank you.
Thank you. The next question is from Vladimir Dassolov of CTP Capital. Please go ahead. Your line is now open.
Hello. Thank you for taking my questions. First, Could you maybe comment a little bit on the way to the release of Cyberpunk? Do you see any risks inside CD projects? And the risks beyond your control, which could still delay the launch on the data announced?
My second question will be on your marketing budget. As far as I understand, in the third quarter, there will be no major spikes based on the slides that you presented, but there will be a significant increase in the fourth quarter. Maybe could you provide more color how big this spike in the fourth quarter could be in terms of your marketing cost? And the third question is probably longer term on potential capital allocation post the release of Cyberpunk. You have a pretty good cash pile right now.
It will increase probably manifold after the launch of Cyberpunk. How are you going to spend this money? Are you going to do some M and A activity, invest more heavily in new products or maybe just return this cash to shareholders? What is the your longer term thinking in this respect?
So I'll cover the first one, Adam Petchinski. Well, so definitely, if we talk about future, there are always risks. But November 19 is the only date we have and will deliver. I mean, I don't see any chances to have another date. So we are focused on this and we are very close to send the build for the final certification.
So this is the only day the whole company is working on from development to marketing.
Okay. The second question about marketing budget for Cyberpunk. I would say it's accelerating in the third quarter, starting with the Knight Citywires with it and all we prepared for it. But obviously, the main push is targeted for the window around the release. So couple of weeks before and then lasting few weeks more after the game is released.
How big will the push be? Definitely the biggest ever in our historically. We did not reveal the marketing budget for Cyberpunk yet, But the scope of the campaign is supposed to be at least three times wider, three times bigger than what we had for The Witcher three. And what I would like to underline also is that actually the marketing budget for Cyber Punk is in a certain way dynamic. We try to spend certain percent of the expected revenue.
So along with increase of expected revenues, also the marketing budget is tuned. Therefore, we try not to announce it before as we know that the final amount will depend on the final expectations from our distributors, from our market analyzers and may change on the way to releasing the game.
And the third one, Adam Klinsky again. Regarding cash, well, starting from M and A, we've been always mostly about organic growth, and I think that's our destiny. Of course, we might one day join forces with some smaller teams, but it's I mean, but our mission is to build the company based on organic growth. Dividend or buyback, yes, it's possible, but it's too early to discuss. We paid dividend twice.
So if we decided to propose it to shareholders meeting one day, we will, same with buybacks. But the most important thing is to have a decent pillow for the further growth. I mean, we want to grow the company. In our industry, the scale of the company is strictly linked with the size of the team or teams. So we want to grow.
We want to have more people. We want to work on more titles and all of this costs. So wind buffers for future productions and future internal investments in this regard.
Thank you very much.
Thank you.
Thank you. The next question is from Martin Liqulian of Bernstein. Your line is now open. Please go ahead.
Hello. In 2015, there appeared to be a surge in preorders in the weeks immediately before Witcher three launched. Is this a pattern you expect with Cyberpunk as well? And then a more technical question about Witcher Monster Slayer. Do you know if Spokko uses Google Maps SDK for that game?
Michal, over Koski again. I can take the preorder question. Interested in a given title decide to preorder the game. It's simply due to the fact that the game is just within the reach. They can see that it's launching any moment now, and this is when they feel fine with spending their money on the game because that's very often depending on where the preorder means they're paying either some or full amount for the game.
So yes, we do expect a spike in the final weeks before the launch.
Hello, Adam Kaczynski again. And regarding MAPs, yes, the Witcher monster player, the Spokko project is based on Google Map. That's true. I can confirm. Thank you.
Great. Many thanks.
Thank you. The next question is from Mathilde Dovassano of Barclays. Your line is open. Please go ahead. Hi, good morning.
I wanted to ask two questions. The first one is, given that you're reporting the third quarter a week after the release release of Cyberpunk, can we expect any first week sales figure at that point? And then my second question is, can we have any idea information on when the open and closed beta launches will be for Cyberpunk? Thank you.
Yes. So the first question, yes, definitely, we will address the release of the Cyberpunk during our financial meeting for the third quarter. It's hard to say what data we will immediately have to share with you. I mean, we would definitely love to share reliable and complete data, and some of them are delivered to us with a certain delay. But as much as possible, we will be willing to share and comment on the performance of the game.
And the second question, not asking about betas to multi player or Cyberpunk 2,077 single player?
Cyberpunk 2,077, sorry.
Oh, so for single player, there are no betas. Bets. I mean, we have internal ones, of course. And we have I mean, we had them. Now finalizing the product.
But in terms of public beta, there are not we are not providing any public bettas because it's a single player game. And so we never did it and no one does it for this kind of product. So you sell the final game to gamers. You won't allow them to play the before launch. And it's a normal practice.
Great. Thank you.
Thank you.
Thank you. The next question is from Robert Berkow of Berenberg. Please go ahead. Your line is now open.
Hi. Just a follow-up on a couple of previous questions if I can. I'm interested in digging a little deeper in the physical digital shift trends. It's probably a quick answer, but giving a significantly different economics for both, I just wanted a bit of clarity. Have you adjusted your physical units order?
You mentioned you will only sell as many as you order, but have you adjusted that order over recent months either up or down? And at the same time, have you had any communication with your distribution partners? Have they shown any willingness or desire to increase or decrease their own marketing budgets up or down during the period as sales potentially look more likely to be online? And maybe you would offset that with some more direct marketing of your own. Anything on those points would be very interesting.
Thanks.
We negotiate who will answer
the question whether Michal or
myself, Michal is Charles, and I may add something.
All right. So I got it, Mihael, because here I can start. So regarding the shift to digital, especially this year, because there's been some for sure and we've seen it in quite a few releases, new releases this year, where digital was, well, taking larger share than in the years past. That shift is really also dependent on where you are based as a consumer. So So it's not exactly the same all over the world, to be honest.
There are still some regions which are way more physical. For a lot of reasons, there's regions which are transferring more to digital also because, for example, the COVID situation to this very date is more serious there than in some other places. So there is no one clear answer to that question. Although in general, if I were to comment on the global than, for example, one we would have seen, say, a year ago. And now when it comes to the distribution partners, whether they are shifting anything in terms of units or marketing commitments or anything of the kind.
We have actually I don't want to point fingers to specific ones, but we've actually seen shifts, yes, and we've seen shifts going up in some places in terms of physical units and in terms of some of the marketing commitments as well.
So you're saying you've seen increased marketing budgets and increased or
is that what you're saying?
Yes. Because very often, marketing spend is correlated. For example, if it's above trade, let's say, because it's a marketing spend, it's very often correlated to the number of units that is supposed to go to the retail. So it's that's the reason why. There were some increases.
I'm not saying these increases were, I don't know, crazy skyrocket high, but there were some increases, yes.
Okay. Interesting. Thank you.
Thank you. At the moment, there are no further questions. So I would like to hand back to you.
We have some questions All right. So the question from Macias, Noble Securities. What is the estimated number of CP277 preorders as today? Well, we are not revealing those numbers, so we can't answer this question directly. The only thing we can confirm that we are really happy with preorders, but no numbers is to be provided.
Let me read another question from Albert Rokitsky. Are you going to continue to buyback your own shares in the future to offset supply from Motivation program to some degree? That was the first question. The second, how you can compare sales of preorders of CP with preorders of which are three at the similar stage before the launch, two, three months before launch? And the third one, did you hit over 1,000,000 preorders of CP already?
So maybe, Piotr, can you cover the first one?
Yes. I'll come with the first one. Actually, the shares that the participants of the motivation program will be selling over the next three weeks come from the pipe program. So the two events were not happening exactly at the same time, but that were two similar transactions with opposite direction, I would say. First, we bought back the shares.
And I don't know whether you noticed the detail, we decided to buy back the shares with a limited participation in daily liquidity. It was limited versus the official requirements down to 20%. And right now, on the process of selling the shares, we've further limited this maximum participation down to 15%. So the idea of it is to have as little influence
on
the market as possible. And I believe there is no other buyback required to really meet the supply of the shares if the supply is limited to such a low percent as 15%. So that was the first question. The second question, how can you compare the preorders of Cyberpunk versus The Witcher, Michal?
Yes, I can take this one. So we are definitely in a much better spot with the preorders of Sabapunk than we were at a comparable time frame for which are free. However, and then transferring directly to the third question, as Adam mentioned, we're not discussing specific numbers. And the 1,000,000 you mentioned in the question is a specific number. So I cannot answer that directly, unfortunately.
But we are happier we are in a better position than we were with the which are free.
The next question from Adrian Kovalik, alpha value. Is The Witcher Monster's Play going to be released on iOS and Android smartphones at the same time? And the second question, can you confirm that it will be a free to play with item sales game? So the goal is to have simultaneous release on both platforms, so iOS and Android. I can't confirm it in 100%, but that's our goal.
And yes, I can confirm that the game is going to be free to play with some micro transactions inside. We are not reviewing too many details about this, but we can expect some items to buy. All right. The next question is from Piotr Wopachuk, PKO VP. New consoles are backwards compatible.
How enhanced, which are three additions for new consoles, will work with people who already own the game on old consoles. Will there be an upgrade for purchase? So as we announced during our call, because there was a press announcement with more details, we did it like before, like we always do. So for all to have bought already, which are three, there will be a free update on the platform they have. So on PC, they'll get an upgraded version, updated version of the PC version on Xbox, an update, free update to Xbox Series X and same on PlayStation.
But of course, it will be a new product for new gamers on each platform. So we'll from a certain moment, we'll sell a new version from certain moment next year, we'll sell a new version of Witcher three with all those enhancements and upgrades. And the key thing behind this decision is to, as I said, to extend the life cycle of the product of the game. Witcher three is still selling great, I mean, are selling great. And we believe that having it updated on par with the most recent games or the games will be that will be released, It's a great advantage in terms of sales for the next, I know how many years, five, maybe more.
So in the long term, I really do believe it's a meaningful addition to our back catalog sales. All right. The next question from Filip Klikiewicz, Santander TFI, CP2077. How the optimization of the game going? If you could give us a color, how did you improve FPS in the game since hands on time?
Well, it's going well. I mean, optimization is usually something you do at the very last moment when everything is ready. So of course, we have to optimize. I mean, without this, the game can be released. So it's going well and the game looks stunning.
So expect that everything will be as optimized as it should be on Luis.
I can take the next one. It's from Mr. Filip Kievich, Santander TFI. Can we expect that a price for in house developed game CP2077 design for next gen consoles should be released next year should be around USD70. So in terms of euro, USD 60 9 point 9 9 has actually been a full price SRP already in the current generation, so PS4 and Xbox One, new game for release at $69.99 So yes, you should expect that this is going to be the leading price around the market in The Eurozone.
When it comes to USD, we have announced and we have launched our preorders at USD60. And of course, we're going to keep that price for the consumers. We're not going to change it last minute to USD70. So just to confirm, I mean, these prices are out in the market anyway. You can check them on various sites, USD60 dollars and so USD59.99 dollars and USD69.99 dollars for euro is what we're going for.
So the next one from Daniel Pachkovsky, Stockwatch, how many DOCs are we planning for Cyberpunk? Will this project be developed similar to Witcher to the Witcher three? Yes. You can expect similar path after release. You can expect more actually.
We are not going too much into the deals today, but everything will be clear before release. So we are before release, so expect fairly soon. All post release things will be revealed. So series of free DLCs and expansions, everything will be described. So you can expect it, as I said, fairly soon and everything then will be clear.
Okay.
Michana Vakoski again. The next question
The next question
is from Mr. Alexey Filippov from JPMorgan. Do you plan to price gain some next gen consoles at a premium like was recently announced by EA? I'm assuming you're referring to increased SRP in The U. S.
So as I mentioned in the previous question I answered, we already announced a while ago preorders for our game in The U. S. Going at 59.99 and we're not planning to change that price last minute. This has been out in the market and with the consumers for a while, so we're not going to be shipping that. Whereas in Europe, our SRP has been announced and has been marketed by quite a few retailers for a while as well.
So in other words, we're not planning to change where we are last minute for the consumers for sure not. And actually, the next And actually, the next question I'm going to take as well. That's from Mr. Piero Pachuk from PKOBP. Same question for PC version of Enhance Witcher three, will there be an update to Enhance?
How it will be priced roughly? So for Witcher three, I believe we Adam mentioned that before, but there will be an update as well. Mind you, for PC, it's a little bit different because there's no actual switch between the platforms or anything of the kind like is the case with consoles. So it's more of a patch adding additional visual quality and a few extra features that will be added. And of course, we're not going to be charging people for a patch.
I mean, it's going to be something that they're going to download. It's going to upgrade their game, upgrade their experience, but we're not going to ask them extra money. If you have your game on PC, you will just download and update. And the game will continue to cost what it currently does on the PC market. So we consider that as an upgrade of the currently existing game.
So the next question comes from Konrad Krasuski from Bloomberg News. Do you see that COVID new reality with bigger focus on digital sales that helps smaller studios makes competition in gaming industry fiercer and it allows to new entities to emerge globally? Do you consider any strategy changes to take this new phenomenon? Digital distribution is definitely much easier to access for smaller developers than creating a chain of physical distributors all around the world. So I would say, yes, this trend is quite obvious in a situation where the digital keeps growing.
And at the same time, to be honest, the digital was growing for the last ten years. So maybe there is certain acceleration, but it's not a totally new trend occurring or happening nowadays. It's simply accelerating. Does it change our strategy? No.
Our strategy remains unchanged. We want to develop the best games on the planet. That's our aim. That's our dream. And that's what we want to do.
And we will be delivering them to gamers in the way gamers want to buy them, want to consume them. So either physical or digital or streaming in the future, that's all among our distribution lines of interest.
All right. It seems there are no other questions. So thank you very much for participating in the call. As Peter mentioned, there is stock holder meeting in plan and the last registration date is next Monday, so please register. And if you have any questions regarding the meetings and what we were voting on it, please give us a call because it's kind of technical, but for us as a management, it's a very important tool.
So it would be great to have it said before Cyberpunk is launched and provide people with the next plan as we did in the past nine years because all those problems so far were very successful and we really do believe that the next one will be as successful as the previous ones.
Thank you
very much.